Thinking about investing in a winter rental property, but unsure where to start? A recent study by Vacasa, a property management company, crunched data on about 500,000 American rental properties to determine the 10 best American cities in which to buy a profitable winter rental. We asked the company to share an expanded list of 15 destinations for the subject of this week’s chart.
When we reported on Vacasa’s rankings last year, Ludlow, Vt., topped the list. This year another Vermont city, Killington, is number one. But that doesn’t mean you should look exclusively to the northeast for rental revenue: While eastern winter destinations tend to have lower median sale prices, making it easier to get started as a landlord, western destinations dominated the rankings both this year and last.
Like last year, locations were ranked by capitalization rate, or cap rate, a metric used to determine the profitability of rental properties. Cap rate is found by comparing a home’s sale price to what is left of the annual rental revenue after expenses are met. For example, if a home sold for $100,000 and there was $1,000 left at the end of the year after expenses, the cap rate would be 1 percent. The higher the cap rate, the more money in your pocket at year’s end.
Because the cap-rate equation does not include mortgage costs, we asked the analysts at Vacasa to calculate how buyers would do if they took a 30-year, fixed-rate loan at 4.39 percent, with a 25 percent down payment. The top five cities on the list were still likely to be profitable if properties were mortgaged, the company found.