How to Buy an Airbnb Investment Property

How to buy Airbnb properties for maximum return is one of the most important questions that every investor in short term rentals faces.

In recent years, short term rental properties have emerged as the most profitable and, thus, the most preferred real estate strategy, taking over their long term counterparts. However, finding the optimal home to buy and rent out on Airbnb is even more challenging than finding a good traditional income property. It is due to seasonal demand, varying daily rates, and strict laws and regulations.

Table of Contents

1. Before Learning How to Find Airbnb Properties: Is It Worth Buying an Airbnb Property?
2. Step 1: Check Your Budget
3. Step 2: Choose Your Target Guests
4. Step 3: Identify a Top City
5. Step 4: Find the Best Neighborhood
6. Step 5: Study the Airbnb Laws and Regulations
7. Step 6: Search for Airbnb Properties for Sale
8. Step 7: Perform Airbnb Rental Property Analysis
9. Step 8: Use the Power of the Best Airbnb Data Analytics Platform
10. How Do I Find Properties for Airbnb Arbitrage?
11. How to Find Airbnb Properties in 15 Minutes

In this article, we aim to address one of the burning questions in real estate investing, namely, how to find the best residential properties for sale to buy and turn into Airbnb rentals. 

We’ve provided an eight-step guide that details the exact process you need to follow in order to pick a winner each and every time. Moreover, we’ll show you how the Mashvisor data and analysis tools can help you along the journey.

Before Learning How to Find Airbnb Properties: Is It Worth Buying an Airbnb Property?

Buying an Airbnb property is totally worth it. According to a nationwide real estate market analysis conducted by Mashvisor in March 2023, the average cash on cash return for short term rental properties amounts to 3.69% across the US market. Meanwhile, the average ROI for long term rentals is only 2.99%.

It means that in spite of the higher costs associated with running an Airbnb business, it is still the more profitable real estate investing strategy this year. The trend emerged shortly after the launch of the Airbnb platform, which revolutionized the vacation rental industry and the property investment world.

Despite a quick reversal at the outbreak of the COVID-19 pandemic, Airbnb is back on track to being the best way to invest money and make money in real estate.

Now that you know that investing in Airbnb is worth it, let’s take a look at how to find an Airbnb property for optimal investment results.

Step 1: Check Your Budget

The first step in how to find Airbnb properties is to work out your budget. You need to take into consideration your savings, your current streams of income, and your ongoing expenses. and any expected or unexpected changes in revenue and living costs in the coming years.

A smart real estate investor is an investor who budgets carefully and accurately. The last thing that you want as an aspiring Airbnb host is to lose your property to the bank because of defaulting on your mortgage payments due to poor calculations.

Thus, you should take the matter very seriously and come up with as precise an estimate of your financial situation as possible. It will help you set up the down payment that you can afford, as well as other expenses when you buy an investment property. It’s also a good idea to keep some cash reserves to be able to cover the recurring rental costs should you fail to keep your Airbnb occupied at all times.

Here is how to budget for your Airbnb rental property and what costs to consider before you buy:

Financing Method

How to pay when you buy a short term rental is one of the major factors that go into budgeting. While most beginner investors go for a conventional mortgage, you should consider all the best loans for investment property, including less conventional options like FHA loans, hard money, and HELOC.

Take into account the required minimum down payment, the premium mortgage insurance (PMI) requirements, the interest rate, the loan term, and all other conditions.

Keep in mind that mortgage rates have increased significantly over the course of last year, making financing an Airbnb property more expensive. At the beginning of March 2023, the 30-year fixed mortgage rate was 6.65%, compared to 3.76% a year earlier. Thus, it’s worth checking out different financiers to locate the best investment property lenders.

How you finance your Airbnb will determine the initial cash investment and the ongoing expenditure (monthly mortgage payments).

Other Startup Costs

While the down payment is the biggest expense when you buy a short term rental, it’s not the only one. Other costs to account for include:

• Closing costs: These usually average 3%-6% of the property purchase price. As a buyer, you don’t need to worry about real estate agent commissions, as they are covered by the property seller.
• Fixes and repairs: Unless you buy a turnkey property, you’ll need to spend some money on fixing it up and upgrading it. It is particularly important for Airbnb rentals as you want to be able to take great photos to attract ongoing guests.
• Furnishing: When you rent out on a short term basis, you must furnish the property completely. You don’t need to go for expensive furniture, but they must be comfortable and full.
• Setting up a smart home: It’s a good idea to install smart locks, smart thermostats, and other smart appliances throughout your vacation rental. It will make managing the property much easier and safer.
• Home insurance: In addition to regular insurance, it’s a must to obtain vacation rental insurance that protects you and your property against damage and liability.
• Property tax: Depending on where your property is located, you’ll need to pay a certain amount of real estate tax.

All the above costs should go into your budget.

Operating Monthly Expenses

The goal is to find a property to buy that will be able to generate positive cash flow when rented out on the Airbnb platform. But you must think proactively and consider a scenario where your rental remains unoccupied for a few weeks or even months. So, you should keep in mind that you’ll need to cover the following operational costs when running a short term rental business:

• Property maintenance
• Property management
• Property tax
• Landlord insurance
• Rental income tax
• Utilities
• Supplies
• Airbnb service fee equivalent to 3% of the booking price

Make sure to have at least a few months’ worth of cash reserves when budgeting for your Airbnb properties before you buy them.

Step 2: Choose Your Target Guests

The next step in how to locate the best Airbnb properties is to decide on the type of guests that you’d like to cater to. There are different kinds of travelers who resort to short term rentals over hotels and other hospitality options. And each of them comes with its own unique set of requirements, expectations, and needs.

So, to boost your occupancy rate, reviews, and ROI, it’s advisable to choose a specific group of potential guests and focus on providing the best possible experience for them.

Types of Airbnb Guests

The main types of guests who stay at short term rental properties include:

• Solo travelers: There are many people who like to take a break and go on a trip on their own. They most likely need a small studio or apartment for their stay.
• Vacationing couples: These could be couples who’re dating, newlyweds on a honeymoon, or young families who’d enjoy a romantic getaway.
• Families on a trip: Parents with small and big children enjoy traveling together during public holidays and summer vacations. They’d need a larger space equipped with a playpen, a high chair, toys, etc.
• Businesspeople: Business travelers would benefit from a house or an apartment with a home office setup, close to the business center of the city.
• Travel professionals: Travel professionals like nurses and others need Airbnb long term rentals, also known as furnished rentals.
• Remote workers: Many freelancers working from home choose to travel occasionally, so they’d need the comfort of a home office when staying at your Airbnb property.

Before you buy an investment property, decide on your ideal guests so that you can look for the most optimal location, property type, and home setup for them. It will help you maximize occupancy, revenue, and ROI.

Step 3: Identify a Top City

Once you decide on what type of guests you want to welcome to your Airbnb property, it’s time to start searching for the best locations for Airbnb. The first step is to find a city that is good for this rental strategy and for your selected kind of renters.

You should pay attention to the following factors:

• Affordable property prices: Do not buy in a market that is above your budget. It will not only compromise your ability to pay for your Airbnb but will also push down your ROI.
• High Airbnb daily rates: Look for a location where the nightly rates on the Airbnb platform are good enough to bring you positive cash flow and strong returns.
• Above-average Airbnb occupancy rates: Search for areas with a lot of visitors year-round. If you want to cater to leisure travelers, aim for hot tourist destinations. If you want to welcome business travelers, go for business hubs and commercial centers.
• Low operating costs: Choose a real estate market where property tax, utilities, and property management fees are not prohibitively high for Airbnb hosts.
• Reasonable safety: Do not buy a property in a place racked by high crime rates. It will push away guests and will also risk your second home being vandalized.

How to Find the Best City for Airbnb Properties

Traditionally, locating the best market to buy a short term rental property required months of Airbnb market research and analysis. You used to need to look at macro-level indicators like real estate prices, tourism, Airbnb demand, Airbnb pricing, and many others and crunch a lot of numbers.

Now, you can check out the Mashvisor blog, where you can find readily available rankings of the top Airbnb locations based on a number of different criteria. Some of the factors include affordable prices, daily rates, occupancy rates, rental income, and return on investment. 

5 Best Airbnb Markets

In addition, we’ve conducted a nationwide analysis of the US Airbnb rental market in order to identify and rank the top cities and towns to buy a rental for this strategy this year. We’ve looked at markets with affordable property prices (median below $1,000,000) and strong Airbnb demand (more than 100 active Airbnb listings and occupancy rate above 50%).

As a result, below you can find the five absolutely best short term rental markets that promise the highest ROI. We’ve organized them in order from the highest cash on cash return down. 

However, you should keep in mind that some of the markets might regulate vacation rentals at the local level, so you should check it out before you buy. We’ll come back to this issue in a bit.

1. Northlake, IL

• Median Property Price: $323,180
• Average Price per Square Foot: $217
• Days on Market: 139
• Number of Airbnb Listings: 120
• Monthly Airbnb Rental Income: $4,269
• Airbnb Cash on Cash Return: 8.29%
• Airbnb Cap Rate: 8.44%
• Airbnb Daily Rate: $171
• Airbnb Occupancy Rate: 53%
• Walk Score: 33

2. Columbia Heights, MN

• Median Property Price: $294,482
• Average Price per Square Foot: $142
• Days on Market: 22
• Number of Airbnb Listings: 314
• Monthly Airbnb Rental Income: $3,742
• Airbnb Cash on Cash Return: 8.06%
• Airbnb Cap Rate: 8.21%
• Airbnb Daily Rate: $158
• Airbnb Occupancy Rate: 58%
• Walk Score: 82

3. Bridgeton, MO

• Median Property Price: $264,711
• Average Price per Square Foot: $136
• Days on Market: 23
• Number of Airbnb Listings: 120
• Monthly Airbnb Rental Income: $3,291
• Airbnb Cash on Cash Return: 7.69%
• Airbnb Cap Rate: 7.83%
• Airbnb Daily Rate: $154
• Airbnb Occupancy Rate: 58%
• Walk Score: 3

4. Rileyville, VA

• Median Property Price: $332,031
• Average Price per Square Foot: $192
• Days on Market: 15
• Number of Airbnb Listings: 155
• Monthly Airbnb Rental Income: $3,733
• Airbnb Cash on Cash Return: 7.57%
• Airbnb Cap Rate: 7.69%
• Airbnb Daily Rate: $236
• Airbnb Occupancy Rate: 56%
• Walk Score: 10

5. Harahan, LA

• Median Property Price: $398,200
• Average Price per Square Foot: $209
• Days on Market: 57
• Number of Airbnb Listings: 111
• Monthly Airbnb Rental Income: $4,022
• Airbnb Cash on Cash Return: 7.46%
• Airbnb Cap Rate: 7.57%
• Airbnb Daily Rate: $137
• Airbnb Occupancy Rate: 59%
• Walk Score: 56

Step 4: Find the Best Neighborhood

After you’ve identified some top cities for Airbnb, it’s time to narrow down your real estate market research and analysis to the neighborhood level. Which neighborhood you buy in is just as important as which city you buy in. Areas within the same market can be drastically different from an investment point of view.

Once again, it’s important to focus on the same factors as with the city-level analysis. Look at things like prices, rental demand, rental rates, regulations, etc.

This brings us to the question: 

How Do I Find High Demand Airbnb Areas?

The Mashvisor Airbnb analytics platform offers a specific tool that turns searching for the best neighborhoods to buy Airbnb properties into a piece of cake. With the real estate heatmap, you can identify local markets with low property prices, high rental income, high Airbnb occupancy rates, and high ROI. Just use the available filters to get color-coded representations of the areas of any US city.

You want to focus on areas with affordable home values and above-average rental demand and return. But that’s not enough to guarantee a successful short term rental investment. Next, you need to perform a detailed neighborhood analysis to confirm that your selected location is indeed the best choice.

Mashvisor offers another tool that helps with this: The Mashvisor Neighborhood Analysis Pages. They are available for all areas in any US city with active listings for sale. There, you can find what results you can expect from investing in an Airbnb property, as well as info on the best property type and size.

Step 5: Study the Airbnb Laws and Regulations

Something that sets short term rentals apart from long term rentals is the legislative environment. While there are states that are more or less landlord-friendly, there isn’t a US city where renting out to tenants is prohibited. Meanwhile, there are plenty of locations where you cannot rent out on a short term basis, or at least this strategy faces very strict regulations.

That’s why the next step in how to find Airbnb properties is to look at the local Airbnb laws to ensure that non-owner occupied short term rentals are allowed. Moreover, you want to make sure that there isn’t a limit on the number of days you rent out per year.

A quick and efficient way to do the above is to visit the Mashvisor short term rental regulations page. There, you can find a quick summary of the applicable requirements in all top locations for Airbnb hosting, in addition to links to more detailed information.

Step 6: Search for Airbnb Properties for Sale

The next step in the process of finding the best investment is to look through vacation rentals for sale. 

There are plenty of traditional ways to do it, like reading local newspapers, looking for “For Sale” signs, asking around your network, working with real estate agents, and talking to property managers. You can also find several websites with listings for sale, but they are not usually tailored to investor needs.

How Do I Find Properties to Use on Airbnb?

The best way to find properties to buy and rent out on Airbnb is to use the Mashvisor tools. What makes Mashvisor different from other online property marketplaces is that you can focus your search on investment properties alone, and you can analyze their investment potential right away.

The Mashvisor investment property search engine allows investors to set up dozens of filters to locate the best opportunities for short term rentals. The filters include but are not limited to market, budget, financing, income, ROI, and property type. The search engine will show only properties for sale that match all the criteria, and investors can sort them by revenue, return, or other factors.

Another Mashvisor tool that helps investors identify the top vacation homes for sale is the Property Finder. The Property Finder tool uses AI and machine learning to suggest and compare the best Airbnb rental properties in up to five markets simultaneously. Investors can focus on certain locations and property sizes. Available houses for sale will be listed with the most profitable opportunities on top.

To find the best Airbnb properties in any US market, sign up for a 7-day free trial of Mashvisor now.

Step 7: Perform Airbnb Rental Property Analysis

Once you’ve found a few good potential properties, it’s time to analyze them in detail. That’s something that requires a lot of research and data collection, and calculations. But the tools available on Mashvisor help facilitate the process while boosting analysis accuracy.

The Mashvisor Airbnb calculator conducts detailed rental property analysis, providing all the data and numbers an investor needs to make an informed, profitable decision before they buy. The tool offers the following Airbnb data analytics:

• Property price
• Financing details: Cash vs. mortgage, including down payment, interest rate, loan type, and loan term
• Startup costs, including closing costs, repairs, and furniture
• Monthly rental income
• Monthly recurring costs, including property tax, insurance, income tax, management, maintenance, utilities, etc.
• Cash flow
• Occupancy rate
• Cash on cash return
• Cap rate

All pre-set estimates are based on the performance of actual Airbnb rental listings in the area, similar to the property that you’re analyzing, known as rental comps. Moreover, all numbers are adjustable so that you can fit the analysis to your precise situation as an Airbnb host. Changing any pre-set data point will result in the automatic recalculation of everything else.

Step 8: Use the Power of the Best Airbnb Data Analytics Platform

The last step in how to find Airbnb properties is not really a step, but it’s so crucially important that it must be highlighted on its own: Benefiting from the right real estate investing tool. And the best tool to help you identify profitable vacation rental opportunities is the Mashvisor Airbnb analytics platform.

The real estate blog, heatmap, neighborhood analysis pages, investment property search engine, and the Property Finder are the best friends of both beginner and experienced investors. They help aspiring hosts find the best markets to buy a house, as well as the best listings to turn into short term rentals for maximum profitability.

How Do I Find Properties for Airbnb Arbitrage?

While many investors want to buy a property to rent out on a short term basis, others want to make money on Airbnb without buying and owning a property. To achieve this, they rent a long term rental from a landlord and rent it out on a short term basis. This is known as Airbnb arbitrage.

How to find Airbnb properties for rental arbitrage follows the same logic as finding traditional Airbnbs for sale: You need a good market where vacation rentals are legal and where ROI is high.

But instead of factoring in the property price and closing costs, you need to find a market with lower long term rental rates and higher Airbnb daily rates and a property that meets such requirements. Meanwhile, you still need to account for expenses, such as furnishing, utilities, maintenance, and management.

Once again, the Mashvisor investment property calculator can help you with the rental arbitrage strategy. With the Property Finder, you can search for neighborhoods where long term rental income is significantly below Airbnb income. And, you can look for listings that are able to generate more income when rented out short term than when rented out long term.

How to Find Airbnb Properties in 15 Minutes

The short term rental strategy has experienced sweeping success in recent years because of the increased potential for profitability. To reach the level of success that other Airbnb hosts have been able to get, you need to find a good city and neighborhood, ensure legality, stay within budget, and locate the best property opportunities.

Traditionally, the process of finding the best listings to buy and rent on Airbnb takes three months of research, data gathering and cleaning, calculation, and analysis. Moreover, it’s prone to human error, which can easily happen throughout the calculations on an Excel spreadsheet.

Alternatively, the best way to ensure success is to get access to the right tools on the right platform. Mashvisor can help you speed up and optimize all steps along the way for optimal Airbnb real estate investing results. Furthermore, all data and analytics will be fully accurate as they reflect the performance of actual Airbnb listings in the area.

To learn more about how Mashvisor can support your Airbnb investing journey, sign up for a 7-day free trial now, followed by 15% off for life.