Investing in Airbnb rental properties has been a growing trend in the last several years.
This is because Airbnb rental properties can be a top choice when it comes to investing in income-producing assets.
While traditional renting is the top choice for most real estate investors, especially beginner real estate investors who have yet to develop a solid real estate investment portfolio, Airbnb rental properties can generate a much higher rental income in some locations, making them the better choice depending on the area that you’re investing in.
But before investing in an Airbnb rental property, any real estate investor should first make sure to check the state’s and the city’s regulations regarding short-term and Airbnb rental properties.
In some states and cities across the United States, short-term and Airbnb rental properties have been made illegal in certain contexts or have severe regulations and laws that can drastically limit the viability of an Airbnb investment and reduce the amount of profit that you can make from investing in these properties.
Since it can be a challenge to research the different markets for both the legality or the regulations that are related to short-term and Airbnb rentals, as well as to conduct market analysis to determine the viability and profitability of Airbnb rental properties in the area, we have created a list of some of the best and worst cities to invest in Airbnb rental properties.
The Best Cities to Invest in Airbnb Rental Properties
Palm Springs, California
Palm Springs, California, is a very popular destination for tourists who are seeking a warm sunny place during the winter. This popularity among tourists has made the city explode with life and festivities, and the city is now known for its musical festivals, such as Coachella and Stagecoach, both of which manage to attract a large number of tourists to the city each year.
These events alone have made investing in Airbnb rental properties worth the money. Despite the relatively low occupancy rate for Airbnb rental properties in Palm Springs throughout most times of the year, the amount of tourism that these festivals attract can be enough to cover the expenses of these rental properties in the area and make them profitable.
Here are Mashvisor’s Airbnb data and traditional data on Palm Springs, California, for comparison:
- Median Prices: $592,670 | $1,859 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 1.94%
- Cash on Cash Return for Airbnb Rental Properties: 4.28%
- Rental Income for Traditional Rental Properties: $2,000
- Rental Income for Airbnb Rental Properties: $2,946
- Airbnb Occupancy Rate: 34%
Click here to start searching for Airbnb and traditional rental properties in Palm Springs, California.
Davenport, Florida
Davenport is another great choice for investing in Airbnb rental properties. The city is well-known for its lower than average cost of living, which is 11% lower than the state’s average, which makes it a top pick for tourists and people who are traveling on a budget.
What makes Airbnb rental properties successful in the area is that tourists who typically travel to Davenport for its low costs of living are generally the same type of tourists who are usually looking for Airbnb rental properties due to their affordability.
Additionally, the moderate weather in Davenport, especially during the summer, only makes it a more favorable destination, particularly when compared to other areas that share the same weather but have a much higher cost of living.
Here are Mashvisor’s stats for investing in Davenport, Florida, for Airbnb as well as traditional rental properties for a comparison:
- Median Prices: $226,549 | $1,853 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 1.92%
- Cash on Cash Return for Airbnb Rental Properties: 4.25%
- Rental Income for Traditional Rental Properties: $1,195
- Rental Income for Airbnb Rental Properties: $1,626
- Airbnb Occupancy Rate: 53%
Click here to start searching for Airbnb and traditional rental properties in Davenport, Florida.
Bend, Oregon
The next place on the list goes to Bend, Oregon. Bend is a mountain getaway with a cosmopolitan appeal. Unlike the previous two cities on the list, which attract tourists for their tropical nature and beaches, Bend is a destination for people seeking outdoor recreational activities, hiking, and mountain biking. With a majestic view of the snow-capped peaks and the high-desert skyline, Oregon is well-known for its amazing weather all year long.
This, of course, made Bend one of the best destinations for traveling in both winter and summer times. As a result, the performance of Airbnb rental properties has flourished, making Bend one of the best places to invest in Airbnb rental properties in the United States.
Here are Mashvisor’s stats for investing in Bend, Oregon, for both Airbnb as well as traditional rental properties for a comparison:
- Median Prices: $585,748 | $2,239 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 1.71%
- Cash on Cash Return for Airbnb Rental Properties: 2.41%
- Rental Income for Traditional Rental Properties: $1,873
- Rental Income for Airbnb Rental Properties: $1,461
- Airbnb Occupancy Rate: 42%
Click here to start searching for Airbnb and traditional rental properties in Bend, Oregon.
Nashville, Tennessee
Nashville has seen a growth in employment in the past year due to a series of construction projects that helped the industry grow. Despite the new construction and increasing home prices, local homes have continued to stay affordable.
The population is growing more than double the US rate. Single-family homes are growing the most and would most likely be the most optimal choice for investment properties.
The number of closings in 2016 increased by 10%, which explains the low property inventory, which is unusual for this city. Nashville has been listed as the third hottest housing market in the country, after Seattle and Portland, which should comfort those investing in Nashville real estate. If you considering buying investment properties, watch the mortgage rates carefully as they rose in Nashville post the 2016 presidential election.
Some perks to investing in Nashville real estate include affordable home prices, no personal income tax, high employment rate, and the low cost of living.
Here are Mashvisor’s stats for investing in Nashville, Tennessee, for Airbnb as well as traditional rental properties for a comparison:
- Median Prices: $468,143 | $2,040 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 2.85%
- Cash on Cash Return for Airbnb Rental Properties: 6.14%
- Rental Income for Traditional Rental Properties: $1,821
- Rental Income for Airbnb Rental Properties: $2,936
- Airbnb Occupancy Rate: 49%
Click here to start searching for Airbnb and traditional rental properties in Nashville, Tennessee.
The Worst Cities to Invest in Airbnb Rental Properties
Miami Beach, Florida
Miami Beach is not just a beach town, but also a city full of culture. The city offers fun in the sun, while also offering diverse art and entertainment. Miami Beach real estate investing has always been popular because it is the city where people go to seek out a luxurious real estate. Whether it is foreign investors or domestic citizens looking for a luxurious vacation rental, Miami Beach is where they go.
Real estate investment properties in Miami Beach are great because of the many families looking for vacation homes.
While a large number of tourists that visit Miami Beach could benefit greatly from Airbnb rental properties in the area, the strict laws and regulations related to short-term rentals in Miami Beach have made it a less-than-optimal choice to invest in Airbnb rental properties, making Miami Beach among the worst places to invest in Airbnb rentals.
Here are Mashvisor’s stats for investing in Miami Beach, Florida, for Airbnb as well as traditional rental properties for a comparison:
- Median Prices: $858,390 | $1,254 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 2.31%
- Cash on Cash Return for Airbnb Rental Properties: 0.66%
- Rental Income for Traditional Rental Properties: $3,144
- Rental Income for Airbnb Rental Properties: $1,860
- Airbnb Occupancy Rate: 42%
Click here to start searching for Airbnb and traditional rental properties in Miami Beach, Florida.
Oakland, California
Oakland, California, was not always known as a bad market for Airbnb rental properties. However, with the now steep home prices rise and the increase in costs and expenses, Airbnb properties in Oakland are struggling to generate enough rental income to cover these expenses, causing some Airbnb property owners to lose money on their investments.
Additionally, due to the large growth of the Airbnb rental inventory over the years and the limited number of tenants, the occupancy rate for most Airbnb properties has dropped, and their pricing power was severely lowered, causing Oakland to become one of the worst places to invest in Airbnb rental properties in the United States.
Here are Mashvisor’s stats for investing in Oakland, California, for Airbnb as well as traditional rental properties for a comparison:
- Median Prices: $696,143 | $1,421 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 1.66%
- Cash on Cash Return for Airbnb Rental Properties: 0.11%
- Rental Income for Traditional Rental Properties: $3,238
- Rental Income for Airbnb Rental Properties: $455
- Airbnb Occupancy Rate: 35%
Click here to start searching for Airbnb and traditional rental properties in Oakland, California.
Houston, Texas
Although Houston, Texas has been known as a top location for seeking out investment properties, it is also one of the worst locations for investing in Airbnb rental properties.
Mark Dotzour, a former chief economist for the Texas A&M University’s Real Estate Center, described Houston housing market’s performance as “stunning, astonishing, astounding” as in his words “it’s amazing how resilient the housing market is in Houston when you’re in the middle of a root canal.”
According to Neighborhood Scout, the Houston real estate market has experienced an overall appreciation of 136%, which means an average annual appreciation of over 3%. In the past 10 years, the overall appreciation was 48%, with an average annual appreciation of 4%, which ranks Houston in the top 10% nationally. In the past 12 months, the housing market in Houston appreciated with 7%, higher than in 80% of US cities and towns.
Despite all this, Houston Airbnb properties suffer for the same reasons as Oakland, as the increase in home prices and maintenance costs, coupled with a high number of Airbnb rental properties in the area, have caused Airbnb rentals performance to decline, making it a suboptimal choice for real estate investing.
Here are Mashvisor’s stats for investing in Houston, Texas, for Airbnb as well as traditional rental properties for a comparison:
- Median Prices: $394,178 | $2,315 Avg/Sq.Ft.
- Cash on Cash Return for Traditional Rental Properties: 3.73%
- Cash on Cash Return for Airbnb Rental Properties: 0.14%
- Rental Income for Traditional Rental Properties: $1,984
- Rental Income for Airbnb Rental Properties: $448
- Airbnb Occupancy Rate: 30%
Click here to start searching for Airbnb and traditional rental properties in Houston, Texas.
Bottom Line
When you consider investing in Airbnb rental properties, always keep in mind that the obvious locations aren’t always the best locations to invest in. While Airbnb properties typically perform best in vacation areas and tourist towns, some factors might affect the performance of Airbnb properties in these areas, such as an increase in home prices or the laws and regulations that limit the viability of these properties.
Before investing in an Airbnb property, make sure to visit our website, Mashvisor.com, and search for investment properties in your area of choice to see how they perform and whether or not they can generate a high enough income to cover their costs and start generating a profit.
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