When it comes to picking out a vacation house, different factors come into play depending on one's financial goals. Those looking to spend a lot of time there but rent it out occasionally generally pick popular vacation spots near where they live while investors are always on the lookout for new under-the-radar destinations before someone else discovers them.
"I'd recommend that interested buyers consider their lifestyle and how they plan to use their home, how often and who will take care of it when they're not there," Austin Allison, co-founder of the vacation home property platform Pacaso, recently told USA Today. "There are nearly 10 million second homes in the U.S. and the majority sit empty 10 to 11 months of the year."
In its annual Best Places to Invest report, rental data analytics provider AirDNA looked at factors such as rental demand, real estate growth over the last year, local regulation laws and how much revenue a property is expected to generate.
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This year, the city of Fairbanks, Alaska, came out on top as the best place in the country to invest. The 32,000-person town attracts tourists as the starting point where they start exploring the state -- the average vacation property rented out full-time generates $49,000 a year at an average daily rate of $198.
At $148,000, the typical home is low enough for many people looking to break into the rental market. The 65% occupancy rate also means one's investment is unlikely to sit empty.
"Visitors come to experience the natural beauty of the area, including the northern lights, the midnight sun, and the nearby national parks," write the study's authors.
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Another highly-ranked destination is Evansville, Ind. The city on the Ohio River has been attracting more and more visitors looking to see the archaeological Angel Mounds State Historic Site but has a relatively low entry price of just $116,000.
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The average home rented out full-time, meanwhile, generates an average $27,000 a year at an average daily rate of $129.
"Current market conditions are complex, but it can be the right time to invest in the right property, in the right market," AirDNA's VP of Research Jamie Lane said in a statement on the findings.
Two cities in Illinois, Rockford and Springfield, rounded out the top five along with New York's Burdett. The picturesque town is popular among those traveling north for skiing or to Seneca Lake in the summer but is below others due to its higher entry point.
A typical vacation property costs $244,000 but can generate an annual average of $77,000 at $345 a night.
"Visitors are drawn to Burdett for its charming, small-town atmosphere and its proximity to popular destinations such as the Finger Lakes and Watkins Glen State Park," write the study's authors. "The Finger Lakes Trail, a 584-mile footpath that winds through the southern Finger Lakes region, also runs through the village center of Burdett. Furthermore, with an average daily rate of $345, guests are willing to pay premium prices to experience the beauty of this picturesque paradise."
SEE THE FULL LIST OF INCOME-GENERATING VACATION RENTAL DESTINATIONS HERE.
