10 Vacation Rental Markets to Watch Now

If you're considering getting into the vacation rental market, you're not alone. Over four million people around the world are Airbnb hosts, and plenty of others use platforms like Expedia's VRBO or have independent vacation rentals.

Operating a vacation rental is an easy way to start your own business or to rent out your own home if you travel frequently. If you're looking for top vacation rental markets to get into, keep reading to see 10 that should be on your list.

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Hawaii has been a sought-after vacation destination for generations, so it shouldn't be surprising to find Maui on this list. The remote work boom should favor Hawaii, allowing for longer visits to the faraway locale. And Maui, the island known for big wave surfing and breathtaking vistas, has long been a popular tourist spot.

According to AirDNA, a vacation rental data analytics company, Maui ranked as the No. 1 short-term rental market in 2022, thanks to its high occupancy rates and strong revenue growth from 2020. There's no doubt the beautiful year-round climate helps keep occupancy numbers high.

ALSO READ: 3 Reasons Vacation Rentals Will Be Big in 2022

Second-home markets have taken off during the pandemic as city dwellers have sought refuge from the demands of social distancing and an escape from high-density urban environments. One of those markets is the Palm Springs area outside of Los Angeles, which includes Joshua Tree.

Home to Joshua Tree National Park and next door to the popular Coachella music festival, the area sees a lot of tourist traffic, which seems to be helping the vacation rental market. Realtor.com ranked Joshua Tree the No. 1 place to buy a short-term rental this year, noting that revenue growth in the town more than doubled last year.

Located in the Great Smoky Mountains -- next door to the national park of the same name and near Dolly Parton's Dollywood amusement park -- Gatlinburg has long been a popular tourist destination. Offering access to the highest mountains in the U.S. east of the Rockies, it's a beloved escape from the southern heat.

Not surprisingly, it's also an excellent market for vacation rentals. According to Lodgify, Gatlinburg has the best cap rate of any short-term-rental market at 8.1%. That means rental operators can expect an annual profit of 8.1% of the home's value.

Pulaski, Virginia -- home to 9,000 residents and near two state parks -- might not be on most travelers' bucket lists, but that's part of what makes it appealing as a vacation rental market. The median home price in Pulaski is just $145,000, making it a bargain for any aspiring short-term rental entrepreneurs.

Even better, Pulaski ranks No. 1 on Mashvisor's list of best short-term rentals, with a cash-on-cash return of 9.9%. That means investors can expect to get back nearly 10% of the cash they invest in the property each year. Generally, that calculation is based mostly on mortgage payments.

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The Poconos are a true undervalued gem. Located just two hours from New York City and 2.5 hours from Philadelphia, the Poconos are significantly more affordable than other second-home areas near NYC, like the Hamptons, the Hudson Valley, rural Connecticut, or the Jersey Shore.

That explains why Evolve ranked the Poconos as its top spot for a short-term rental for the fourth year in a row. According to the website, the region offers a median listing price below $200,000 and median annual rental revenue above $40,000, or a cap rate above 14%. That's a great return on investment for a real estate investment.

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Charleston, South Carolina, has long been a popular destination for travelers, with a reputation for old Southern architecture, good food, and a subtropical climate.

In fact, Conde Nast Traveler readers voted Charleston the No. 1 U.S. city for 10 years in a row, a strong endorsement from travelers in the know. According to AvantStay, it's one of the top 10 markets for short-term rentals, with the website giving it a rating of 9.6 out of 10. The city is also more affordable than you might think, with a median home price of $429,000.

ALSO READ: Should You Invest in a Short-Term or Long-Term Rental? 15 Things to Consider

Another under-the-radar southern city, St. Augustine has a number of the same features that make Charleston popular, including a long history. In fact, St. Augustine is the oldest continuously occupied European settlement and was founded by Spanish explorers.

Today, St. Augustine is known for pristine beaches, a historic downtown area, and the oldest masonry fort in the country. Vacasa ranks it the No. 2 short-term rental market and says investors can take advantage of a 7.4% cap rate and a median home price of $366,000.

ALSO READ: Is It Too Late To Buy Airbnb Stock?

Key West has been a popular destination for travelers for generations and is known, in part, for being the home of Ernest Hemingway for a time. The southernmost city in the U.S. attracts tourists with its tropical weather, funky culture, and beautiful drive down Highway One through the Keys.

As you might expect, it's also a booming short-term rental market. Key West is expensive, with a median home price of $763,000, but offers a solid cap rate of 6.1% and the reliability of a longtime tourist destination.

On Maine's Mount Desert Island, the home of Acadia National Park, you'll find Southwest Harbor, Maine. The national park and its surroundings are popular destinations in the warmer months, helping to explain Southwest Harbor's appeal. The town also seems to benefit from being on the "quiet side" of the island, so visitors enjoy Acadia without feeling like they're surrounded by tourists.

According to AirDNA, short-term rental operators in Southwest Harbor brought in $73,000 in annual revenue, and the average home price is $399,000.

If you've got your heart set on a rental in a ski area, you may want to consider Conway, New Hampshire, which is near 13 ski resorts in the heart of New Hampshire's White Mountains. Conway draws visitors in both winter and the warmer months as nearby Mt. Washington and the White Mountains make it a popular destination for hiking, rock climbing, mountain biking, and other forms of outdoor recreation.

Vacasa ranks it as a top 10 short-term rental market if you're looking for a place near a ski area. It offers a cap rate of 4.8% with an average home price of $343,000.

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While you might think the best vacation rental markets would be the most popular tourist destinations -- like major cities or tourist meccas like Orlando or Las Vegas -- that's not the case. And this list shows that prospective operators have a wide range of options both in terms of geography and price.

Rising mortgage rates may make buying a home more difficult, but with the tailwinds from the economic reopening, all signs point to 2022 being a boom year for vacation rentals.

Jeremy Bowman has positions in Airbnb, Inc. The Motley Fool has positions in and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.