Alabama's Beaches and Lakes: The Perfect Vacation Home Investments

Alabama's Beaches and Lakes: The Perfect Vacation Home Investments

When it comes to investing in a vacation home, buyers across the country flock to Alabama for some pretty sweet deals. According to a Synovus Bank listing of the top 10 places to buy a vacation home in the Southeast, Gulf Shores and Dauphin Island ranked 3rd and 4th based on vacation lifestyle, price and investment opportunity. With median home prices in those communities priced under $530,000, home buyers see Alabama as a more affordable option than pricier neighboring towns along the Florida panhandle where beach properties can cost three times as much. says the median home price in Florida’s popular Rosemary Beach is $3.97 million.  As one recent Orange Beach buyer pointed out, it’s the same shore, same sun, and same sunset.

Buyers seek a vacation home for a variety of reasons. For some, it’s a permanent vacation retreat and for others a beach home serves a dual purpose – vacation home and rental property. The gulf’s famous “snowbirds” come to Alabama’s beaches to escape freezing temperature and fall in love with the warmth of both the weather and the people. Many are able return to retire on Alabama’s coast. Retirement just feels better in the sunny south than colder climates. Retirees also find that, though temperatures soar in the summer, property taxes are low and those over 65 may pay no state property tax. Also, second homes used primarily by the owner, are assessed at only 10 percent of assessed value compared to 20 percent for a primary residence.

Lower property taxes are not lost on investors – many of whom already are Alabama residents – who look to beach properties as a positive revenue stream. Alabama‘s more affordable purchase prices help to boost an investor’s capitalization rate (cap rate) which is the rate of return on a real estate investment. A cap rate is a simple calculation: income minus expenses, divided by the purchase price. A recent Southern Living article cited a Vacasa study finding Gulf Shores the nation’s number one place to buy a vacation home based on cap rates. Vacasa, a vacation rental platform, found “an average Gulf Shores vacation home or condo costs around $400,000 and yields a cap rate of around 10.2%, resulting in around $56,000 in annual gross rental revenue,” said the Vacasa study.

Whatever the reason, 52 percent of buyers who are looking for a vacation home, are targeting beach destinations, according to a report by Vacasa.  

In Baldwin County, home to the Gulf Shores, Orange Beach, and Fort Morgan communities, population growth is evident. According to a Wall Street Journal article, Baldwin County’s growth outpaced all other Alabama counties between 2010 and 2020. In 2022, the county’s population increased by 3 percent.  

Vacation home buyers also have discovered Mobile County’s Dauphin Island, a Gulf of Mexico barrier island that boasts 16 miles of Gulf beaches. Once a quiet town inhabited mainly by residents, Dauphin Island is rapidly becoming a vacation destination. Dauphin Island ranked 5 on Travel + Leisure's list of 12 best tropical vacations in the U.S. 

Alabama’s plentiful lakes boast vacation home and investment properties that rival beaches. A recent article cited Lake Martin as the fifth hottest lakefront real estate market in the country and Smith Lake as the 8th hottest market. The 2023 “Hot Lakes” Top Ten List was released by Hoover-based Lake Homes Realty, the country’s largest lake real estate brokerage. As more lakefront communities have been developed and properties offer more amenities, demand for short-term rentals has increased as well as interest in investment properties.

Alabama residents and leisure lifestyle lovers from other states – whether they buy a vacation/retirement home or investment property – likely will find a sweet deal somewhere along Alabama’s 53 miles of Gulf beaches, pristine lakes, and scenic mountains.