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Buying a vacation property can be a great investment. In addition to the perks of having a home in a desirable area to which you can escape, you can also charge people daily to use the property. While daily rates will vary by area, renting out your vacation property can allow you to recoup a significant portion of the cost.
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When it comes to vacations, one area that is always desirable for Americans is the Northeast. In addition to its history, you can also find plenty of outdoor activities, arts and culture, and plenty more.
However, the Northeast can also be very expensive, and that means that buying won’t be ideal in every market. Hence, we will focus on the best markets, particularly if you are thinking of your vacation home as an investment.
Niagara Falls, New York
Cash on cash return:
- Traditional: 4.57%
- Airbnb: 13.31%
Just across the border from Canada, Niagara Falls is a vacation attraction for people around the country. Of course, the state park is the main draw here, but there are other things to do there as well. It features several museums, Old Fort Niagara and a boat tour. And don’t forget the Canadian side of the falls, where you can get the best view.
Niagara Falls may also be the perfect place to buy your next vacation home. Not only does it have a high cap rate for Airbnb rentals, but it has the cheapest median sale price on this list at just $119,900. Its traditional cap rate isn’t bad, but you’ll get the best cap rate with an Airbnb rental.
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Lancaster, New Hampshire
Cash on cash return:
- Traditional: 2.43%
- Airbnb: 11.33%
Lancaster, New Hampshire, is a great place to buy for anyone who wants easy access to White Mountain National Forest. White Mountain offers plenty of outdoor activities for every season, including ziplining, whitewater rafting or even a scenic drive. There are also several trains you can ride, such as the Hobo Railroad, for a unique view of the landscape.
The median listing price is around $319,000, and you can bring in over $10,000 per year in short-term rental income with a three-bedroom Airbnb.
Burlington, Vermont
Cash on cash return:
- Traditional: 1.38%
- Airbnb: 9.61%
Located on Lake Champlain, Burlington is a small city in the northwest part of Vermont. Marked by its city hall featuring a clocktower, historic buildings and red brick roads, Burlington is perfect for a weekend getaway. Burlington has the ECHO Lake Aquarium, a marketplace and no shortage of bars and restaurants.
Vacation homes in Burlington also have investment potential. As you can see above, the cap rate for Airbnb is 9.61%, and the median sale price is a reasonable $359,000.
Norwich, Connecticut
Cash on cash return:
- Traditional: 1.82%
- Airbnb: 7.69%
Located about 40 minutes southeast of Hartford, Norwich allows you to step back in time and experience some of the history of the Northeast. With the abundance of hydropower in the state, Norwich was an ideal location for the textile factories of the 1800s. Today, you can visit various museums, the Norwich Inn and the pristine Yantic Falls. Itching for something more modern? Check the Casino of the Sky.
The average rent in Norwich is $1,330, and the median sale price is $184,500.
Windham, New York
Cash on cash return:
- Traditional: 7.19%
- Airbnb: 5.82%
New York City may get all the attention, but those who want to escape the hustle and bustle of the city might pick Windham for a weekend retreat. Located in the Catskills about three hours north of New York City, Windham has vineyards, art galleries and even a magic show. Of course, there are also the mountains and several ski resorts nearby for those who want to hit the slopes.
The median listing price in Windham is $770,700, so you will have to be prepared to pay premium prices for a desirable location. However, the typical Airbnb cap rate is nearly 6%, and the traditional cap rate is over 7%. Hence, you may find this is a better place for a traditional investment property — but the cap rate is acceptable in either case.
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About the Author
Bob Haegele is a personal finance writer who specializes in topics such as investing, banking, credit cards, and real estate. His work has been featured on The Ladders, The Good Men Project, and Small Biz Daily. He also co-runs Modest Money and is a dog sitter and walker.