Investing in Airbnb rentals has emerged as a highly profitable real estate investing strategy in the past decade. However, similar to traditional rentals, beginner real estate investors face many challenges when searching for top-performing vacation rentals to buy. As a result, they are often beaten by more experienced property investors. This should no longer be the case in 2020 as new investors get exposure to many reliable and efficient real estate investment tools for finding the best Airbnb income properties, and one of these tools is the heatmap.
If you plan to start investing in Airbnb rental properties in 2020, don’t forget to take a look at The Ultimate Guide to Buying an Airbnb Property with Ease.
But what is a heatmap in real estate investments? And how does it help investors find the best rental property for sale? Let’s figure it all out.
What Is a Heatmap in Real Estate Investing?
We all know what a heatmap is though we might not be sure how this visualization tool helps real estate investors find income properties to use as Airbnb rentals.
A heatmap is a visual representation of numerical data where numbers and values get illustrated in different colors. The main idea is to help users comprehend and analyze large amounts of data and information in a user-friendly manner. The concept of heatmap has become particularly relevant in many industries since the emergence of big data and predictive analytics.
In recent years heatmaps have found their place in the real estate investment business too, where they help new and experienced investors find the best income properties to buy, regardless of their rental strategy. But how?
The short answer to this question is that the real estate heatmap has turned into an indispensable tool in neighborhood analysis. All real estate experts know that location is one of the key factors for the success of an investment property as it determines rental income, Airbnb occupancy rate, rental expenses, cash flow, and return on investment in the form of both cap rate and cash on cash return. While the city is important in this regard, so is the neighborhood as various neighborhoods in the same city can produce a very different return on investment. This means that neighborhood analysis in real estate is as crucial as the overall real estate market analysis.
The traditional way of conducting real estate analysis involved reading through newspapers to find rental comps, driving through neighborhoods to identify real estate comps, making complicated calculations manually using spreadsheets, etc. As you can imagine, finding income properties in this manner was not particularly effective and pleasant.
To help new real estate investors analyze neighborhoods quickly and efficiently to find the best Airbnb properties for sale, online platforms like Mashvisor have come up with the heatmap analysis tool. Mashvisor’s heatmap uses a few colors to highlight the best neighborhoods for buying rental property based on different criteria such as property price, rental income, cash on cash return, and Airbnb occupancy rate.
If you’ve decided on buying an Airbnb investment property in 2020, then this article will point out what other tools you should consider: Buying Airbnb Property in 2019? Then You Need These 3 Tools.
Identifying the best neighborhoods for investing in short term rental properties in the US housing market in 2020 has never been so easy and time-saving. With a few clicks of the computer mouse, you can find the best places to invest in real estate in 2020, whether you are looking for affordable Airbnb rentals or high return on investment vacation homes.
How Does a Heatmap Help in Finding Income Properties with High Return on Investment in 2020?
When buying an investment property, it is important to know that you are choosing the best neighborhood for your real estate investment. Mashvisor’s heatmap provides real estate investors with readily available neighborhood analysis of any US real estate market. This analysis is based on big data and Airbnb rental comps which have been applied to Mashvisor’s machine learning AI algorithms.
The heatmap available on Mashvisor’s real estate investing platform helps investors find income properties which will make for profitable Airbnb rentals through the following criteria:
No matter if you are going for long term rentals or short term rentals, you have to take your budget into consideration in order to avoid foreclosure and to assure positive cash flow properties. Finding affordable, cheap real estate properties for sale can be challenging if you don’t have access to the right resources. Lucky for you, Mashvisor’s heatmap real estate investment tool helps you find the most affordable neighborhoods for buying an income property in any US city or town. In specific, the tool shows you the median listing price of homes for sale in all neighborhoods in a real estate market. As you can see in the heatmap analysis of the Dallas real estate market below, the cheaper Dallas neighborhoods are colored in red, while the more expensive Dallas neighborhoods are colored in green, with those in between being marked in orange and yellow.
If you think you might be investing in Airbnb in the Dallas housing market in 2020 (as one of the few US real estate markets where Airbnb remains fully legal), have a look at our Dallas Housing Market Predictions 2020.
With the help of a heatmap, even beginner real estate investors can find an income property within their budget to start an Airbnb rental business.
Airbnb Occupancy Rate
One of the major drawbacks of investing in vacation rentals as opposed to long term rentals is the fluctuating Airbnb occupancy rate. New Airbnb hosts face challenges in terms of keeping the occupancy rate of their vacation rentals high as they have to constantly work on marketing their rental property. Moreover, as Airbnb properties get rented out on a nightly basis, real estate investors find it hard to estimate what vacancy rate to include in their profitability calculations. At the same time, Airbnb occupancy rate is one of the most important determinants of an Airbnb investment property’s monthly rental income and return on investment – whether Airbnb cap rate or Airbnb cash on cash return. Thus, it is really important for beginners to focus on locations that offer a high Airbnb occupancy rate when investing in rental properties to rent out on Airbnb.
This is one more thing that Mashvisor’s heatmap can help out with. Finding income properties with a high Airbnb occupancy rate in any US city or town in 2020 is easy. As you can see in the image above of the Dallas real estate market analysis, neighborhoods with low Airbnb occupancy rate are marked in red, while those with high rates are colored in green.
Airbnb Rental Income
Investors get into property investments in order to make money from real estate. What this means is that eventually all real estate investors – whether beginner or not – are investing for income. That’s why it is crucially important for them to master the art of finding income properties with high Airbnb rental income. This will assure not only a positive cash flow investment property but also a rate of return. Showing the average Airbnb rental income in the neighborhood analysis as well as highlighting the areas which enjoy high Airbnb rental income as opposed to those with low investment income is another principal feature of a real estate heatmap tool. Finding income properties for sale with good monthly income in 2020 is easy as they will pop out in green.
If you need some help in identifying the best locations in the US housing market for short term rentals at the moment, read through The 8 Most Profitable Airbnb Cities in the Summer of 2019.
Airbnb Cash on Cash Return
Now we come to the most critical element of Mashvisor’s heatmap real estate investment tool. Regardless of their budget and the property price, regardless of their rental strategy, regardless of the occupancy rate and the monthly rental income, all that real estate investors and Airbnb hosts care about at the end of the day is how much money their rental homes will make for them each and every month. They want to know exactly how much money they will make for every dollar that they invest in their income properties and in this case – in their vacation home rentals.
Instead of going around and gathering real estate comps to conduct real estate market analysis and investment property analysis over dozens of real estate listings, investors can find all the info they need with respect to return on investment on Mashvisor’s heatmap. The selected measure of profitability for this real estate investing tool is the Airbnb cash on cash return. Unlike the other most widely used return on investment metric – the Airbnb cap rate – the Airbnb cash on cash return takes into consideration the method of financing of rental properties, which makes it more comprehensive and realistic. After all, very few investors, especially beginners, can afford to buy an investment property in all cash.
In 2020, investors aspiring to become top Airbnb hosts will not need to collect real estate data on one-time and recurring costs associated with owning rental property, occupancy rates and vacancy rates, nightly rates and monthly income, and all the other numbers required to calculate the cash on cash return on an Airbnb income property. They can enjoy readily available estimates with a high degree of accuracy on Mashvisor’s real estate heatmap. All the calculations there are based right on Airbnb data from Airbnb.com and computed by Mashvisor’s real estate investment calculator. In any US housing market, the neighborhoods with high Airbnb cash on cash return are colored in green. Finding income properties with a good cash on cash return has never been as easy as it will be in 2020.
The world of real estate investing has become incredibly competitive, and this trend is expected to intensify even further in 2020 and beyond. Investing in rental properties is all about working smart, not hard. Thus, successful investors need to get a hold of all real estate investing tools out there which not only make their life easier but also make their property investment decisions better and more profitable. Finding income properties without a heatmap is unimaginable in 2020 as this analysis tool will be of indispensable help in locating the best neighborhood for buying an Airbnb investment property in any US real estate market.
So, why don’t you go ahead and sign up for Mashvisor to make 2020 a profitable one?! Enjoy 14 days of free trial and a 20% discount afterward.