Boston short term rentals, should you jump in?
What about Beantown?
Boston is the capital of Massachusetts, and one of the oldest and most visited cities in the US. The city’s economy runs on different industries such as technology, financial services, tourism, and venture capitals are all thriving – all gave Boston the 6th largest economy in the US. Because of this, many young professionals are flocking into Boston and are driving up the demand for Boston real estate.
Additionally, Boston is a city which hosts multiple popular colleges and universities. Among those are Boston University (BU), Northeastern University, University of Massachusetts (UMASS), as well as both Harvard and MIT in the adjacent city, Cambridge. Students flood by the thousands every September to Boston, which contributes to the rising demand for rental properties.
Boston is one of the more expensive cities when it comes to real estate investing, however, it makes up for it with the high potential profits you can make. The Boston real estate market is a seller’s market. While Boston is still running on low inventory, investing in Boston real estate, specifically in Boston short term rentals, is still a great idea.
Let’s make things clearer with numbers. Check out some general data on Boston real estate below calculated by Mashvisor’s investment property calculator.
- Median Property Price: $852,782
- Traditional Rental Income: $2,642
- Traditional Cash on Cash Return: 0.91%
- Traditional Cap Rate: 0.91%
- Airbnb Rental Income: $3,203
- Airbnb Cash on Cash Return: 1.15%
- Airbnb Cap Rate: 1.15%
Why consider Boston short term rentals
From a general overview of the data, one can note that investing in Airbnb rentals can be a more profitable investment for someone considering the Boston real estate market. The cap rate and cash on cash return are evidently higher for Airbnb rentals than for traditional rentals. Moreover, the average Airbnb rental income is higher than traditional rental income. Not only that, looking at a breakdown of different neighborhoods, you can see that Airbnb rental incomes are close to $4,000 per month!
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And legally speaking?
Boston short term rentals have usually laid low when it came to legal issues. The home sharing service is most definitely as controversial in Boston as it is in other US cities. Nonetheless, the city has successfully implemented different policies and regulations in efforts to better control the service. Most recently, a 5.7% hotel tax was imposed on Boston short term rentals – Airbnb being one of them. A few things to keep in mind when choosing an Airbnb real estate investing strategy include:
- Business registration
- Rental property registration
- Tax laws
- Zoning laws
- Dwelling laws
- Boston’s new Airbnb law
The new ordinance aims at allowing investors to capitalize on Boston’s real estate market while, at the same time, ensuring that they do not monopolize it using short term rentals. The law dictates that Airbnb units cannot be rented out for more than 90 days per year. Moreover, properties need to be registered with the city at annual fees that could equate $25, $100, or $500. Finally, the law prohibits listing any properties that violate any of the above laws, including registration, tax, and zoning laws, among others.
So, when considering investing in Boston short term rentals, make sure you research the latest Airbnb law, get your business registration, rental property registration, and mind other city codes and laws. For a more thorough breakdown of these Airbnb regulations and laws for the city of Boston, check out the below blog.
Top neighborhoods for Boston short term rentals
We’ve put together a list of the best neighborhoods in Boston to invest in if you’re considering Boston short term rentals. Here they are, in no particular order, along with data provided from Mashvisor’s investment property calculator:
A historic neighborhood in Boston, North Dorchester is one of Boston’s historic neighborhoods and was actually among the first founded neighborhoods in the city. Not only that, but Dorchester is also known for being diverse. A more affordable option in relation to other neighborhoods, the neighborhood is well below the median home price of Boston real estate properties and has strong CoC and cap rate values.
- Median home price: $625,800
- Airbnb occupancy: 56.1%
- Airbnb rental income: $3,381
- Airbnb CoC return: 1.87%
- Airbnb cap rate: 1.87%
Considered as another one of the city’s renowned historic neighborhoods, Beacon Hill is currently home to over 9,000 residents. And while very popular and desirable among locals and tourists alike, Beacon Hill is actually the most affordable neighborhood on this list. You can also note its high Airbnb occupancy rate, at 68.6%, as well as its high rental income, making it a great option when considering Boston short term rentals.
- Median home price: $599,450
- Airbnb occupancy: 68.6%
- Airbnb rental income: $3,963
- Airbnb CoC return: 2.53%
- Airbnb cap rate: 2.53%
South End is known for its Victorian-style row house architecture and for being a culturally rich neighborhood. Like Dorchester, it is very diverse. Very close to Downtown Crossing and Back Bay, South End is quite popular among city visitors due to its prime location.
- Median home price: $932,906
- Airbnb occupancy: 55.85%
- Airbnb rental income: $3,445
- Airbnb CoC return: 1.39%
- Airbnb cap rate: 1.39%
South Boston, or Southie as the locals call it, is very popular among city visitors as well as locals. The neighborhood flaunts its dining and bar/pub scene. Southie’s also known for being within easy access of downtown and the T (Boston’s transportation system/Subway). Moreover, South Boston has seen remarkable gentrification efforts in recent years. Consequently, its real estate market has improved, also driving property prices up.
- Median home price: $909,808
- Airbnb occupancy: 54.15%
- Airbnb rental income: $3,913
- Airbnb CoC return: 1.86%
- Airbnb cap rate: 1.86%
Jamaica Plain (JP)
Like South End and South Boston, Jamaica Plan is also among the more expensive neighborhoods in the city. Additionally, JP is quite isolated from the bustling city, but still has easy access to the T and other Boston neighborhoods. Check out the numbers for JP below:
- Median home price: $908,222
- Airbnb occupancy: 58.73%
- Airbnb rental income: $3,178
- Airbnb CoC return: 1.01%
- Airbnb cap rate: 1.01%
To sum up this guide on Boston short term rentals
Boston short term rentals are, without a doubt, lucrative real estate investments. After all, the city is popular among property investors for a reason. Therefore, the only tip we have at the end of this guide is to make sure you abide by the legal details that come with investing in Boston to always stay on the safe side.
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