The best place in the U.S. to buy a vacation home is Sevierville, Tennessee, in the foothills north of Great Smoky Mountains National Park. That’s the lead finding of a new report from Vacasa, the major vacation home rental site. The report names the top 25 locations for buying a vacation home based on capitalization, or “cap rates,” which is a ratio of home cost and the income a property can produce by being rented out.
The top rating of Sevierville is based on it having the highest cap rate: 10.3 percent. The top 24 places to buy a vacation home have cap rates between 4.5 and 9.3 percent. Here’s what they are.
The Smartest Places to Buy a Vacation Home
| Market | Median home sale price | Cap rate | |
| 1 | Sevierville, TN | $239,976 | 10.3% |
| 2 | Killington, VT | $208,828 | 9.3% |
| 3 | Davenport, FL | $255,390 | 8.4% |
| 4 | Whittier, NC | $178,000 | 7.9% |
| 5 | Kissimmee, FL | $264,863 | 7.2% |
| 6 | Dauphin Island, AL | $345,281 | 6.7% |
| 7 | Myrtle Beach, SC | $213,950 | 6.2% |
| 8 | Key West, FL | $763,109 | 6.1% |
| 9 | Fort Bragg, CA | $509,500 | 5.9% |
| 10 | Big Sky, MT | $585,000 | 5.4% |
| 11 | Blue Ridge, GA | $273,000 | 5.4% |
| 12 | Gulf Shores, AL | $345,135 | 5.3% |
| 13 | Panama City Beach, FL | $347,430 | 5.3% |
| 14 | Warren, VT | $262,003 | 5.3% |
| 15 | Marathon, FL | $639,000 | 5.1% |
| 16 | Kihei, HI | $708,161 | 5.0% |
| 17 | Scottsdale, AZ | $513,301 | 5.0% |
| 18 | Orange Beach, AL | $475,026 | 4.8% |
| 19 | Harbor Springs, MI | $256,303 | 4.7% |
| 20 | Rhododendron, OR | $315,744 | 4.7% |
| 21 | Ellijay, GA | $243,000 | 4.7% |
| 22 | Seaside, OR | $373,258 | 4.7% |
| 23 | Waikoloa, HI | $575,422 | 4.6% |
| 24 | Cocoa Beach, FL | $370,406 | 4.6% |
| 25 | Destin, FL | $484,154 | 4.5% |
Technically speaking, the cap rate on a rental property is the net operating income (NOI) a rental property can produce divided by the property cost. As a result, the best places to buy are not necessarily the places where property is cheapest, Property prices in several locations in the survey are high, with median home sale prices of $763,109 in Key West, $708,161 in Kihei, Hawaii, and $639,000 in Marathon, Florida, but the cap rates are good because rental income is also high.
The best places to buy tended to group a bit:
- Florida has the most listings, at nine, with a mix of high-price-high-rent beach locations and lower-price-lower-rent inland areas. Three additional top spots are in the adjacent Alabama Gulf Coast beaches, with locations scoring medium-range home prices and cap rates.
- The Smoky Mountains area claimed four locations: Ellijay and Blue Ridge, Georgia, and Whittier, North Carolina (on the south side of the Great Smoky area) in addition to Sevierville, Tennessee.
- Most top spots are either beach or mountain destinations. But you can also do well with properties in some cities, like Fort Bragg, California and Scottsdale, Arizona.
Good buying opportunities span the country, from Killington, Vermont, to Waikoloa Village and Kihei, Hawaii, to Big Sky, Montana, to Scottsdale, Arizona. The location with the lowest buy-in price, is Whittier, North Carolina, at $178,000 and a relatively high cap rate of 7.9 percent. Other areas with low buy-in prices include Killington at $208,929 and a second-best cap rate of 9.3 percent, along with Myrtle Beach, South Carolina, at $213,950 and 6.2 percent.
Vacasa’s data come from its own extensive data base of property values and rental rates. Of course, you can’t assume that any property in one of these areas would be a good investment: You need to scout the property to assess its location, design, condition, and suitability for rental use. And you might want to consider whether you would like to use it on your own vacation periods.
Owning property in an area enjoying a reasonably good economy can be an excellent investment. But I’m not an investment advisor; you need to find one or work the numbers youtself to decide whether to buy a vacation home.
Readers: Have you considered owning, or currently own, a property in any of these areas? Comment below.
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Consumer advocate Ed Perkins has been writing about travel for more than three decades. The founding editor of the Consumer Reports Travel Letter, he continues to inform travelers and fight consumer abuses every day at SmarterTravel.
