When it comes to purchasing a holiday rental property, location is a major factor, which is why Florida is a top pick for many. The state is known for its warm weather throughout the year, stunning white sandy beaches, and numerous attractions.
However, the decision to buy a vacation home as a short-term rental (STR) in Florida should also consider aspects such as cap rate, median house sale price, net operating income, and understanding STR regulations.
In this report, we’ve ranked the prime locations for investing in a vacation home in Florida, using aggregate cap rate as our basis – the ratio of a property’s net operating income to its sale price.
To calculate the net operating income, we first determined the gross rental income for each market. We then deducted each market’s average operating costs, including things like management fees and property taxes. Finally, we divided these numbers by the historical costs of purchasing a vacation rental to get the cap rates for each market.
Knowing the cap rate can assist you in making an informed decision about where to purchase a vacation home.
| Rank | Market | Cap rate | Median sale price |
|---|---|---|---|
| 1 | Kissimmee | 6.9% | $250,046 |
| 2 | Port St. Joe | 6.2% | $343,236 |
| 3 | Navarre | 6.1% | $382,392 |
| 4 | Panama City Beach | 5.6% | $289,757 |
| 5 | Amelia Island | 5.3% | $460,172 |
| 6 | Pensacola Beach | 5.1% | $455,883 |
| 7 | Key West | 5.1% | $652,530 |
| 8 | Destin | 4.7% | $476,332 |
| 9 | Miramar Beach | 4.6% | $415,886 |
| 10 | Middle Keys | 4.5% | $537,839 |
1. Kissimmee
| Category | Value |
|---|---|
| Cap rate | 6.9% |
| Median sale price | $250,046 |
| STR market size | 32,673 |
| Market annual gross rental revenue | $36,960 |
Kissimmee frequently appears on our top places to buy reports due to its many attractions. Located near Davenport, it offers a range of activities, including Walt Disney World Resort, Universal Studios Resort, and LEGOLAND. Old Town Kissimmee offers a serene experience with beautiful brick streets and tall trees.
For adventure seekers, there are options like hiking, biking, canoeing, and kayaking. With a cap rate of 6.9% and median home prices around $250,000, Kissimmee delivers both in terms of vacation rental income and guest experiences.
2. Port St. Joe
| Category | Value |
|---|---|
| Cap rate | 6.2% |
| Median sale price | $343,236 |
| STR market size | 774 |
| Market annual gross rental revenue | $42,513 |
Rebounding from the devastation of Hurricane Michael, Port St. Joe lands at the #2 spot on our list. Known for its hospitable residents and beautiful white-sand beaches, visitors can enjoy a range of activities such as swimming, snorkeling, and fishing at Cape San Blas Park.
Although the average home sale price is a bit higher than surrounding areas, the annual vacation rental revenue also sits higher at just over $42,000.
3. Navarre
| Category | Value |
|---|---|
| Cap rate | 6.1% |
| Median sale price | $382,392 |
| STR market size | 615 |
| Market annual gross rental revenue | $45,325 |
Located in the northwest of Florida, Navarre offers 12 miles of beautiful shoreline, clear emerald waters, and relaxation. The stunning beaches are consistently rated among the best in the country.
Activities include paddleboard yoga and fishing along the longest fishing pier in Florida. Although the STR market is smaller in Navarre, raising the median sale price to $382,000, the investment is worth it.
4. Panama City Beach
| Category | Value |
|---|---|
| Cap rate | 5.6% |
| Median sale price | $289,757 |
| STR market size | 6,730 |
| Market annual gross rental revenue | $35,441 |
Also known as PCB, Panama City Beach is ideal for both families and solo travelers. The area boasts many attractions against the backdrop of the stunning Panhandle beaches. Shopping and dining options abound at the Pier Park Mall.
Family-friendly attractions like Ripley’s Believe It or Not and Gulf World Marine Park offer unique experiences. A spacious condo costs around $300,000 but delivers a healthy cap rate of 5.6%.
5. Amelia Island
| Category | Value |
|---|---|
| Cap rate | 5.3% |
| Median sale price | $460,172 |
| STR market size | 848 |
| Market annual gross rental revenue | $46,872 |
Situated off the northeast coast of Florida, Amelia Island is a barrier island that offers a variety of experiences. Golf enthusiasts will find courses for all skill levels, while others can relax in one of the island’s spas. The dining scene is diverse, offering everything from fresh sushi to Southern cuisine.
Although all Florida destinations are family-friendly, Amelia Island is perfect for guests seeking a peaceful retreat. The median home sale price on Amelia Island is around $450,000.
6. Pensacola Beach
| Category | Value |
|---|---|
| Cap rate | 5.1% |
| Median sale price | $455,883 |
| STR market size | 1,354 |
| Market annual gross rental revenue | $45,330 |
Pensacola Beach, situated in the northwest corner of Florida, is renowned for its vibrant beach scene. The area is alive with beachfront bars, restaurants, and live music accompanying stunning sunsets over the ocean.
Guests can enjoy the sun-soaked coastline, which boasts an average of 343 days of sunshine and 72-degree ocean temperatures, while observing the local wildlife on the Footprints in the Sand Eco-Trail. The colorful vacation homes and condos in the area can generate approximately $45,000 in annual vacation rental income.
7. Key West
| Category | Value |
|---|---|
| Cap rate | 5.1% |
| Median sale price | $652,530 |
| STR market size | 1,254 |
| Market annual gross rental revenue | $59,323 |
Positioned at the southernmost point of the U.S., Key West is celebrated for its sunny beaches, vibrant nightlife, historic landmarks, and excellent cuisine. Visitors can enjoy the area’s colorful ambiance and a sense of nostalgia.
This vibe is best captured while strolling along Duval Street, which is the heart of Key West, filled with restaurants, shops, famous bars, and attractions. The area’s beautiful waters can be experienced through various means such as sailboats, jet boats, kayaks, paddleboards, or parasailing.
The average home sale price in Key West is the highest on our list, over $650,000, but the average vacation rental income of $60,000 may balance out the initial investment.
8. Destin
| Category | Value |
|---|---|
| Cap rate | 4.7% |
| Median sale price | $476,332 |
| STR market size | 4,072 |
| Market annual gross rental revenue | $44,199 |
Known as the “world’s luckiest fishing village,” Destin offers more than just a great catch. While many choose to charter a boat for fishing, others prefer snorkeling or scuba diving to observe the abundant marine life, which includes colorful fish, sea turtles, and nurse sharks.
On land, Destin provides some of the best shopping and dining experiences in Florida. With over 4,000 short-term rentals in the area, buyers are sure to find something that suits their preferences.
9. Miramar Beach
| Category | Value |
|---|---|
| Cap rate | 4.6% |
| Median sale price | $415,886 |
| STR market size | 3,993 |
| Market annual gross rental revenue | $39,618 |
This neighborhood in South Walton is a quintessential Florida gem. The best way to enjoy a vacation in Miramar Beach might be to simply relax and soak in the sun on the beautiful Emerald Coast. The area offers an array of water activities, fishing, boating, and the Emerald Bay Golf Club for golf enthusiasts.
Local homes often come with access to tennis courts and swimming pools. Shoppers can visit the popular Silver Sands outlets, or find relaxation at Spa Sandestin. This market offers a steady cap rate of 4.6%.
10. Middle Keys
| Category | Value |
|---|---|
| Cap rate | 4.5% |
| Median sale price | $537,839 |
| STR market size | 944 |
| Market annual gross rental revenue | $47,004 |
The final destination on our top Florida markets is the Middle Keys. As the name suggests, they are located in the middle of the Florida Keys. This area is breathtaking, with stunning waterways and iconic bridges such as the Seven Mile Bridge.
Among the many places to visit are Conch Key, Duck Key, Grassy Key, and Marathon, but a trip to the snorkeler’s paradise of Sombrero Reef is a must. After a day of water activities, guests can enjoy fresh seafood and a refreshing beverage while enjoying the stunning view of the shore.
This market can yield just over $47,000 in annual gross vacation rental revenue.
FAQ
Why is Florida considered a good location for vacation home investments?
Florida is a popular destination for tourists due to its warm climate, beautiful beaches, and a variety of attractions. This makes it a desirable location for vacation home investments. Furthermore, factors such as cap rate, median house sale price, and net operating income also make Florida a lucrative place for vacation home investments.
What is a cap rate and why is it important for vacation home investments?
A cap rate, or capitalization rate, is the ratio of a property’s net operating income to its sale price. It’s a crucial factor for vacation home investments as it can help you assess the profitability of the property and make an informed decision about where to purchase.
How is the net operating income of a property calculated?
The net operating income of a property is calculated by first determining the gross rental income for each market. Then, average operating costs such as management fees and property taxes are deducted. This number is then divided by the historical cost of purchasing a vacation rental to get the cap rate for each market.
Why does Kissimmee frequently appear on top places to buy reports?
Kissimmee is located near many popular attractions such as Walt Disney World Resort, Universal Studios Resort, and LEGOLAND, making it an attractive location for tourists. It also offers various activities like hiking, biking, canoeing, and kayaking, providing a rich experience for vacationers.
Furthermore, with a cap rate of 6.9% and median home prices around $250,000, it delivers both in terms of vacation rental income and guest experiences.
What unique experiences does Panama City Beach offer to vacationers?
Panama City Beach, also known as PCB, is ideal for both families and solo travelers. The area is filled with attractions set against the backdrop of stunning Panhandle beaches. For shopping and dining, there’s the Pier Park Mall. Family-friendly attractions like Ripley’s Believe It or Not and Gulf World Marine Park offer unique experiences.
What makes Amelia Island a perfect location for a peaceful retreat?
Located off the northeast coast of Florida, Amelia Island is a barrier island that offers a variety of relaxing experiences. Golf enthusiasts can find courses for all skill levels, while others can unwind in one of the island’s spas. The dining scene is diverse, catering to many tastes. These features make Amelia Island an ideal location for guests seeking a peaceful retreat.
What activities can tourists enjoy in Destin besides fishing?
Destin, known as the “world’s luckiest fishing village,” offers a range of activities beyond fishing. Visitors can snorkel or scuba dive to observe the abundant marine life, which includes colorful fish, sea turtles, and nurse sharks. On land, Destin provides some of the best shopping and dining experiences in Florida.
Conclusion
In conclusion, Florida provides a host of lucrative opportunities for investing in vacation home rentals. With a wide variety of attractions and activities, each city presents a unique opportunity to generate substantial rental income.
Whether it’s the theme park mecca of Kissimmee, the serene shores of Port St. Joe, or the vibrant nightlife of Key West, there’s a location to match every investor’s preference. By understanding key metrics such as cap rate and median sale price, and considering local attractions and market size, potential investors can make informed decisions to maximize their return on investment.
