Rental investment review

For over a decade, Coastal Delaware has benefited from a consistently strong real estate market. This period has marked an extraordinary chapter for our small state. As we approach the height of the selling season, broader national and global economic trends are beginning to shape buyer and seller behavior—especially in coastal and higher-end markets that attract interest from across the region and beyond.

Amid ongoing stock market volatility and growing concerns about economic stability, many consumers are seeking more dependable investments. In my experience, when equities become uncertain or start to decline, people often turn to tangible assets. As a result, we’re seeing a renewed interest in alternatives like bonds, gold, and real estate—particularly properties in desirable, resilient markets like ours. As a result, investors are showing increased interest in the potential returns from our rental investments.

Short-term rental (STR) demand in Coastal Delaware continues to build as we head into peak booking season. With a potent mix of family travelers, regional vacationers, and retirees seeking extended stays, the 2025 rental market shows signs of resilience and profitability, especially in sought-after areas like Rehoboth, Bethany Beach, and Lewes.

If you're considering purchasing a rental property, listing an existing home for summer, or evaluating your portfolio, here are key figures and insights:

Opportunity by the numbers

According to AirROI, short-term rentals along the Delaware coast achieve average daily rates (ADR) of $290 to $450+ per night during peak months. While rates vary depending on location, amenities, and home size, the opportunity to generate passive income is significant.

Additionally, occupancy rates for coastal properties are robust. For example, Rehoboth Beach reaches 42%+, with investors reporting monthly peak-season revenues over $5,765. Median annual revenue is about $41,270, with high-end homes pulling in significantly more.

Moreover, summer guests are booking an average of 99 days ahead, indicating high consumer confidence and intense competition for quality inventory.

Statewide, Delaware short-term rentals are booked for an average of 175 nights per year, with a median occupancy rate of 48% and an average daily rate of $217, resulting in median annual revenue of $39,000.

What's driving this demand?

Delaware's appeal as a drive-to coastal destination continues to grow. Its beaches, charming boardwalks, and laid-back atmosphere draw families and retirees from metro areas like D.C., Philadelphia, and New York. With no need to fly, many travelers opt to stay longer, particularly those working remotely or combining vacation with flexible schedules.

Additionally, a surge in retiree migration to Sussex County has added upward pressure on the market. According to a recent article in the Cape Gazette, over 32,000 people moved to Sussex County from out of state since 2020, including 5,000 new arrivals in 2023.

This population growth drives patrons and investment. Many enter the market with significant equity and buy second homes for lifestyle and rental income.

What investors should know in 2025

If you're thinking about entering or expanding in the STR market, here are some considerations:

• Revenue potential: Properties in top-tier beach locations with updated interiors and modern design consistently outperform the market average.
  
  
• Guest preferences: Coastal guests prioritize walkability to the beach, smart-home features, EV chargers, pet-friendly policies, and dedicated outdoor space.
  
  
• Regulatory updates: Effective January 1, 2025, Delaware implemented a 4.5% statewide lodging tax on short-term rentals (defined as stays of 31 nights or less). This is in addition to any local taxes and typically collected by platforms like Airbnb and Vrbo.

Though this new tax may slightly compress margins, Delaware remains one of the most investment-friendly destinations in the region due to low property taxes, no state sales tax, and strong year-round rental demand.

If you're considering a short-term rental strategy, we'll help you identify listings with strong income potential, navigate licensing and tax questions, and connect you with experienced property managers. -Henry