Housing Market 2023: 10 Small Towns Where You Should Buy Vacation Property – Yahoo Finance

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Investing in a vacation rental is one of the best ways to make money in real estate, but finding the right combination of a reasonable home price and high rent demand is tricky. While big cities offer plenty of amenities for travelers, small towns can still be popular destinations for vacationers, without the big-city home prices.

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We’ve combed through data from Zillow for average home prices in small cities, as well as AirDNA to find low-priced homes that can fetch high rental income. Here are 10 small towns where you should consider buying your vacation property.

Kanokwalee Pusitanun / Getty Images/iStockphotoKanokwalee Pusitanun / Getty Images/iStockphoto

Kanokwalee Pusitanun / Getty Images/iStockphoto

Pensacola, Florida

  • Average home price: $247,364

  • Monthly revenue potential: $3,166

Located in the Florida panhandle, Pensacola is a popular vacation destination with reasonable housing prices and an in-demand rental market for vacation properties. Home to the Blue Angels and known as the “Cradle of Naval Aviation,” Pensacola has a strong military presence, as well as some amazing museums and history to explore. Home prices average around $250,000, and short-term rentals bring in over $3,000 per month on average.

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St. Augustine, Florida

  • Average home price: $452,452

  • Monthly revenue potential: $3,798

Located on the Northeast coast of Florida, St. Augustine is known as the “oldest city in America.” Founded in 1565, St. Augustine has quite a few historical sites and museums to visit. But it’s also right on the glorious Atlantic Ocean, with breathtaking beaches and miles of coastline to surf, fish and explore. St. Augustine has become popular, and housing prices are north of $450,000, but vacation rentals can bring in almost $3,800 per month on average, making it a great investment location.

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Sean Pavone / Shutterstock.com

Birmingham, Alabama

  • Average home price: $99,176

  • Monthly revenue potential: $2,051

White not quite a small town (population of almost 200,000), Birmingham has the charm of a small town with the amenities of a city. As a college town, there are quaint coffee shops, delicious local cuisine and riverfront parks that make it a great place to enjoy the outdoors. Prices don’t hurt either, with houses averaging around $100,000 and vacation rentals fetching around $2,000 per month, which can be massively profitable.

Paulaandreaonline / Getty Images/iStockphotoPaulaandreaonline / Getty Images/iStockphoto

Paulaandreaonline / Getty Images/iStockphoto

Bar Harbor, Maine

  • Average home price: $588,334

  • Monthly revenue potential: $6,130

Bar Harbor is a sleepy mariner town that offers beautiful views of Frenchman Bay, unique home architecture and proximity to Acadia National Park. While the winter is covered in snow, summers bring travelers from all over to visit the national park and enjoy destinations like Eagle Lake, Cadillac Mountain and the harbor itself. While prices around near $600,000 for houses, vacation homes can fetch over $6,000 per month in rental income.

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halbergman / Getty Images

Alpine, Texas

  • Average home price: $229,641

  • Monthly revenue potential: $2,056

Alpine, Texas, is a little-known town just outside Big Bend National Park, with a beautiful, mountainous backdrop and small-town charm. It’s one of the bigger towns near Big Bend, so it’s a great place for a vacation rental home. Home prices come in around $230,000 but can be rented out for over $2,000 per month.

SRIMAN EMANY / Getty Images/iStockphotoSRIMAN EMANY / Getty Images/iStockphoto

SRIMAN EMANY / Getty Images/iStockphoto

Shasta Lake, California

  • Average home price: $289,514

  • Monthly revenue potential: $2,520

Shasta Lake is a small town in northern California that offers access to a large reservoir (Lake Shasta), which is a popular vacation destination. Lake Shasta is known for its houseboats, allowing vacationers to travel the 365 miles of shoreline while enjoying the comforts of home. It is also known for fishing, water skiing and recreational boating, and it can keep vacation homes occupied year-round. Housing is under $300,000 and can rent for around $2,500 per month.

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Darryl Vest / Shutterstock.com

Gulf Shores, Alabama

  • Average home price: $444,535

  • Monthly revenue potential: $4,429

Gulf Shores is a beautiful waterfront destination that offers access to 32 miles of beaches along the Gulf of Mexico. It is a very popular vacation spot for travelers from the Midwest and offers many amenities you’d expect in a beach town. Housing prices average just under $450,000, but you can pull in nearly $4,500 per month for a short-term rental property, making it a solid investment opportunity.

ChrisBoswell / Getty Images/iStockphotoChrisBoswell / Getty Images/iStockphoto

ChrisBoswell / Getty Images/iStockphoto

Grand Marais, Minnesota

  • Average home price: $343,778

  • Monthly revenue potential: $4,930

Grand Marais, Minnesota, is a small lakefront town on Lake Superior, offering a wide range of local art shops, restaurants and hiking and mountain biking trails. Visitors come from all over to enjoy some peace and quiet, as well as the majesty of Lake Superior. Homes are reasonable, too, with average prices under $350,000. But during the summer months, vacation rentals can fetch almost $5,000 per month, making it a smart place to buy.

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urbancow / Getty Images

West Yellowstone, Montana

  • Average home price: $531,188

  • Monthly revenue potential: $4,477

Yellowstone National Park was the first national park and, with over 2 million acres of preserved land to explore, it is one of the most popular destinations for summer travelers. Over 3 million people visit the park each year, and they all need a place to sleep. West Yellowstone is a small town that borders Yellowstone National Park and offers a glimpse of the park, as well as access to the Yellowstone River. Prices are a bit on the higher end, with homes around $530,000, but the rent potential is nearly $4,500 per month.

Chris Rubino / Shutterstock.comChris Rubino / Shutterstock.com

Chris Rubino / Shutterstock.com

South Tucson, Arizona

  • Average home price: $185,524

  • Monthly revenue potential: $2,050

Tucson is a popular city in Arizona, but South Tucson is a much smaller town with close access to Saguaro National Park. With an elevation near 2,500 feet, it is a bit cooler than Phoenix, and the close proximity to the national park and Santa Rita mountains makes it a traveler’s paradise. Home prices are low, too, at around $185,000, and short-term rentals can make $2,000 per month.

All information was compiled on and is accurate as of April 25, 2023.

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