Discover the 10 best cities for Airbnb in the US where real estate investors will make the highest rental income in2019!
While some real estate investors prefer to keep investing in traditional rentals, many have switched to investing in Airbnb. The main motivation behind their decision is the fact that short-term rental properties yield higher rental income than long-term ones. If you didn’t know, buying an Airbnb investment property has become one of the best ways to make money in real estate!
However, that doesn’t mean that Airbnb is the simplest or fastest way to riches. Where you decide to buy plays a huge role in what Airbnb rental income you can expect. Therefore, only real estate investors who take the time to find the best cities for Airbnb have the chance to make the highest profits. But why does the rental income from Airbnb investments vary from one city to another?
What Affects Your Airbnb Rental Income?
1. Short-Term Rental Laws and Regulations
Some cities in the US housing market are welcoming to Airbnb hosts. Others, not so much. There are legal issues surrounding short-term rentals in major cities like San Francisco, Los Angeles, and Las Vegas. In an attempt to limit Airbnb rentals, these cities only allow owner-occupants to list their primary residence on Airbnb. Consequently, this makes buying an investment property specifically to rent out on Airbnb illegal.
In addition, while other cities allow investing in vacation rentals, Airbnb hosts may be facing strict laws. From insanely high taxes to licensing and inspections costs, these reduce your rental income and bottom line return on investment. Hence, the best cities for Airbnb are those with friendly short-term rental regulations.
Airbnb real estate investors in cities of Arizona or Michigan, for example, are more likely to make more money because these states are extremely welcoming to them. In Michigan, officials are pushing to pass bills that prevent any city from banning Airbnb. This has already been done in Arizona! As a result, buying an Airbnb investment property is not only legal, but hosts are unlikely to face restrictions that affect their rental income.
2. Airbnb Occupancy Rate
An investment property’s occupancy rate is the amount of time that it is occupied by a tenant throughout the year. As logic would have it, higher Airbnb occupancy rates lead to a higher rental income. In other words, the more times out of the year your short-term rental property is booked, the higher your rental income is. Simple! However, the occupancy rate is determined by a number of factors, mainly the location.
A city with a high demand for vacation rentals will have a high Airbnb occupancy rate. So, if you’re looking to invest in vacation rentals, choose locations that have a healthy economy and strong tourism. These are the best cities for Airbnb investors looking to make a high rental income. Think about it: strong tourism means strong demand for Airbnb properties in the real estate market, meaning higher occupancy rates. In addition, the higher the demand for your Airbnb, the more you’d get to charge for nightly rates. And the higher the nightly rates, the more rental income your property will yield.
Interested in finding out what’s the average occupancy rate for Airbnb rental properties in the neighborhoods in your city? You can get this data (and more) from Mashvisor. Using our Heatmap Tool, you’ll get an overview of neighborhoods in terms of what occupancy rate, average rental income, and cash on cash return you can expect from investing in Airbnb here. This tool also provides the same data for real estate investors interested in traditional rentals as well!
To find the best cities for Airbnb using our tools, start your free trial with Mashvisor now!
3. Seasonality and Pricing Strategy
A vacation rental business is almost entirely dependent on seasons. This is one of the most essential things to consider before buying short-term rentals in a certain city. Some states (like Florida) provide excellent investment opportunities because they’re filled with tourists all year round. Tourism in other states (like Colorado), however, is seasonal. This will also influence the amount of rental income Airbnb rentals can generate. How come?
Unlike traditional landlords, Airbnb hosts don’t have a set rent price that they charge throughout the lease period. Instead, they have nightly rates which they have to adjust to attract guests. Meaning, if you want to succeed with short-term rentals, you shouldn’t set a baseline price. What you need to do is set a dynamic pricing strategy and adjust your price based on seasonality, special events, and travel trends.
For example, peak tourism seasons present an opportunity for real estate investors to maximize their rental income when the demand is high. On the other hand, you should lower your price during the offseasons to attract guests when the demand is low. Otherwise, you’ll miss out on bookings and leave profits on the table!
This is something all successful hosts do because even the best cities for Airbnb will have a high and low season. Of course, specific highs and lows for each real estate market will be different. Therefore, make sure you understand these trends in the location where you decide to invest in Airbnb and then set your price accordingly.
10 Best Cities for Airbnb Real Estate Investors
Now that we’ve covered why location is important for Airbnb real estate investors, let’s move on to our list of the best places to buy vacation rentals. According to data from Mashvisor’s Investment Property Calculator, investing in Airbnb rental properties in any of these cities will make you a monthly rental income of over $3,000! Moreover, short-term rentals here also have a good Airbnb occupancy rate. Thus, with the right pricing strategy, real estate investors have the potential to earn great cash on cash return in these 10 best cities for Airbnb.
To learn more about our tools and how we will help you make faster and smarter real estate investment decisions, click here.
Napa, California
- Median Property Price: $815,315
- Price/Square Foot: $437
- Airbnb Rental Income: $9,500
- Airbnb Occupancy Rate: 55%
- Cash on Cash Return: 8%
Sonoma, California
- Median Property Price: $530,557
- Price/Square Foot: $356
- Airbnb Rental Income: $5,765
- Airbnb Occupancy Rate: 60%
- Cash on Cash Return: 7%
Key West, Florida
- Median Property Price: $1,038,529
- Price/Square Foot: $738
- Airbnb Rental Income: $5,562
- Airbnb Occupancy Rate: 78%
- Cash on Cash Return: 4%
Brookline, Massachusetts
- Median Property Price: $599,000
- Price/Square Foot: $532
- Airbnb Rental Income: $4,745
- Airbnb Occupancy Rate: 63%
- Cash on Cash Return: 4%
Nashville, Tennessee
- Median Property Price: $414,462
- Price/Square Foot: $203
- Airbnb Rental Income: $3,531
- Airbnb Occupancy Rate: 57%
- Cash on Cash Return: 5%
Traverse City, Michigan
- Median Property Price: $405,563
- Price/Square Foot: $258
- Airbnb Rental Income: $4,336
- Airbnb Occupancy Rate: 70%
- Cash on Cash Return: 6%
Oakland Park, Florida
- Median Property Price: $277,380
- Price/Square Foot: $199
- Airbnb Rental Income: $3,503
- Airbnb Occupancy Rate: 56%
- Cash on Cash Return: 6%
Dubuque, Indiana
- Median Property Price: $138,581
- Price/Square Foot: $97
- Airbnb Rental Income: $3,051
- Airbnb Occupancy Rate: 46%
- Cash on Cash Return: 10%
Kalamazoo, Michigan
- Median Property Price: $250,722
- Price/Square Foot: $105
- Airbnb Rental Income: $3,175
- Airbnb Occupancy Rate: 50%
- Cash on Cash Return: 5%
Portland, Maine
- Median Property Price: $489,379
- Price/Square Foot: $216
- Airbnb Rental Income: $3,051
- Airbnb Occupancy Rate: 65%
- Cash on Cash Return: 3%
To start looking for and analyzing investment opportunities in the best cities for Airbnb, click here.
Generating high rental income is a very attractive aspect of investing in Airbnb rental properties. However, as you now know, the Airbnb rental income you can expect to earn will depend on where you invest. So, to make sure you get a high Airbnb return on investment, make sure you look into investing in these best cities for Airbnb in 2019.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.