Investing in an Airbnb rental property has become a great way to earn income in real estate. In fact, in most cities, it is the optimal rental strategy an investor can pursue! For other cities, however, having an Airbnb rental property is not a good idea.
In some cities, Airbnb is very legally complex or flat-out illegal. Other cities do not have any legal issues with Airbnb, but investing in these cities does not generate much rental income.
Want to know what these bad cities are? You came to the right place. Here are the cities where Airbnb is most illegal and the cities with the lowest Airbnb rental income, based on Mashvisor’s Airbnb data.
Related: The 6 Best Cities for Airbnb Investment
Most Illegal Cities for Airbnb
Airbnb has been subject to legal criticism by some cities. Some cities have very little Airbnb legal issues. Other cities may have laws that are very incompatible with Airbnb, and investing in them can be very tedious. If you plan on investing in an Airbnb rental property in these cities, be sure to be very aware of their laws.
Related: New 2017 Airbnb Legal Issues
Legal issues are never a good thing, but there is hope for these cities. There has been a trend of legalizing Airbnb in various cities. In the meantime, however, be aware of the most illegal cities for Airbnb.
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New York City
New York City had to take the cake for this one. The Big Apple is no stranger to Airbnb, as it is the city that contains the most Airbnb listings in the U.S. Yet, it is the most controversial city with Airbnb. The city and Airbnb have been going back and forth with legal issues, with proponents of the city claiming that Airbnb has damaged the city’s housing market.
The city had also been rampant with illegal Airbnb rentals in the past, fueling the controversy. Airbnb and NYC have been cooperating to crack down on illegal rentals. However, one major legal issue remains for Airbnb hosts: the city forbids listing an entire unoccupied listing for 30 days.
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San Francisco
The Airbnb criticisms of San Francisco are like those of NYC’s. Damage to the housing market and unregistered properties (75% of them) are at the forefront of SF’s Airbnb issues. New legislation was enacted to deal with the unregistered properties problem. As it stands now, an Airbnb host in San Fran can rent out their Airbnb rental property for only 90 days per year. The host must also remain in the property while it is being rented.
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Santa Monica
Santa Monica is a city where there is no shortage of potential guests for an Airbnb rental property. However, one thing may prevent or limit an investor’s ability to do so: the city’s Airbnb laws.
The regulations and restrictions on Airbnb in the city have been called the toughest in the country by some. A 14% occupancy tax and a business license are two of the things renters must pay and obtain. To add on, Airbnb hosts must remain in the property while it is being rented. And short term rentals, like an Airbnb rental property, are forbidden unless they are 30 days or longer.
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Atlanta
Just like the three previous cities, Atlanta is a city where an investor will find plenty of potential tenants. It’s rich history, combined with its cultural events, make the city extremely attractive for Airbnb. It’s legal matters, however, are a major turn off.
Like Santa Monica, an Airbnb rental property in Atlanta will require a business license. Unlike San Monica, though, investors in Atlanta must obtain a hotel license. Zoning is also a key issue for Airbnb rentals in the city, so keep an eye on that.
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Denver
Denver, The Mile-High City, is another place that would seem like a good fit for Airbnb. Unfortunately, its Airbnb legal issues say otherwise. In order to legally run an Airbnb rental property in the city, investors need to prove whether or not the property is a primary residence.
Once proven, an investor will need to apply for a permit allowing for short term rental use. Like Atlanta and many other cities, there are many regulations regarding construction and renovation of Airbnb properties. Find out if the change you plan to make is completely legal.
Cities With the Lowest Airbnb Rental Income
Everyone seems to know about the most profitable Airbnb locations, like Philadelphia, Miami, and San Diego, among others. But what about the least profitable cities for Airbnb?
There are mentioned in the list below. To emphasize how unprofitable these cities are for Airbnb, the traditional rental income for these cities is included for comparison, as well as cash on cash returns for both strategies. If you plan on investing in these cities, DO NOT rent them through an Airbnb rental property. These cities will leave you with nothing but an empty wallet.
Hudson, FL
- Rental Income
– Airbnb: $693.64
– Traditional: $1,176.2 - Cash on cash return
– Airbnb: 0.71%
– Traditional: 3.66%
Merced, CA
- Rental Income
– Airbnb: $747.62
– Traditional: $1,145 - Cash on cash return
– Airbnb: 1.08%
– Traditional: 2.88%
Bethlehem, PA
- Rental Income
– Airbnb: $818.3
– Traditional: $1,536.25 - Cash on cash return
– Airbnb: 0.41%
– Traditional: 3.4%
Ellenville, NY
- Rental Income
– Airbnb: $826.26
– Traditional: $1,411.5 - Cash on cash return
– Airbnb: 1.97%
– Traditional: 6.98
Yonkers, NY
- Rental Income
– Airbnb: $982.50
Traditional: $2,040.29 - Cash on cash return
– Airbnb: -0.47%
– Traditional: 2.81%
These cities have a huge disparity between Airbnb and traditional rental income. In fact, the least difference was at a significant 48% (Yonkers). The other four cities’ Airbnb rental incomes were 59% (Hudson and Ellenville), 53% (Bethlehem), and a whopping 65% (Merced) lower than the traditional rental income. It’s safe to say that buying an Airbnb rental property in these cities would be a fruitless investment.
Related: 10 Most Profitable Airbnb Locations for Cash on Cash Return
Investing in an Airbnb rental property can be time consuming. You might not want to add more pressure by investing in any of these cities.
To find an Airbnb rental property in the blink of an eye, start your search on Mashvisor.