Investing in a short-term vacation rental properties can be an exciting and lucrative opportunity—if you choose the right property. With sunny weather year-round and an abundance of things to do, Arizona makes the perfect place for a short-term vacation rental.
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At Coast to Cactus Vacation Homes, we’ve helped property owners navigate the complex world of vacation rentals, maximizing their returns while delivering top-tier guest experiences. Whether you’re a first-time investor or looking to expand your portfolio, here are the key factors to consider when spotting a high-performing investment property for short-term rentals.
It’s All About Location
The success of a vacation rental largely depends on where it’s located. High-demand markets with consistent tourism offer better occupancy rates and returns. Look for areas with year-round demand, attractions and amenities nearby, and regulatory friendliness. Destinations with steady tourism, like Arizona, tend to outperform more seasonal locations. Additionally. properties within walking distance of hiking trails, restaurants or tourist attractions are more desirable. Lastly, research local laws and short-term rental regulations to ensure you can legally operate in the area.
Consider Your Future Guests
Not all properties make great vacation rentals. When you’re making a purchase, consider the size and layout of the space. For example, while studio apartments may work well in urban markets, larger homes with multiple bedrooms thrive in family-friendly or group-travel destinations. Additionally, prioritize outdoor space. Private patios, pools, hot tubs and fire pits add value and attract bookings. Since the outdoor space is often the first photo guests see on listings, it can be a major selling point. Lastly, opt for homes with standout features like a mid-century modern design, panoramic views or luxury finishes as they can increase nightly rates.
Do The Calculations
Before making a purchase, analyze the numbers. You can use vacation rental data tools like AirDNA to estimate average nightly rates and occupancy in the area. From there, you can compare the purchase price of the property with potential revenue factoring in expenses such as property management, maintenance, utilities and platform fees (Airbnb, Vrbo, direct bookings). At Coast to Cactus, we recommend aiming for a cash-on-cash return of at least 8-12% in strong markets. Ideally, your property should generate positive cash flow even with conservative occupancy estimates, 50-60% occupancy is a safe benchmark.
Look at Current and Past Market Trends
Understanding seasonality is crucial. Some markets can fluctuate in demand and require careful planning to maintain profitability, based on the time of year. Check tourism reports and short-term rental analytics in your area. If your market has off-seasons, consider adjusting pricing, targeting digital nomads, traveling nurses or offering extended stays.
Think About Investing in Property Management and Automation
Even the perfect property needs strong management to succeed. Decide if you will self-manage or hire a property manager. Running a rental property involves guest communication, cleaning, marketing and maintenance. If that sounds overwhelming, professional vacation rental management (like Coast to Cactus) can help optimize performance. Additionally, automation can help you in the long run— smart locks, dynamic pricing tools and automated guest messaging improve efficiency and guest satisfaction.
A great investment property is more than just a house, it’s a strategic asset. By focusing on location, demand, financial viability and effective management, you can create a high-performing vacation rental that delivers consistent income.
At Coast to Cactus Vacation Homes, we specialize in maximizing returns for short-term rental investors. Whether you’re just starting out or looking to expand, our expert team is here to help you find and manage the right property. If you’re thinking about investing, visit us at www.coasttocactus.com.
Author: Peter Carabetta is the founder of Coast to Cactus Vacation Homes.
