If you want to buy a profitable Airbnb income property, you need to learn how to use real estate heat map analysis to your benefit.
The success of every real estate investing endeavor starts with buying the best rental property. It holds true for Airbnb rentals, which have grown in popularity in the past few years. Purchasing the best Airbnb investment property requires access to comprehensive, reliable data and analysis. This is something a heat map real estate can provide.
Table of Contents
- What Is a Heat Map in Real Estate Investing?
- What Is Heat Map Analysis in Airbnb Rental Property Investing?
- How to Use Airbnb Heat Map Analysis to Buy the Best Income Properties
- The Pros and Cons of Real Estate Heat Map Analysis for Airbnb Hosts
If you want to become a successful short term rental property investor, you’re in the right place. We will show you how to use the Mashvisor heat map. It is one of the hottest real estate tools to find the best markets and listings for this strategy.
That’s the most straightforward and secure to look for investment properties with the following:
- affordable prices
- robust rental income
- high occupancy rates
- good cash on cash return
And as you already know, these are the main factors determining a profitable investment.
But first things first. Let’s talk about the basics.
What Is a Heat Map in Real Estate Investing?
Most of us already know what a heat map is, albeit outside the context of the real estate industry. It’s been traditionally used in politics, sociology, weather, and other sectors. More recently, it’s also found widespread use in analyzing websites and their users’ behavior.
A heat map is a user-friendly, two-dimensional visual representation of data using different colors to mark different value ranges. The most important feature of this visualization tool is that it summarizes big data in a way that makes it accessible to just about everyone.
A real estate map does the same with real estate data. It provides real estate and rental data analysis and representation in a very visible and perceptible manner. Different data values are coded with different colors to show the prevailing numeric ranges in geographical regions of a real estate market.
It helps even beginner investors search for and locate the top areas for buying a money-making income property. And as all experts highlight, a successful real estate investment starts with a good location.
In the rest of this article, we will focus our discussion on the Mashvisor heat map, as this is the best real estate heat map available to investors in Airbnb (and long term) rental properties in the US.
What Does a Real Estate Heat Map Show?
There are several criteria you can use to filter your market search on the Mashvisor Airbnb hotspot map, including:
- Listing price: Although the listing price is not necessarily the exact price for buying an investment property for sale, it’s a good approximation. Naturally, the property price is a crucial factor for the ROI of your rental. It determines all major return metrics, such as the Airbnb cash on cash return and cap rate. Moreover, it affects the affordability of a market.
- Airbnb rental income: In addition to the property value, the Airbnb rental revenue is the second most important factor affecting the profitability of your short term rental property. The higher the nightly rate for your Airbnb, the higher the rental income and your return on investment.
- Airbnb occupancy rate: Additionally, the Airbnb occupancy rate shows you how much you can raise your nightly rate before this starts impacting your rental income negatively. As a successful real estate investor, you have to learn to find the balance between the nightly and occupancy rates. And that’s something analyzing an Airbnb heat map can definitely help you with.
- Airbnb cash on cash return: The cash on cash return is a profitability metric mostly used in the real estate investment business. It shows an Airbnb host what their return will be based on the money they spend in cash when buying an investment property. It is different from the cap rate, which looks at return compared to the sale price or the property’s current market value.
How Does a Heat Map Work?
The Mashvisor real estate heat map is one of the most powerful Airbnb analytics tools for short term rental market analysis. It can be applied to markets defined by the city, neighborhood, zip code, or street address.
Airbnb investors looking for the most lucrative areas can use one of the four filters mentioned above at a time. As soon as they select a filter, the heat map will become color-coded to show the locations with low and high values for this metric. The Mashvisor heat map highlights areas in the following ways:
- low-value areas in red
- high-value areas in green
- middle-value areas in different shades of yellow and orange
A legend shows the minimum value of the metric on this specific view of the heat map (in red) and the maximum value (in green).
The best thing is that our heat map works for all US markets, no matter how big or small they are.
This visual depiction replaces the need to conduct manual neighborhood analysis, which is a tedious, time-consuming, and costly process. Instead, it provides real estate investors looking for the best place to buy an Airbnb rental property with readily available analytics.
To start looking for the best markets for Airbnb income properties across the US, sign up for a 7-day free trial of Mashvisor.
A heat map analysis can be easily done with Mashvisor’s real estate heat map. It allows you to make more informed investment decisions.
What Is Heat Map Analysis in Airbnb Rental Property Investing?
In short term rental property investing, heat map analysis refers to using the data and visualizations provided by this tool to investigate the potential of a certain market. By switching between the different filters, investors can see what range of prices, income, occupancy, and ROI they can expect in other areas within the same major market.
The main benefit of this analysis is that it is very visual. It makes it extremely easy to read and comprehend. Looking at colors offers a much faster understanding of large amounts of Airbnb data and analytics. It is a lot better than looking at hundreds or even thousands of data points.
In other words, savvy Airbnb investors can use the analysis provided by the Mashvisor heat map to find the top areas for their investment needs and aspirations in a matter of minutes. Then, they can focus their Airbnb income property search on these exact locations to strike the best results.
Next, we’ll discuss how this is done exactly.
How to Use Airbnb Heat Map Analysis to Buy the Best Income Properties
By conducting real estate market analysis in general and neighborhood analysis in specific, the Mashvisor heat map generator facilitates the process of buying a profitable Airbnb income property.
But how exactly?
Listing Price
Most real estate investors, especially beginners, buy on a tight budget. Whether you pay in cash, go for a conventional mortgage, or resort to the best loans for investment property, you always face a certain budget. This budget should consider both the down payment and the monthly loan payments.
Once you establish your budget, the Mashvisor Airbnb heat map analysis will point you to the neighborhoods in your city of choice where you can afford to buy a rental property. It will save you lots of time as you don’t have to look into neighborhoods that are not affordable for you. It will also give an early direction to your property search.
And even if you are not constrained by cash, it’s a smart investment move to go for a market with relatively low real estate prices. After all, the property price or down payment size is present in all formulas for return on investment in the real estate industry. The less money you spend on your income property, the more profit you can generate from it.
That’s why our tool works as an Airbnb price map to show you markets with affordable prices in white and light blue, those with medium prices in blue, and those with high prices in dark blue. The legend that depicts the exact range of values will help you focus on the locations that fit your budget.
Airbnb Rental Income
As a future Airbnb host, you should care not only about the money you will spend on your property but also about the rental income that your property will generate. After all, regardless of investment costs, it matters a lot whether you make $200 or $2,000 in Airbnb rental income per month.
At the very minimum, you need to ensure gross revenue that will cover your recurring monthly expenses and still leave some cash in your pocket. Otherwise, you risk ending up with a negative cash flow income property, which is a nightmare for any real estate investor. It signifies losing money rather than making money from your Airbnb business.
In the vacation rental industry, rental income is the product of the daily and occupancy rates, which we will discuss shortly. This means that you need a lot of data analytics to calculate the average Airbnb revenue of an entire market.
With the Mashvisor heat map generator, you can easily find the locations within your real estate market of choice where Airbnb properties yield high income for hosts. All you have to do is to look for the dark blue areas after switching to this filter. So, this tool acts as an Airbnb revenue map.
Airbnb Occupancy Rate
Even if you buy the best investment property in town, you will not make money from it unless you can start renting it out on Airbnb. It means you should always go for income properties for sale in locations with high Airbnb occupancy rates.
As mentioned above, occupancy is one of the two determinants of rental revenue for short term rentals. The more days per month your property is booked for stays, the more money you will make from it. And the more Airbnb income you generate, the higher your ROI will be, regardless of whether you look at the cash on cash return, cap rate, or any other metric.
With the analysis performed by Mashvisor’s Airbnb popularity map, even beginner investors with no previous experience in a market can locate the most popular areas for vacation rentals. That’s because the tool works as an Airbnb demand map by showing the exact average Airbnb occupancy rate of each city neighborhood.
When reading the Airbnb heat map, focus on markets with occupancy rates above 50%. While there’s no exact number for a good Airbnb occupancy rate, you won’t maximize the performance of your income property if it stays vacant for more than half the time it’s available for booking.
Airbnb Cash on Cash Return
The only reason anyone would want to invest in real estate is to make money. Airbnb rentals have become a great way to do that, but not all properties for sale have the same profitability potential when rented out on Airbnb.
Indeed, there is a lot that goes into finding a profitable Airbnb income property, and one of the main factors is the location where it is situated.
You need a market with many visitors year-round who prefer to stay in short term rentals rather than hotels. You also need neighborhoods and cities with no Airbnb legal issues so that you can rent out all the time and boost your occupancy rate. The market should also offer reasonable taxes, fees, and Airbnb property management costs.
Yet again, the daily rates should be high and the property prices low. This lets you have positive cash flow and a good return on investment.
As you can imagine, taking all these factors into consideration when searching for the best short term rental markets for investing will require weeks or maybe even months of data collection and analysis.
Mashvisor’s heat map analysis will instantly show you the neighborhoods where Airbnb rentals get the highest cash on cash return. Then, you can focus on these areas provided by the Airbnb profitability map in your property search. There is no point wasting time on locations that will just not bring you the expected cash on cash return.
Once you combine the price, income, occupancy, and cash on cash return analysis of the heat map, you can identify the absolute best place for your Airbnb income property investment.
The Pros and Cons of Real Estate Heat Map Analysis for Airbnb Hosts
Just like all other real estate data analytics tools, heat maps have advantages and disadvantages.
Let’s take a look at the most important ones.
Pros of Real Estate Heat Map Analysis
The main advantages of using the Mashvisor Airbnb heat map in your investment research and decisions include the following:
- Analysis of large quantities of data with a simple look
- Dynamic visualization of data based on an investor’s specific requirements and expectations
- Use of nationwide real estate and Airbnb rental data
- Coverage of the entire US market, including all cities and towns
- Access to always up-to-date, reliable data and information
- Viewing of all the most important Airbnb data analytics. This includes property prices, rental income, occupancy rate, and cash on cash return
- Ability to find the best neighborhoods for investing in short term rental properties with a few clicks of a button
- Providing direction for the search for profitable Airbnb properties for sale
Cons of Real Estate Heat Map Analysis
Meanwhile, the most significant disadvantages of analyzing Airbnb opportunities with a heat map include the following:
- Less reliable results in areas with relatively few Airbnb listings
- Challenges in finding a location with affordable real estate prices and strong return on investment
The pros of an Airbnb hotspot map clearly outweigh the cons. Moreover, both limitations apply to all real estate analytics tools, not just heat maps. Thus, using a heat map to analyze vacation rental investment opportunities gives hosts an important benefit over other investors in the market.
Getting Started With the Best Airbnb Map
Investing in Airbnb income properties has been an optimal strategy in many US real estate markets in the past decade. The trend continues in 2023 and beyond, despite tightening short term rental regulations in some parts of the country.
The first step to starting an Airbnb business successfully is to buy a good property in a profitable location.
How to do that?
With the Mashvisor heat map analysis, which will save you time, money, and effort. This data analytics tool will help you find the areas with the lowest property prices and the highest Airbnb rental income, occupancy rate, and cash on cash return. All analyses will be presented in a visual, easy-to-interpret format. This makes it possible even for beginner investors to focus their search on the top locations.
Identifying the best markets for investment properties to rent out on Airbnb has never been that easy and efficient.
Learn more about how the Mashvisor heat map can help you find profitable areas for Airbnb income properties. Schedule a demo with our team of experts.