I recently read a MSN article on vacation rental markets, http://realestate.msn.com/10-hottest-vacation-real-estate-markets, and wanted to discuss an important topic. When reading real estate blogs for investment advice, it's very important to remember most of these articles are written to be more general. In order to appeal to a broader audience, the writer typically focuses on discussing real estate trends on a national level. The biggest drawback to this approach is they focus on article topics which generate hits to boost their advertising banners and therefore revenues. There is nothing wrong with the big national real estate blogs. I read them all the time, but it's important to understand they only tell a part of the story. Have you ever noticed that the major real estate blogs rarely provide you with information you can actually use? That's because their content is too generalized to allow people to make solid real estate investments in localized real estate markets. It's true that real estate is influenced on a macro level, but it is critical that it be analyzed at the local level.

In this article, the writer discusses the “TOP TEN” vacation markets in terms of just one statistic, the price per square foot for living space. He generalizes that the second home market is down a greater percentage than the primary home market and is therefore a better market. I believe this statement is a more direct result of the strict lending requirements currently in place for purchasing second homes and therefore is not a function of the general vacation real estate market.

Although, the Outer Banks vacation real estate market did not make the “top ten” list this time, from an investment standpoint, vacation rental homes here have one of the highest returns per dollar. It is one thing to look at the investment strictly from a cost per square foot basis. For example, SAGA is currently building an oceanfront property that is 5,000 square feet with a construction cost nearing $2.1M. Using his analogy, we would simply analyze a $420/sqft price in order to determine if this is a solid investment option. What is not taken into consideration is that this home will generate over $250,000 in gross annual revenues. This high sustainable income makes this oceanfront property a much better long-term investment than any of the examples he cited in his "Top Ten" market.