Are you looking for the perfect place to start investing in vacation properties? Choosing a city is an important decision – it can be crucial for financial success.

Knowing where to begin can take a lot of work with so many options! Fortunately, we have done the research and narrowed down our top picks for cities that are ripe with opportunities when it comes to vacation rental investments.

From coastal escapes in sunny Florida to impressive mountain scenery in Montana – our list of the best cities to invest in vacation rentals will help you decide about your next vacation home rental!

What To Look for When Investing in a Vacation Rental Property

While the location is critical for short-term rentals, it is not the only factor. With vacation rental properties, owners should use a rent affordability calculator to determine rates and perform improvements that provide an experience equal to or greater than a hotel. Doing this will ensure steady bookings and income for your property.

Of course, you must also run the numbers, as not every property is a good deal. Take the time to complete a detailed analysis before you begin investing. This includes speaking with local officials, as many municipalities are cracking down on short-term rentals. The last thing you want to do is purchase a property intending to rent it out, only to find the community is voting to outlaw short-term rentals.

With that said, let's look at the best 18 cities to invest in vacation rentals.

1. Castroville, CA

If you are looking for a getaway to a small town that feels like a home away from home, look no further than Castroville, California.

Castroville is a small agricultural town located a few miles west of Monterey Bay in southern California. This small city provides many attractions, such as the scenic view along the Monterey Peninsula or watching workers unload the day's catch at Old Fisherman's Wharf.

The Annual Revenue Potential is $133,934.

2. Lakehead, CA

Lakeland is a vacation destination for people who enjoy being active.

Families interested in caverns and rock formations visit Lakehead in northern California. One of the main attractions is the Lake Shasta Caverns. Vacationers can also choose to do a boat ride or a bus tour.

The annual Revenue Potential is $66,359.

3. Manchester, CA

Manchester is on the coast of northern California. Tourists can do various outdoor activities, like visiting Coast Lighthouse, whale watching outlooks, and Fort Ross State Historic Park.

The trick with this location, as with many other locations in California, is high home prices, making it more difficult to profit with rental real estate. This is not to say you cannot make money, but finding a vacation rental property that fits your budget and can provide an income might take longer.

The Annual Revenue potential is $62,403.

4. Apollo Beach, FL

If you enjoy the ocean, owning a beach house rental property in Apollo Beach can't be beaten.

Apollo Beach is near Tampa Bay in Florida. Tourists can spend their day on the beach or visit the Apollo Beach Nature Preserve, a 63-acre nature preserve for various aquatic species, and the Manatee Viewing Center.

The annual revenue potential is $48,101.

5. Cherry Log, GA

Cherry Log may be an option for you if you're interested in investing in a mountain vacation area.

This city boasts a local barbeque favorite, The Pink Pig, and a horseback ride with Adventure Trail Rides.

The annual revenue potential is $41,399.

6. Cleveland, GA

This Cleveland is different from the city in Ohio. This Georgia city offers various activities, such as North Georgia Wildlife Park, Yonah Mountain Vineyards, and the Babyland General Hospital.

The annual gross rental revenue potential is $36,701.

7. Slade, KY

Slade is east of Lexington, KY, and offers multiple trails for hiking enthusiasts within the Red River Gorge, making it a top vacation rental location. Also, the Nada Tunnel is an exciting way to enter the Red River Gorge.

The annual revenue potential is $39,124.

8. Manistee, MI

You can find the small town of Manistee on the edge of Lake Michigan. This city has 25 miles of sandy Lake Michigan shoreline, the Manistee North Pierhead Lighthouse, and a historic theater.

If you plan to buy a vacation home here, consider adding a hot tub, as many short-term renters look for this amenity.

The annual revenue potential is $50,459.

9. Lutsen, MN

Lutsen is a quaint little town located just off Lake Superior and is a popular skiing destination, and is the perfect vacation rental for those looking to disconnect from the world. Tourists can also visit the Cascade River State Park on the north tip of Lake Superior.

The annual revenue potential is $62,635.

10. Nevis, MN

If you are looking for the world's largest Tiger Muskie, a vacation rental property in Nevis is the place to be! With access to various lakes, fishing fans will find this location a great catch. After all, there is a reason Minnesota is known as the 10,000 lakes state.

The annual revenue potential is $30,297.

11. Two Harbors, MN

Two Harbors is another city off of Lake Superior. Whether you're out-of-state tourists or medical school students driving from the Mayo Clinic, Two Harbors provides attractions like Gooseberry Falls State Park and the Split Rock Lighthouse. While there aren't white sandy beaches like in Florida, this is a cheaper beach vacation for many families.

The annual revenue potential is $32,355.

12. West Glacier, MT

Vacationers seeking wilderness and solitude perfectly match the Glacier National Park in West Glacier. This location offers endless outdoor adventure options, from hiking to fly fishing and more. Visitors can also do a boat tour or rafting on the Flathead River.

A must-have for vacation homes here is a jacuzzi. Many potential renters filter by this feature, so by not having one, you could have the ideal house for a family vacation and never show up in the search results of vacation rental sites.

The annual revenue potential is $49,291.

13. Tuckasegee, NC

In western North Carolina, Tuckasegee offers many outdoor activities for nature lovers.

Tuckasegee has the largest stair-step reservoir at Bear Creek Lake, a popular destination for anglers and boaters. There are also Class II rapids that are gentle enough for kayaking or canoeing. Its location also allows renters to enjoy the Great Smoky Mountains in Tennessee.

The annual gross revenue potential is $38,188.

14. Rockbridge, OH

One might not think of a smaller town in Ohio as a prime vacation rental market, but here it is.

Rockbridge is just south of Columbus, OH. High Rock Adventures and Hocking Hills Canopy Tours are some of the many tourist attractions in Rockbridge.

The annual revenue potential is $45,447.

15. Pocono Summit, PA

Pocono Summit is located on the east side of Pennsylvania and draws vacationers in all four seasons. There's a wide range of attractions, from water parks to ski slopes and stunning state parks.

The most important thing for potential vacation rental owners in this location is contacting local officials. Many municipalities in this region are cracking down on the short-term rental market by placing ordinances that discourage or outright ban them.

The annual revenue potential is $55,023.

16. Whitwell, TN

Tennessee is becoming one of the most popular states to move to, and along with that comes the popularity of vacationing here. The state is seeing a hotter-than-usual real estate market, so finding a good deal on a vacation investment property could be challenging. Still, there are areas to consider.

Whitwell is 24 miles northwest of Chattanooga. Outdoor activities include the Canoe Kayak Chattanooga and the Sequatchie Valley Institute. Families wanting to enjoy more of mother nature will be interested in booking their next trip here.

The annual revenue potential is $35,116.

17. Denison, TX

In some cases, people choose to vacation in an area outside of the major city they are visiting to cut down on costs. Denison could fit this description for those looking to travel to Dallas.

Denison is north of Dallas, home to several Eisenhower Veterans Monuments and Eisenhower's Birthplace State Historical Park. Families who enjoy adding history lessons to their outdoor adventures will enjoy this place.

The annual revenue potential is $26,854.

18. Shenandoah, VA

This small town is nestled within the Blue Ridge Mountains of Virginia, making this an excellent option for those who love the outdoors.

Shenandoah is within driving distance of the Washington, D.C. metro area and features many tourist attractions, such as the Shenandoah National Park, Luray Caverns, waterparks, and wineries. There are also multiple ski resorts close by, allowing for solid income during the winter months.

The annual revenue potential is $44,426.

Tips for a Successful Vacation Property

These are the best cities to invest in vacation rentals. If you are considering buying an investment property for vacation rentals, do your homework first. Many rental property markets have seen a significant increase in investors looking into real estate investing who opt for the vacation rental industry. With more competition, home prices are higher, impacting your rental income.

To be successful in short-term rentals, especially for family vacations, you need to invest in an area that is popular but also provides activities for the whole family. Consider also that pet-friendly rental homes are in high demand, which could help you be profitable.

Remember, too, that you must contact local officials to ensure short-term rentals are legal. The good news is that the crackdown is only on these types of rentals, not long-term rentals. You could still find your vacation house if you are open to that option.

Finally, if your vacation rental home is far from where you live, consider hiring a property management company to handle your day-to-day tasks. Otherwise, your dream could turn into a nightmare.

This article was produced and syndicated by Wealth of Geeks.