The Best Beach Towns To Invest in a Vacation Rental, Based on Your Budget

For many people, the reasons for buying a second home on the coast are twofold: The escape can serve as a spot for personal enjoyment and also as a means for generating extra cash flow when not in use. And while you might direct your real estate search based on a favorite getaway, it’s smart to take into consideration a home’s capitalization rate (or the annual return you can expect on your investment). Vacation rental manager Vacasa recently analyzed home sale prices, operating costs and average incomes of rental properties in high-density rental markets to create the ultimate guide for beach house hopefuls. If your destination is flexible, here are some of the top revenue-generating beach towns to buy in, based on your budget:

If you have $225,000…head to Myrtle Beach
The affordable neighbor to Hilton Head Island, Myrtle Beach offers many of the same benefits—including a boardwalk and 60 miles of beachfront—at a significantly lower price. (Median home price is $213,950, though you can snag a one- or two-bedroom condo for $100k.) If affordability is paramount, Vacasa suggests looking in North Myrtle Beach, where you’ll find lower price tags attached to waterfront homes with easy access to golf courses and the ocean.

If you have $250,000…head to Harbor Springs, Michigan
Located on the shores of Lake Michigan, this charming resort community comes alive in the summer, with a flurry of festivals that includes one of the Great Lakes’ most epic 4th of July bashes. But while you might want to snag a sweet little place here along the coast for your own summer vacays, owning a home can also be extremely lucrative, with nightly rates in the high season asking nearly $350 per night. After all is said and done (including all operational costs for having and maintaining a second home), Vacasa says rental homeowners can expect to earn an average net operating income of upwards of $12,000.

If you have $350,000…head to Dauphin Island, Alabama
This sliver of a barrier island separating Mobile Bay from the Gulf of Mexico is beloved among Southerners and beyond for its wealth of water views and relaxed way of life. In addition to top-notch beaches and plenty of opportunity for watersports, must-dos here include a visit to the Audubon Bird Sanctuary, a 137-acre nature preserve that sees one of North America’s largest bird migrations annually. Rental homeowners here earn an average of $269 per night from vacationers for an overall capitalization rate of 7 percent—more than any other beach town on the list.

If you have $375,000…head to Cocoa Beach, Florida or Seaside, Oregon
From coast to coast, there are always opportunities to cash in on a vacation rental. And if you have just shy of $400k in the bank, your best bets are in the sleepy surf towns of Cocoa Beach and Seaside. Both cities boast median sales prices hovering just under $375k, and nearly identical capitalization rates of around 5 percent. The only question is, do you prefer your beach towns bathed in year-round sunshine or served with a side of rugged beauty (and adorable sea otters)?

If you have $450,000…head to Fort Bragg, California `
The California coast might have a reputation as a playground for millionaires, but not all beach towns come with a seven-digit price minimum. In Fort Bragg, one of the larger cities along California’s quiet Mendocino coast, median sales prices come in just under $450k. And according to Vacasa, the city sees an average of 8,600 rental bookings annually, so your chances of earning some of that cash back at the end of the year are pretty good.

If money doesn’t matter…head to Key West
There’s no question the Conch Republic is a destination high on just about everyone’s list. Couple that with a limited supply of rental properties, and you’re guaranteed a great investment no matter where you buy. If you want to be the first to catch the eye of vacationers, however, Vacasa suggests going for properties with classic cottage charm and inviting outdoor spaces (bonus points for a pool), and finding one with a transient license in place if you want to rent short-term. Homes here go for a hefty median price of $763k, but you can expect to earn back an average income of $46,279 after operating costs annually, making the home well worth the cost if you can swing it.