Best Beach Towns for Vacation Rental Investment

Beach vacation rentals combine the appeal of coastal real estate with the income potential of short-term rentals. The right beach town delivers high occupancy, premium nightly rates, and long-term appreciation. The wrong choice means seasonal headaches, regulatory battles, and poor returns.

This guide identifies the best beach towns for vacation rental investment in 2026, analyzing regulations, demand patterns, competitive dynamics, and financial performance.

What Makes a Great Beach Vacation Rental Market?

Year-Round Appeal: Markets with multiple seasons (summer beach, fall events, winter snow birds) maintain higher annual occupancy than purely summer destinations.

Regulatory Environment: Permissive short-term rental regulations are essential. Many beach towns have banned or severely restricted vacation rentals.

Supply-Demand Balance: Oversaturated markets drive down rates and occupancy. Undersupplied markets offer opportunity.

Accessibility: Proximity to major airports and drivable from population centers increases demand.

Amenities and Activities: Beyond the beach, attractions like dining, nightlife, water sports, and family activities drive bookings.

[Property Management](/blog/property-management-complete-guide) Ecosystem: Markets with established property management create easier passive income.

Insurance and Financing: Some coastal areas face insurance challenges that affect profitability.

Top Beach Towns for Vacation Rental Investment

1. Gulf Shores / Orange Beach, Alabama

Overall Grade: A

Alabama's Gulf Coast offers the rare combination of beautiful beaches, permissive regulations, and affordable entry.

Key Metrics:

• Average ADR (Average Daily Rate): $285
• Peak season occupancy: 85%+
• Annual occupancy: 60-65%
• Median condo price: $385,000
• [STR regulations](/blog/best-states-for-airbnb-investing): Permissive with registration

Why It Works:

• White sand beaches rival Florida's best
• Drive market from Atlanta, Nashville, Birmingham, Memphis
• No [state income tax](/blog/states-with-no-income-tax-investing) benefits investors
• Lower property costs than Florida Panhandle
• Established vacation rental culture

Revenue Potential: A well-managed 2-bedroom condo generates $45,000-65,000 annually in gross rents. After expenses, expect $15,000-25,000 net cash flow on a 25% down conventional investment.

Investment Strategy:

• Target Gulf-front condos in newer buildings
• Orange Beach offers slightly better beaches than Gulf Shores
• Avoid older buildings with deferred maintenance
• Budget for [hurricane insurance](/blog/hurricane-insurance-guide) (~$3,000-5,000 annually)

Regulatory Environment: Business license required, occupancy tax collected, but no caps on licenses or rental days. Favorable climate for investors.

Risks: Hurricane exposure requires proper insurance. Summer-heavy demand means off-season is slow.

2. Destin / 30A, Florida

Overall Grade: A

Florida's Emerald Coast represents the premium beach rental market with incredible beaches and affluent clientele.

Key Metrics:

• Average ADR: $425 (30A), $315 (Destin)
• Peak season occupancy: 90%+
• Annual occupancy: 65-70%
• Median home price: $850,000 (30A), $550,000 (Destin)
• STR regulations: Permissive in unincorporated Walton County

Why It Works:

• Stunning white sand, turquoise water (30A)
• Affluent clientele willing to pay premium rates
• Drive market from Southeast + flights to Destin airport
• Established vacation rental ecosystem
• Year-round appeal (fall and spring popular)

Revenue Potential: 30A homes generate $100,000-200,000+ in gross rents. Destin condos produce $55,000-85,000. Net returns of 6-8% on purchase price are achievable.

Investment Strategy:

• 30A commands premium rates but requires $1M+ investment
• Destin offers more affordable entry with solid returns
• Gulf-front commands 30-50% rate premium over non-gulf
• Newer properties rent better than older
• Pool adds 15-25% to rental income

Regulatory Environment: Walton County (30A) remains vacation-rental friendly. Destin city has stricter rules but still allows STRs. Monitor local politics.

Risks: High acquisition costs. Insurance crisis in Florida has driven costs up 200-300%. Hurricane exposure. Competitive market requires professional management.

3. Myrtle Beach, South Carolina

Overall Grade: A-

The "Grand Strand" offers affordable entry with high volume demand from drive markets.

Key Metrics:

• Average ADR: $195
• Peak season occupancy: 80-85%
• Annual occupancy: 55-60%
• Median condo price: $245,000
• STR regulations: Permissive with business license

Why It Works:

• Most affordable beach market with scale
• Massive drive market (Charlotte, Raleigh, Atlanta)
• Family-friendly attractions (golf, entertainment, dining)
• Established vacation rental market
• Value-oriented travelers provide consistent demand

Revenue Potential: 2-bedroom oceanfront condo generates $30,000-45,000 gross rents. Newer properties in North Myrtle reach $50,000+. Cash-on-cash returns of 8-12% achievable.

Investment Strategy:

• North Myrtle Beach (quieter, newer developments)
• Oceanfront vs ocean-view creates 40% rate differential
• Newer buildings (post-2000) perform better
• Avoid older, dated properties in central Myrtle

Regulatory Environment: Business license required, hospitality tax collected. Generally landlord-friendly with minimal restrictions.

Risks: Lower-end market means wear-and-tear. Hurricane exposure. High supply means competition keeps rates moderate.

4. Outer Banks, North Carolina

Overall Grade: A-

North Carolina's barrier islands offer natural beauty and strong summer demand.

Key Metrics:

• Average ADR: $365
• Peak season occupancy: 85-90%
• Annual occupancy: 45-50% (highly seasonal)
• Median home price: $625,000
• STR regulations: Vary by town, generally permissive

Why It Works:

• Unique barrier island geography (no high-rises)
• Affluent Mid-Atlantic market
• Large homes suited for multi-family gatherings
• Less commercial than Myrtle Beach
• Historical and natural attractions

Revenue Potential: Large 5-6 bedroom homes generate $65,000-120,000 in summer season alone. Annual gross of $80,000-140,000 common for well-positioned homes.

Investment Strategy:

• Focus on towns with beach access (Duck, Southern Shores, Kill Devil Hills)
• Larger homes (5+ bedrooms) capture group bookings
• Oceanfront commands massive premium
• Pool essential in this market
• Pet-friendly adds 15-20% more bookings

Regulatory Environment: Most towns allow vacation rentals with registration. Some restrict number of unrelated occupants. Nags Head and Kill Devil Hills most permissive.

Risks: Highly seasonal (June-August dominates). Hurricane exposure. Erosion issues on northern beaches. Higher maintenance on older beach boxes.

5. Siesta Key / Anna Maria Island, Florida

Overall Grade: B+

Florida's Gulf Coast islands offer pristine beaches with more complex regulations.

Key Metrics:

• Average ADR: $375 (Siesta Key), $425 (Anna Maria)
• Peak season occupancy: 80-85%
• Annual occupancy: 60-65%
• Median home price: $895,000 (Siesta Key), $1.1M (Anna Maria)
• STR regulations: Restrictive and tightening

Why It Works:

• Siesta Key has #1 rated beach in U.S.
• Affluent clientele, premium rates
• Year-round Florida appeal
• Close to Sarasota (culture, dining, airport)
• Less crowded than Clearwater or Naples

Revenue Potential: Homes generate $75,000-150,000 gross rents. Condos produce $45,000-75,000. Strong cash flow if you navigate regulations.

Investment Strategy:

• Anna Maria Island stricter regulations; grandfathered properties command premium
• Siesta Key allowing STRs in some zoning districts
• Pre-1977 properties often grandfathered
• Verify rental legality before purchase (critical)

Regulatory Environment: Anna Maria Island has strict licensing caps and residency requirements. Siesta Key (Sarasota County) allows in some areas but restrictions tightening. Due diligence essential.

Risks: Regulatory risk #1 concern. Insurance costs rising. High acquisition prices. Hurricane exposure.

6. Cannon Beach / Seaside, Oregon

Overall Grade: B+

Oregon Coast offers unique Pacific Northwest beach experience with year-round appeal.

Key Metrics:

• Average ADR: $295
• Peak season occupancy: 75-80% (summer)
• Annual occupancy: 55-60%
• Median home price: $685,000 (Cannon Beach), $425,000 (Seaside)
• STR regulations: Permitted with city license

Why It Works:

• Stunning coastline, iconic Haystack Rock
• Portland drive market (90 minutes)
• Year-round appeal (storm watching, summer beach)
• Oregon has no sales tax
• Less competition than [California](/blog/california-heloc-guide) coast

Revenue Potential: Cannon Beach homes produce $55,000-95,000 gross rents. Seaside more affordable with $40,000-65,000 potential.

Investment Strategy:

• Cannon Beach premium market, Seaside value market
• Ocean view essential (weather often cloudy)
• Hot tub adds significant value (cold climate)
• Dog-friendly properties book better (beach-loving pet owners)

Regulatory Environment: Both cities require vacation rental licenses with application processes. Caps on new licenses in some areas. Existing licenses generally renewable.

Risks: Cool, rainy climate limits summer season. Property taxes relatively high. Tsunami zone (coastal properties).

7. Cape May, New Jersey

Overall Grade: B

Jersey Shore's southernmost town offers Victorian charm and established vacation market.

Key Metrics:

• Average ADR: $315
• Peak season occupancy: 80-85%
• Annual occupancy: 40-45% (highly seasonal)
• Median home price: $725,000
• STR regulations: Permitted with zoning compliance

Why It Works:

• Historic Victorian architecture
• Philadelphia/DC/NYC drive markets
• Family-friendly beach culture
• Wine region nearby
• Less crowded than northern Jersey Shore

Revenue Potential: Victorian homes generate $50,000-85,000 in peak summer season. Annual gross $60,000-100,000 depending on property.

Investment Strategy:

• Close to beach critical (few rent far from ocean)
• Victorian charm adds rental appeal
• Larger homes (4+ bedrooms) capture family market
• Pool very valuable in this market

Regulatory Environment: Short-term rentals permitted in residential zones with proper licensing. More restrictive than Florida but manageable.

Risks: Highly seasonal (Memorial Day to Labor Day). High property taxes (New Jersey). Expensive market with moderate returns.

8. South Padre Island, Texas

Overall Grade: B

Texas Gulf Coast island offers year-round warmth and permissive regulations.

Key Metrics:

• Average ADR: $245
• Peak season occupancy: 75-80%
• Annual occupancy: 55-60%
• Median condo price: $315,000
• STR regulations: Permissive with business license

Why It Works:

• Southernmost Texas beach, warmest water
• Strong Texas drive market (Houston, Austin, San Antonio)
• Spring break destination adds mid-season revenue
• Affordable entry compared to Florida
• No state income tax

Revenue Potential: Condos generate $35,000-55,000 gross rents. Beachfront homes produce $60,000-90,000. Solid cash-on-cash returns of 7-10%.

Investment Strategy:

• North end of island (quieter, family-oriented)
• Beachfront vs bay-side significant rate difference
• Condo easier to manage than single-family
• Target newer construction

Regulatory Environment: City requires STR permit and hotel occupancy tax collection. Generally landlord-friendly.

Risks: Spring break creates wear-and-tear and neighbor issues. Hurricane exposure. Border location occasionally raises concerns.

9. Tybee Island, Georgia

Overall Grade: B

Savannah's beach offers southern charm with modest vacation rental returns.

Key Metrics:

• Average ADR: $265
• Peak season occupancy: 70-75%
• Annual occupancy: 50-55%
• Median home price: $595,000
• STR regulations: Permitted with business license

Why It Works:

• Close to historic Savannah (tourism synergy)
• Southeast drive market
• Year-round moderate climate
• Laid-back island vibe
• Less crowded than Florida beaches

Revenue Potential: Homes generate $45,000-70,000 gross rents. Cash flow moderate due to higher acquisition costs.

Investment Strategy:

• North or south end beaches (quieter)
• Larger homes for family reunions, weddings
• Proximity to beach critical
• Golf cart included adds booking appeal

Regulatory Environment: Business license required. Occupancy limits apply. Generally permissive but monitor local politics.

Risks: Moderate returns relative to investment. Competition from Savannah hotels. Hurricane exposure.

10. Ocean City, Maryland

Overall Grade: B-

Mid-Atlantic beach destination with high volume, moderate rates.

Key Metrics:

• Average ADR: $235
• Peak season occupancy: 80%
• Annual occupancy: 35-40% (very seasonal)
• Median condo price: $295,000
• STR regulations: Permitted with license

Why It Works:

• Massive drive market (DC, Baltimore, Philadelphia)
• Affordable family destination
• Boardwalk and attractions
• Established vacation rental culture

Revenue Potential: Condos produce $30,000-50,000 in compressed summer season. Annual income limited by short season.

Investment Strategy:

• Oceanfront commands premium
• North end quieter, south end has boardwalk
• Condo easiest entry point
• Pet-friendly adds bookings

Regulatory Environment: City license required with inspections. Generally allows vacation rentals but monitor regulations.

Risks: Extremely seasonal (summer only). Maryland property taxes moderate. Older building stock.

Honorable Mentions

Clearwater Beach, FL: Beautiful but increasingly restricted regulations.

Hilton Head, SC: Strong market but expensive entry, HOA restrictions common.

Newport, RI: Premium market, very seasonal, high costs.

Key West, FL: Regulations increasingly restrictive, expensive.

Santa Barbara, CA: Expensive, restrictive regulations.

San Diego beaches, CA: Strong demand but regulatory challenges.

Regulatory Risk: The Biggest Threat

The #1 risk to beach vacation rentals is changing regulations. Many beach towns are restricting or banning short-term rentals due to resident complaints about noise, parking, and housing availability.

High-Risk Regulatory Environments:

• California coast (most cities restricting)
• Miami Beach (caps, restrictions)
• Key West (limiting new licenses)
• Many Outer Banks towns considering restrictions

Lower-Risk Environments:

• Gulf Shores/Orange Beach
• Walton County, FL (30A)
• Myrtle Beach area
• South Padre Island

Due Diligence Essential:

• Verify STR legal before purchase
• Get documentation of legal non-conforming status if applicable
• Monitor city council meetings for proposed restrictions
• Join local STR advocacy groups
• Budget for possibility of losing STR ability

Financial Analysis Framework

Gross Rental Income: Conservative estimate using 50th percentile of comparable properties on AirDNA or similar data.

[Operating Expenses](/blog/net-operating-income-guide) (typically 45-55% of gross income):

• Property management: 20-30% of gross rents
• Cleaning: $125-200 per turnover
• Maintenance: 10-15% of gross rents
• Utilities: $250-500/month (investor pays)
• HOA fees: Varies widely
• Property tax and insurance
• Supplies and amenities
• Platform fees (Airbnb/Vrbo): 3-5%

Cash Flow: Gross income minus operating expenses minus debt service.

Returns to Target:

• Cash-on-cash return: 8-12% (good), 12%+ (excellent)
• Cap rate (if buying cash): 6-8% (good), 8%+ (excellent)

Investment Strategy Recommendations

For Maximum Cash Flow: Gulf Shores, Myrtle Beach, South Padre—affordable entry, solid occupancy, permissive regulations.

For Appreciation: Destin/30A, Outer Banks—premium markets with constrained supply.

For Stability: Established markets with long STR history—Gulf Shores, Myrtle Beach, Outer Banks.

For Year-Round Income: Florida Gulf Coast, South Padre—winter demand supplements summer.

For Affordable Entry: Myrtle Beach, Ocean City, South Padre—under $350,000 entry possible.

Mistakes to Avoid

Buying Without Verifying STR Legality: Many buyers discover post-purchase their property can't be rented short-term.

Underestimating Expenses: Beach properties have higher maintenance, insurance, and management costs than long-term rentals.

Ignoring Hurricane Risk: Proper insurance is expensive but essential. One uninsured hurricane wipes you out.

Buying Too Far From Beach: "Beach vacation" means beach proximity. Inland properties don't rent well.

Overestimating Occupancy: Use conservative estimates. First-year occupancy typically 10-15% below market average as you build reviews.

Neglecting Property Management: Self-managing from distance rarely works. Budget for professional management.

Conclusion

Beach vacation rentals offer compelling returns when executed properly. The best markets combine permissive regulations, strong demand, reasonable acquisition costs, and professional management ecosystems.

Gulf Shores/Orange Beach and Destin/30A lead for Gulf Coast investors. Myrtle Beach and Outer Banks dominate the Atlantic. Each offers distinct advantages depending on budget, risk tolerance, and return objectives.

Regulatory risk represents the primary threat. Always verify current regulations, budget conservatively, and maintain flexibility to pivot to long-term rentals if STR restrictions tighten.

The beach vacation rental market rewards careful research, conservative underwriting, and professional management. Properties in the right markets generate substantial cash flow while appreciating over time—building wealth through both income and equity growth.

Choose locations with sustainable demand, manageable regulatory environments, and room for error in your financial projections. The ocean isn't going anywhere, but regulations, insurance costs, and competitive dynamics change constantly. Position in markets with structural advantages that endure regardless of short-term fluctuations.

Related Articles

• Property Taxes Explained: How They Work and How to Reduce Them
• [[How to Calculate Cap Rate](/blog/cap-rate-explained): Examples and When It Matters](/blog/calculating-cap-rate-guide)
• [Cap Rate Explained: The Complete Beginner's Guide to [Capitalization Rate](/blog/calculating-cap-rate-guide)](/blog/cap-rate-explained-for-beginners)