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Where are the most profitable beach houses?

by SuperiorInvest

As much as we love booking beach vacation homes, paying high daily rates doesn’t exactly inspire joy. But if you’re lucky enough to own such a place, short-term rentals can bring significant income.

In recent studies, AirDNA, a company that analyzes Airbnb data, found that the U.S. vacation rental markets, where landlords are likely to see the largest annual profits. The researchers separated the cottage, townhouse and beach house markets and then based the results on occupancy and average daily rates using data for the year from April 2022 to March 2023. Potential gross annual income was calculated by subtracting Airbnb fees from expected rental payments (although mortgage payments and other expenses were not included in the calculation).

Urban rentals had the lowest potential returns of all three housing types. Cabins showed more potential. And the big beach houses came out on top. Granted, it’s expensive to buy in high-priced markets — like top-rated Santa Barbara, California, where a 66 percent occupancy rate and an average daily rate of $1,224 generated a potential annual gross income of $261,115. Los Angeles and Miami followed with similar revenue potential. In fact, 17 of the top 20 grossing short-term beach home rental markets were found in California or Florida. Only coastal areas of often larger markets were considered to determine the profitability of beach houses.

New York’s Long Island (considered a separate market in the study) ranked 20th for beach homes, no doubt helped by luxury rentals in the Hamptons and other parts of the East End. Long Island’s occupancy rate saw a pandemic surge, from 43 percent in 2019 to 52 percent in 2020, and has hovered around that level ever since. The average daily rate increased significantly, from $796 in 2019 to $1,447 in 2023.

Recreational areas on both coasts have shown an increase in demand this year, which is encouraging for those lucky enough to own property. But new owners should be warned: Increased risk of severe weather and rising sea levels threaten to cut into those incomes before long.

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