How to Find the Best Area for Airbnb Investment

Learning how to tell if an area is good for Airbnb is obligatory, as the location is a crucial factor for the profitability of vacation rentals.

The market where you invest in Airbnb determines the property prices, the rental rates, the demand, the rental income, and the return on investment. That’s why it’s arguably the most important requirement for launching a successful Airbnb business. Nevertheless, many investors are not sure how to tell if an area is good for Airbnb.

Table of Contents

1. What Makes for a Good Location for Airbnb Investment?
2. How to Tell if an Area Is Good for Airbnb Using Mashvisor
3. 10 Best Cities to Own an Airbnb Rental

Airbnb rentals have continuously grown over recent years as tourists prefer them over hotels. Consequently, the Airbnb strategy has become a great way for investors to make money in real estate. More and more investors are turning to Airbnb investing to take advantage of opportunities in the short term rental market.

However, not all areas are good for Airbnb investment. Your Airbnb ROI will vary greatly depending on the location. Before buying an income property to rent out on Airbnb, you should ensure you’ve picked the best places for Airbnb investment.

In this article, we’ll teach you how to tell if an area is good for Airbnb with the eight most important factors for a good location for vacation rental investing. We’ll also show you how the tools available on the Mashvisor platform can help you identify the best markets for this strategy based on your own investor requirements and expectations.

Last but not least, we’ll provide you with a list of the 10 best cities for Airbnb in the US market. The ranking is based on Mashvisor data from June this year.

What Makes for a Good Location for Airbnb Investment?

Knowing how to find a good Airbnb property starts with learning how to find a good market for this investment strategy.

Here are the eight major factors to take into consideration if you want to know how to tell if an area is good for Airbnb:

1. Close Proximity to Popular Attractions

When looking for the best location to buy an Airbnb investment property, you should search for cities that enjoy a large number of visitors. Short term visitors may include tourists or business travelers, or both, depending on your preferred Airbnb guest group.

Cities with sought-after attractions like national parks, mountains, lakes, beaches, resorts, museums, theaters, and theme parks are typically desirable to tourists. Meanwhile, destinations with strong economies, multiple businesses, company headquarters, and transportation hubs attract business people.

Such areas usually have a high Airbnb occupancy rate, making them the best places for Airbnb investment. The occupancy rate is one of the most significant determinants of Airbnb’s return on investment, together with the average daily rate. The fewer vacancies you have, the higher your Airbnb monthly rental income will be. This, in turn, will push up your cash on cash return and cap rate.

2. Low Competition

Competition will also influence your Airbnb occupancy rate and ROI. To ensure a high short term rental occupancy rate, you should choose a location with a low supply of hotels and other vacation rental listings.

Places with fierce competition among Airbnb hosts, like big cities and major resorts, should be avoided. If there are many hotels or rentals in the area, you’ll be forced to keep your rates low.

Medium-sized towns with fewer hotels and short term rental options would be your best bet as a beginner investor. In areas with a relatively low supply of hotels and vacation rentals, Airbnb prices tend to go up, provided that there is demand from guests. So, you need to strike the right balance between supply and demand in your Airbnb market research and analysis.

3. Weak Effect of Seasonality

When thinking of how to tell if an area is good for Airbnb, seasonality is a factor you should take into account. You don’t want to purchase an Airbnb investment property in a place with long off-seasons. These usually include seasonal destinations like beach towns and ski resorts, as well as cities that attract interest mostly during major conferences, festivals, and other events.

If your property stays empty for long periods without generating rental income, it will end up costing you more money in the long run. Savvy Airbnb hosts invest in areas with a high influx of travelers all year round. In such places, the demand for short term rentals is consistent. It boosts both Airbnb’s revenue and profitability.

4. Lenient Airbnb Laws and Regulations

Even if an area has a high demand for short term rentals, you must first check the local laws and regulations regarding vacation rentals before investing. Some cities have strict Airbnb laws, which may make the area unfavorable for Airbnb investment. In cities where investing in Airbnb is illegal, renting out on a short term basis can lead to serious legal issues.

In other cities, Airbnb investment may not be illegal altogether, but harsh vacation rental regulations may adversely affect your return on investment. For instance, the taxes and fees you are expected to pay in a particular city will influence your Airbnb profit margin. Or you might be limited to renting for only a certain amount of days per year, which will impact your occupancy and income.

Before you decide to buy a vacation rental property in a particular housing market, be sure to research and understand the local Airbnb rules and regulations. Look to invest in cities with no Airbnb regulations.

To start your research, check out the Mashvisor short term rental regulations page. There you’ll find a summary of the laws in all the best Airbnb locations, along with links to more detailed resources.

5. Access to Public Transportation and Amenities

Airbnb guests care about having access to public transportation so they can get to their preferred tourist attractions easily and conveniently. It’s even better if the most popular places of interest are within walking distance.

Moreover, visitors choose to stay in areas with multiple amenities such as restaurants, shops, cafes, parks, gyms, commercial centers, museums, theaters, tourist centers, etc. In this way, they don’t need to waste time and money commuting.

So, make sure the area you intend to invest in provides future guests with the convenience they need.

6. Reasonable Property Prices

Another factor to consider in your Airbnb location selection is the prevailing home values in the area. The purchase property price determines whether you can afford a certain property based on your available capital. Furthermore, it affects the profitability of a short term rental property by setting both the cash down payment and the monthly mortgage payments.

The sales price is present in all metrics of return on investment in real estate. These include the cash on cash return and the cap rate. The less you pay for your investment property, the more return you will make on it.

7. Affordable Management Costs

Some of the best real estate deals may be found in areas far from where you live. If you are not going to live at the Airbnb property, you should factor in the cost of managing the rental.

When answering the question “Is my area good for Airbnb?”, you need to take into consideration the average Airbnb property management fees. Some markets with high costs of living tend to have more expensive management fees. Unless the rental income is big enough, it might not make sense to invest there to get only a fraction of the revenue while the property manager keeps the rest.

8. Strong ROI Metrics

The ultimate way how to know if an area is good for Airbnb is to find out what profit it brings to investors. It depends on all the factors discussed above and is the real determinant of whether a market is worth it for the short term rental strategy.

In your Airbnb rental market analysis, you have to check the cash flow that hosts can generate. This should be positive. You also need to look at the city-average cash on cash return and cap rate. A good cap rate is considered between 8% and 12%, while cash on cash return above 6% is usually great.

How to Tell if an Area Is Good for Airbnb Using Mashvisor

The process of finding a good Airbnb investment location takes a lot of time and effort. You need to look at many different factors, collect Airbnb data, and make calculations. If you are wondering how to tell if an area is good for Airbnb quickly and easily, Mashvisor’s tools are the answer. The Mashisor tools will help you find the best-performing Airbnb locations in the US housing market in a few minutes.

Here is how you can use the unique Airbnb analysis tools:

Finding the Best Cities for Airbnb Investment

First, you can find the best cities for Airbnb investment with the help of the Mashvisor Market Finder. You can access reliable and up-to-date Airbnb data analytics for any city across the US market.

The best way to benefit from the Market Finder is to set up your criteria and let it search for the Airbnb markets that meet them. You can use multiple requirements such as property price, monthly rental income, occupancy rate, and cap rate. Instantly, you’ll get a list of the 10 best locations to invest in a vacation rental based on your own requirements.

Finding the Best Neighborhood for Airbnb Investment

Once you find a promising city for Airbnb investment, the next step is to find a profitable neighborhood. The potential Airbnb return on investment varies from area to area because of differences in amenities.

You can easily find neighborhoods with the highest ROI in your city of choice using the Mashvisor heatmap analysis tool. Our real estate heatmap uses Airbnb analytics to show you the best – and the worst – areas for buying Airbnb rental properties. You can search for neighborhoods with high and low listing prices, rental income, occupancy rates, and cash on cash return.

Next, you can access detailed neighborhood analysis for each area that catches your attention with the Mashvisor neighborhood pages. There you will find all the numbers and figures you need to confirm if a market really makes sense for this rental investment strategy or not. Some metrics include property prices, rental income, and cash on cash return.

Finding the Best Property for Airbnb Investment

Finding the best neighborhood for Airbnb investment is a crucial step to owning a profitable Airbnb investment property. However, it’s not the end. You still have to identify and analyze different properties to find a suitable Airbnb for sale in your neighborhood of choice.

The Mashvisor Property Finder is an AI-based tool that allows investors to locate the top-performing Airbnb properties currently for sale in any US city. All you have to do is to enter your city, budget, and preferred property type to get a list of all good opportunities.

The best part is that each listing available on the Mashvisor platform comes with a detailed Airbnb investment property analysis. This is conducted by the Mashvisor Airbnb Calculator. Using vacation rental comps from across the US, this tool evaluates exactly how well a property will do if rented out on a short term basis.

In this way, with a few simple steps, you can find not only the best area but also the best property for Airbnb investment.

To get started with the Mashvisor Airbnb research and analysis tools, sign up for a 7-day free trial.

10 Best Cities to Own an Airbnb Rental

Knowing how to tell if an area is good for Airbnb is a must for making smart and profitable short term rental property investing decisions. However, it is not enough if you want to get access to the best vacation rental opportunities before other savvy investors. It will take a while to check all possible US cities to select the top one.

Thus, we’ve used Mashvisor nationwide short term rental data from June 2023 to rank the 10 best Airbnb locations for beginner and experienced investors this year. In our selection, we’ve focused on markets with median property prices below $1,000,000 to make sure that they are affordable. Moreover, we’ve chosen cities with over 100 active listings. so they are all strong vacation rental markets.

The 10 best Airbnb investment locations are:

1. Rileyville, VA

• Median Property Price: $357,598
• Average Price per Square Foot: $241
• Days on Market: 5
• Number of Airbnb Listings: 111
• Monthly Airbnb Rental Income: $4,272
• Airbnb Cash on Cash Return: 8.37%
• Airbnb Cap Rate: 8.50%
• Airbnb Daily Rate: $219
• Airbnb Occupancy Rate: 60%
• Walk Score: 10

2. Penn Hills, PA

• Median Property Price: $196,250
• Average Price per Square Foot: $213
• Days on Market: 29
• Number of Airbnb Listings: 112
• Monthly Airbnb Rental Income: $2,589
• Airbnb Cash on Cash Return: 7.78%
• Airbnb Cap Rate: 7.99%
• Airbnb Daily Rate: $165
• Airbnb Occupancy Rate: 50%
• Walk Score: 43

3. Broadview, IL

• Median Property Price: $236,914
• Average Price per Square Foot: $181
• Days on Market: 82
• Number of Airbnb Listings: 298
• Monthly Airbnb Rental Income: $3,118
• Airbnb Cash on Cash Return: 7.63%
• Airbnb Cap Rate: 7.80%
• Airbnb Daily Rate: $165
• Airbnb Occupancy Rate: 59%
• Walk Score: 77

4. Stone Park, IL

• Median Property Price: $308,932
• Average Price per Square Foot: $171
• Days on Market: 58
• Number of Airbnb Listings: 198
• Monthly Airbnb Rental Income: $3,538
• Airbnb Cash on Cash Return: 7.10%
• Airbnb Cap Rate: 7.24%
• Airbnb Daily Rate: $167
• Airbnb Occupancy Rate: 52%
• Walk Score: 73

5. Columbia, MO

• Median Property Price: $274,033
• Average Price per Square Foot: $126
• Days on Market: 72
• Number of Airbnb Listings: 258
• Monthly Airbnb Rental Income: $2,569
• Airbnb Cash on Cash Return: 6.97%
• Airbnb Cap Rate: 7.14%
• Airbnb Daily Rate: $157
• Airbnb Occupancy Rate: 51%
• Walk Score: 30

6. East Lansdowne, PA

• Median Property Price: $249,500
• Average Price per Square Foot: $149
• Days on Market: 203
• Number of Airbnb Listings: 753
• Monthly Airbnb Rental Income: $2,244
• Airbnb Cash on Cash Return: 6.88%
• Airbnb Cap Rate: 7.09%
• Airbnb Daily Rate: $136
• Airbnb Occupancy Rate: 54%
• Walk Score: 65

7. New Carrollton, MD

• Median Property Price: $216,175
• Average Price per Square Foot: $225
• Days on Market: 63
• Number of Airbnb Listings: 137
• Monthly Airbnb Rental Income: $2,555
• Airbnb Cash on Cash Return: 6.80%
• Airbnb Cap Rate: 7.03%
• Airbnb Daily Rate: $154
• Airbnb Occupancy Rate: 61%
• Walk Score: 38

8. Wilkinsburg, PA

• Median Property Price: $134,900
• Average Price per Square Foot: $119
• Days on Market: 51
• Number of Airbnb Listings: 604
• Monthly Airbnb Rental Income: $2,291
• Airbnb Cash on Cash Return: 6.78%
• Airbnb Cap Rate: 6.95%
• Airbnb Daily Rate: $144
• Airbnb Occupancy Rate: 50%
• Walk Score: 85

9. Schiller Park, IL

• Median Property Price: $338,193
• Average Price per Square Foot: $209
• Days on Market: 58
• Number of Airbnb Listings: 139
• Monthly Airbnb Rental Income: $3,774
• Airbnb Cash on Cash Return: 6.72%
• Airbnb Cap Rate: 6.85%
• Airbnb Daily Rate: $178
• Airbnb Occupancy Rate: 51%
• Walk Score: 63

10. Bridgeton, MO

• Median Property Price: $238,450
• Average Price per Square Foot: $162
• Days on Market: 22
• Number of Airbnb Listings: 132
• Monthly Airbnb Rental Income: $2,667
• Airbnb Cash on Cash Return: 6.70%
• Airbnb Cap Rate: 6.87%
• Airbnb Daily Rate: $152
• Airbnb Occupancy Rate: 63%
• Walk Score: 3

Before you decide to buy Airbnb rental properties for sale in any of these locations, check out the local short term rental laws and regulations. It is your responsibility as a future Airbnb host to ensure legality.

How to Tell if an Area Is Good for Airbnb: Final Words

As a first-time Airbnb investor, knowing how to tell if an area is good for Airbnb can greatly increase your potential returns. As we have seen, finding the best places for Airbnb investment properties needs a lot of market research and data collection. Sometimes the most unexpected areas may be goldmines of high returns.

However, with the Mashvisor tools, you can easily and confidently locate the top Airbnb locations and the most profitable properties for sale to reduce your investment risk. With the help of the Market Finder, the heatmap, the Property Finder, and the Airbnb Calculator, you can search for and analyze markets and properties like never before.

To learn more about how Mashvisor can help you find the best areas for Airbnb investments, schedule a demo with our team of experts.