Investing in real estate is a hard task, especially if you wish to be one of the successful real estate investors. When it comes to rental properties, many real estate investors measure their success by the profit generated from rental income. There are many factors which are influential to the profitability of rental properties. For instance, before investing in real estate, it is advisable to consider variables such as the cap rate and cash on cash return as well as occupancy rate. The most important factor, however, is the location of your rental properties.
If you have chosen short term rentals as the optimal rental strategy for you, the city in which you operate your business is of key importance. Are you willing to manage the Airbnb rentals with the highest rental income? Here are the most profitable Airbnb cities for investing in real estate.
The Most Profitable Airbnb Cities at the Beginning of 2018
As previously mentioned, financing and managing successful Airbnb rentals is quite a complicated thing to do. In order to find the best short term rentals, investors perform real estate analysis. However, the location is vital when it comes to Airbnb rentals. It is important to note that the most profitable Airbnb cities are not necessary the most popular ones on the market. According to Smartassets, these are the ten top of the most profitable Airbnb cities on the current US market:
1. San Diego, California
Expected annual profit of $31,481
2. Miami, Florida
Expected annual profit of $28,696
3. Chicago, Illinois
Expected annual profit of $24,175
4. Boston, Massachusetts
Expected annual profit of $22,931
5. San Jose, California
Expected annual profit of $21,085
6. Philadelphia, Pennsylvania
Expected annual profit of $19,626
7. New York, New York
Expected annual profit of $19,313
8. San Francisco, California
Expected annual profit of $19,279
9. Oakland, California
Expected annual profit of $18,891
10. Houston, Texas
Expected annual profit of $18,470
*The expected annual profit has been calculated by computing the expected annual rental income and subtracting the expected annual expenses. The most profitable Airbnb cities are based on unshared two-bedroom listings.
It is interesting to observe that the top two of the most profitable Airbnb cities are destinations associated with warm weather as well as affordable accommodation. However, far more popular cities, such as New York, for instance, take a lower position. This might be due to the specific expenses related to the city. As we are discussing profitability, the latter plays an important role.
The Top Three Most Profitable Airbnb Cities
In order to provide you with in-depth information about the most profitable places for short term rentals, we will discuss the top three cities in which Airbnb is most likely the optimal rental strategy.
San Diego, California
San Diego is a city in the State of California known for its mild and sunny weather during the whole year. The city attracts many Airbnb guests with its beautiful beaches and parks. In addition, there are various leisure activities to join as well as various destinations to visit. The biggest problem associated with Airbnb San Diego however, is the controversy surrounding the Airbnb laws. There is not official set of requirements to guide the short term rentals in the area yet. This is an important factor to consider if you decide to invest in the city.
Miami, Florida
Miami is another of the most profitable Airbnb cities. Its warm weather almost eliminates the seasonality, and the city strikes high occupancy rate all year long. Miami is a popular vacation destination, but also a place full of culture, offering diverse leisure practices. The place is associated with strict Airbnb laws. The set of requirements for Airbnb rentals varies for the different zones of Miami. That is why it is crucial to make an in-depth research and check why legal terms apply to your property type and the zone in which it is situated.
Chicago, Illinois
The third of the most profitable Airbnb cities is Chicago in the State of Illinois. The city has four distinctive seasons. The latter certainly plays a role in the variation of the Chicago’s Airbnb occupancy rate throughout the year. Nevertheless, the city is a great tourists spot as it is the home town of numerous historic sights and great architectural buildings. Moreover, Chicago hosts many cultural events such as concerts and different shows. The most important thing to know about the destination, though, is that short term rentals in the area should be consistent with strictly specified Airbnb laws and regulations.
Beyond the Most Profitable Airbnb Cities
It is necessary to pay attention to other details besides the location if you truly want to make money from real estate investing. Computing various real estate metrics such as cap rate and cash on cash return is an important indicator of the potential success of your future investment. Using a rental property calculator might help you in finding not only the best place but also the best property. Mashvisor’s rental property calculator is a tool which quickly and accurately provides you with insightful investment analysis online. Mashvisor’s rental property calculator computes much more than cap rate, cash on cash return, and potential rental income. The tool also shows you the optimal rental strategy and gives you in-depth information about the property and its surrounding area.
These are the most profitable Airbnb cities on the US market at the moment. Nevertheless, you need to make an effort and conduct some research before investing in any of them. Go ahead and subscribe to Mashvisor for more useful tips on various real estate topics.