Investing in an Airbnb Property in 2022: The Complete Guide

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Investing in an Airbnb Property: The Complete Guide

by Alfred LauzonFeb 3, 2022November 30, 2023

Investing in an Airbnb property is a very profitable business venture for real estate investors. If you want to know more about this type of investment and how to get started in it, you came to the right place.

The Complete Guide to Investing in an Airbnb Property

Any investor looking to grow a business and diversify his or her portfolio will find real estate investments to be some of the most profitable investments. There are several ways of getting involved with real estate investing. One of them is investing in an Airbnb property.

What Investors Should Know Before They Get Started in an Airbnb Property Investment

Before anything else, one has to understand what he or she is getting into. A wise investor will always perform due diligence before making any investment decisions. Gathering all the necessary data and information about a certain product – in this case, real estate property – is one of the first things investors should do.

Why Should You Invest in a Short-Term Rental Property Instead of a Traditional Rental Property?

Rental properties are divided into two main categories: traditional (long-term) or vacation (short-term) rentals. While both of them have their own sets of pros and cons, a lot of real estate investors are taking the short-term rentals route. Here are some of the main reasons why:

1. Good Source of Passive Income

Just like a traditional rental property, it provides owners with a good source of passive income. Compared to a long-term rental, a short-term rental may not give the stability of regular monthly income, but the tradeoff is in the amount of cash Airbnb properties bring in. Generally, they make more than twice or thrice of what traditional rentals make monthly.

2. Long-term Capital Appreciation

Whether you go into traditional or vacation rentals, investing in real estate almost always comes with long-term capital appreciation. It is one of those types of investments that inevitably appreciate as time goes by, unlike bonds and stocks, which fluctuate depending on the market condition.

3. Variety of Tax Benefits

Investing in an Airbnb property also comes with certain tax benefits, such as tax deductions and write-offs, among others, that can help maximize its profitability.

4. Greater Control and Optionality in the Investment

Unlike investing in other financial assets like stocks and bonds, investing in an Airbnb property gives one greater control and optionality. You can increase the rental rates according to seasonality (peak and off-peak seasons) or sell the property if its value has appreciated significantly. It also helps you reduce the risk of ending up with a bad tenant if you were to do the long-term rental strategy.

Investors Should Know a Lot of Things Before They Start Acquiring Real Estate Properties

Why Is Investing in an Airbnb Rental Property a Sound Strategy?

Other than the reasons stated above, this year is a great one for real estate investing, especially in an Airbnb property. Despite the ongoing pandemic, the year is looking to be a great year for Airbnb property investors. Here’s why:

Pandemic-Induced Work Flexibility

The pandemic has drastically changed the way we do everyday things, such as errands, shopping, school, and work. Most workplaces have adopted a more flexible working arrangement for their employees, which lets them work remotely for the most part. This remote work arrangement has allowed people to travel and be more mobile. As travel restrictions eased over the past year, more and more workers have taken this time to go on trips and not miss a day of work.

Demand for Unique Properties Went Up

With the pandemic upending domestic tourism, travelers are now looking for places to stay that offer them both a time of relaxation and an entirely new experience. This increased the Airbnb demand for unique and interesting properties, such as small homes, treehouses, and farm stays. Properties like these give travelers the chance to take a breather while simultaneously giving them a sense of adventure.

Supply Follows Demand

This shift to a more flexible working and living environment has greatly increased the demand for short-term rental properties. Airbnb has unexpectedly bounced back from what seemed to be doomsday for them in both a practical and creative way. As folks moved to the suburbs at the onset of the pandemic, investors paid attention to the trend and met the demand. Now that people are starting to slowly move back into urban centers, it is most likely that investors will also respond accordingly.

What are the Downsides of Investing in Short-Term Rental Properties?

The pros of investing in an Airbnb property make it all worth diving into; however, the frugal and wise investor will also always consider the risks that come with the territory. And there are a few risks involved.

Occupancy Risks

Unlike traditional rentals where tenants are under a 6-month lease or longer, a vacation home rental does not offer that type of stability to owners. Short-term rentals have a higher risk of being unoccupied, especially in areas where tourism isn’t a priority. Property owners continually have to compete for guests to cover the basic operating costs and make a profit.

Regulation Risks

Another thing to consider for short-term rentals is regulation risks. Vacation rentals are relatively new compared to traditional rentals. Thus, certain laws and policies continue to evolve to regulate the vacation rental industry and ensure that the local communities and their residents aren’t put at any disadvantage.

30 of the Top US Cities for Investing in an Airbnb Property

When it comes to short-term rental property investments, there are basically two types of investors involved: the ones who know which markets they want to invest in and those who are market-agnostic.

The first type of investor already knows which market they want to invest in. Typically, this type of investor will purchase a rental property in a place where they want to own a vacation home for personal use or in markets with which they are very familiar.

The second type of investor, on the other hand, has eyes set on how much money there is to make in the property. They are in it for the long-term investment return. Taking this approach requires plenty of research and study, which are made easier with platforms like Mashvisor. With tools like the Property Finder and the Real Estate Heatmap, investors can easily locate the right properties that align with their long-term investment goals.

Users who plan to venture into Airbnb property investments can fully utilize the site’s Airbnb calculator to make the necessary computations that will make their search for the best rental markets for Airbnb investments. It analyzes not just the property’s profitability but also the real estate market it belongs to, which ultimately increases the chances of getting the best possible returns on investment.

Sign up for a free trial at Mashvisor now and see why thousands of real estate investors are making the wisest and most confident decisions.

Based on Mashvisor’s latest data, we have listed 30 of the best Airbnb markets and divided them into markets with good monthly rental income, cash on cash returns, and a combination of both. But first, let’s take a look at the different factors we used to come up with this list of what makes for a good Airbnb income property:

Median property price. This is the price middle point of all the publicly listed properties in a market. This number indicates that half of the houses that are sold in a market are more expensive while properties included in the other half are cheaper. It is a far more accurate way of determining a property’s affordability instead of average house prices.
Average price per square foot. This shows how much a property costs on average by the square foot.
Days on market. A lower average number shows signs of a stronger market which also means it is a sellers’ market. On the other hand, a market with a higher average DOM indicates that a market is weak and that it is more favorable for buyers.
The number of Airbnb rental listings. This shows the number of active listings on Airbnb in a specific market.
Daily Airbnb rental income. This number is the given daily Airbnb rental income average in a specific market.
Airbnb occupancy rate. This shows the ratio of a property’s monthly booking potential. The higher the percentage, the more bookings it gets.
Monthly Airbnb rental income. This is the monthly Airbnb rental income average in a specific market or neighborhood. This gives an investor an idea of the property’s earning potential if it is listed on Airbnb. This number is determined by using real estate comps.
Airbnb cash on cash return rate. This is what the Airbnb rental property can earn annually relative to the investor’s initial out-of-pocket expense.
Walk Score. This helps determine how accessible facilities and amenities are in a community without having to own a car or its walkability. The higher the score, the greater the walkability.

Top 10 Cities Based on Airbnb Rental Income

For this particular list, we selected markets that have median prices of below $1,000,000 as the top 10 best Airbnb rental income markets all come from California and Hawaii based on Mashvisor’s data.

That being said, here are the top 10 locations that can generate the most rental income for Airbnb property owners:

1. Oakhurst, Monmouth, NJ

Median Property Price: $912,821
Average Price per Square Foot: $422
Days on Market: 134
Airbnb Rental Listings: 127
Airbnb Daily Rate: $412
Airbnb Occupancy Rate: 55%
Airbnb Rental Income: $7,602
Airbnb Cash on Cash Return: 5.20%
Walk Score: 17

2. New Paltz, Ulster County, NY

Median Property Price: $693,920
Average Price per Square Foot: $259
Days on Market: 61
Airbnb Rental Listings: 138
Airbnb Daily Rate: $314
Airbnb Occupancy Rate: 57%
Airbnb Rental Income: $7,503
Airbnb Cash on Cash Return: 6.52%
Walk Score: 74

3. Temecula, Riverside, CA

Median Property Price: $734,128
Average Price per Square Foot: $354
Days on Market: 57
Airbnb Rental Listings: 290
Airbnb Daily Rate: $446
Airbnb Occupancy Rate: 64%
Airbnb Rental Income: $7,118
Airbnb Cash on Cash Return: 6.88%
Walk Score: 28

4. Woodstock, Ulster County, NY

Median Property Price: $999,125
Average Price per Square Foot: $398
Days on Market: 71
Airbnb Rental Listings: 248
Airbnb Daily Rate: $365
Airbnb Occupancy Rate: 58.60%
Airbnb Rental Income: $6,851
Airbnb Cash on Cash Return: 4.26%
Walk Score: 46

5. Annapolis, Anne Arundel, MD

Median Property Price: $776,229
Average Price per Square Foot: $365
Days on Market: 109
Airbnb Rental Listings: 244
Airbnb Daily Rate: $327
Airbnb Occupancy Rate: 66.76%
Airbnb Rental Income: $6,559
Airbnb Cash on Cash Return: 5.94%
Walk Score: 83

6. Murrieta, Riverside, CA

Median Property Price: $779,939
Average Price per Square Foot: $572
Days on Market: 62
Airbnb Rental Listings: 106
Airbnb Daily Rate: $431
Airbnb Occupancy Rate: 59.60%
Airbnb Rental Income: $6,202
Airbnb Cash on Cash Return: 5.47%
Walk Score: 99

7. Melbourne Beach, Brevard, FL

Median Property Price: $927,737
Average Price per Square Foot: $404
Days on Market: 80
Airbnb Rental Listings: 100
Airbnb Daily Rate: $318
Airbnb Occupancy Rate: 56.74%
Airbnb Rental Income: $6,192
Airbnb Cash on Cash Return: 4.51%
Walk Score: 53

8. Middletown, Newport, RI

Median Property Price: $675,429
Average Price per Square Foot: $335
Days on Market: 83
Airbnb Rental Listings: 192
Airbnb Daily Rate: $441
Airbnb Occupancy Rate: 59.33%
Airbnb Rental Income: $6,186
Airbnb Cash on Cash Return: 6.14%
Walk Score: 50

9. Bar Harbor, Hancock, ME

Median Property Price: $724,286
Average Price per Square Foot: $234
Days on Market: 115
Airbnb Rental Listings: 215
Airbnb Daily Rate: $247
Airbnb Occupancy Rate: 78.44%
Airbnb Rental Income: $6,132
Airbnb Cash on Cash Return: 6.37%
Walk Score: 75

10. Groton, New London, CT

Median Property Price: $632,283
Average Price per Square Foot: $27
Days on Market: 654
Airbnb Rental Listings: 100
Airbnb Daily Rate: $307
Airbnb Occupancy Rate: 59.39%
Airbnb Rental Income: $5,991
Airbnb Cash on Cash Return: 7.12%
Walk Score: 57

Top 10 Cities Based on Airbnb Cash on Cash Return

Investing in an Airbnb property involves not just making money in real estate through rental income. For investors, ensuring the return on investment requires looking at other numbers like cash on cash return. Based on this stat, here are the 10 best cities for investors to buy rental properties that are below the million-dollar-median mark:

2. Gaylord, Otsego, MI

Median Property Price: $317,522
Average Price per Square Foot: $153
Days on Market: 63
Airbnb Rental Listings: 117
Airbnb Daily Rate: $232
Airbnb Occupancy Rate: 53.38%
Airbnb Rental Income: $3,588
Airbnb Cash on Cash Return: 7.39%
Walk Score: 81

3. Geneva, Ashtabula, OH

Median Property Price: $181,596
Average Price per Square Foot: $134
Days on Market: 269
Airbnb Rental Listings: 117
Airbnb Daily Rate: $228
Airbnb Occupancy Rate: 47.64%
Airbnb Rental Income: $2,533
Airbnb Cash on Cash Return: 38%
Walk Score: 66

4. Mountain View, Stone, AR

Median Property Price: $267,239
Average Price per Square Foot: $180
Days on Market: 73
Airbnb Rental Listings: 100
Airbnb Daily Rate: $151
Airbnb Occupancy Rate: 64.16%
Airbnb Rental Income: $2,852
Airbnb Cash on Cash Return: 7.37%
Walk Score: 39

5. Tobyhanna, Monroe, PA

Median Property Price: $280,057
Average Price per Square Foot: $167.34
Days on Market: 42
Airbnb Rental Listings: 264
Airbnb Daily Rate: $296
Airbnb Occupancy Rate: 50.92%
Airbnb Rental Income: $3,448
Airbnb Cash on Cash Return: 7.29%
Walk Score: 25

6. Galena, Jo Daviess, IL

Median Property Price: $510,164
Average Price per Square Foot: $255.37
Days on Market: 73
Airbnb Rental Listings: 229
Airbnb Daily Rate: $268
Airbnb Occupancy Rate: 65.07%
Airbnb Rental Income: $5,021
Airbnb Cash on Cash Return: 7.21%
Walk Score: 76

7. East Stroudsburg, Monroe, PA

Median Property Price: $455,873
Average Price per Square Foot: $166
Days on Market: 78
Airbnb Rental Listings: 334
Airbnb Daily Rate: $290
Airbnb Occupancy Rate: 50.98%
Airbnb Rental Income: $5,358
Airbnb Cash on Cash Return: 7.13%
Walk Score: 78

8. Groton, New London, CT

Median Property Price: $632,283
Average Price per Square Foot: $285
Days on Market: 654
Airbnb Rental Listings: 100
Airbnb Daily Rate: $100
Airbnb Occupancy Rate: 39%
Airbnb Rental Income: $5,991
Airbnb Cash on Cash Return: 7.12%
Walk Score: 57

9. Niagara Falls, Niagara, NY

Median Property Price: $190,578
Average Price per Square Foot: $121
Days on Market: 179
Airbnb Rental Listings: 179
Airbnb Daily Rate: $155
Airbnb Occupancy Rate: 59.24%
Airbnb Rental Income: $2,585
Airbnb Cash on Cash Return: 7.02%
Walk Score: 80

10. Temecula, Riverside, CA

Median Property Price: $734,128
Average Price per Square Foot: $354
Days on Market: 57
Airbnb Rental Listings: 290
Airbnb Daily Rate: $446
Airbnb Occupancy Rate: 64.26%
Airbnb Rental Income: $7,118
Airbnb Cash on Cash Return: 6.88%
Walk Score: 28

Top 10 Cities Based on Both Rental Income and Cash on Cash Return

For investors who want to get the best positive cash flow from investing in an Airbnb property, here are 10 of the top overall markets to check out:

1. Sonoma, Sonoma, CA

Median Property Price: $1.246
Average Price per Square Foot: $515
Days on Market: 56
Airbnb Rental Listings: 229
Airbnb Daily Rate: $464
Airbnb Occupancy Rate: 62.47%
Airbnb Rental Income: $10,889
Airbnb Cash on Cash Return: 5.08%
Walk Score: 47

2. Oakhurst, Monmouth, NJ

Median Property Price: $912,821
Average Price per Square Foot: $422
Days on Market: 134
Airbnb Rental Listings: 127
Airbnb Daily Rate: $412
Airbnb Occupancy Rate: 55.23%
Airbnb Rental Income: $7,602
Airbnb Cash on Cash Return: 5.2%
Walk Score: 17

3. New Paltz, Ulster County, NY

Median Property Price: $693,920
Average Price per Square Foot: $258.62
Days on Market: 61
Airbnb Rental Listings: 138
Airbnb Daily Rate: $314
Airbnb Occupancy Rate: 56.75%
Airbnb Rental Income: $7,503
Airbnb Cash on Cash Return: 6.52%
Walk Score: 74

4. Annapolis, Anne Arundel, MD

Median Property Price: $776.229
Average Price per Square Foot: $365
Days on Market: 109
Airbnb Rental Listings: 244
Airbnb Daily Rate: $327
Airbnb Occupancy Rate: 66.76%
Airbnb Rental Income: $6,559
Airbnb Cash on Cash Return: 5.94%
Walk Score: 83

5. Murrieta, Riverside, CA

Median Property Price: $779,939
Average Price per Square Foot: $572
Days on Market: 62
Airbnb Rental Listings: 106
Airbnb Daily Rate: $431
Airbnb Occupancy Rate: 59.60%
Airbnb Rental Income: $6,202
Airbnb Cash on Cash Return: 47%
Walk Score: 99

6. Middletown, Newport RI

Median Property Price: $675,429
Average Price per Square Foot: $335
Days on Market: 83
Airbnb Rental Listings: 192
Airbnb Daily Rate: $441
Airbnb Occupancy Rate: 59.33%
Airbnb Rental Income: $6,186
Airbnb Cash on Cash Return: 6.14%
Walk Score: 50

7. Bar Harbor, Hancock, ME

Median Property Price: $724,286
Average Price per Square Foot: $234
Days on Market: 115
Airbnb Rental Listings: 215
Airbnb Daily Rate: $247
Airbnb Occupancy Rate: 78.44%
Airbnb Rental Income: $6,132
Airbnb Cash on Cash Return: 6.37%
Walk Score: 75

8. Atascadero, San Luis Obispo, CA

Median Property Price: $746,327
Average Price per Square Foot: $462
Days on Market: 63
Airbnb Rental Listings: 113
Airbnb Daily Rate: $292
Airbnb Occupancy Rate: 64.96%
Airbnb Rental Income: $6,010
Airbnb Cash on Cash Return: 5.72%
Walk Score: 68

9. Groton, New London CT

Median Property Price: $632,283
Average Price per Square Foot: $285
Days on Market: 654
Airbnb Rental Listings: 100
Airbnb Daily Rate: $307
Airbnb Occupancy Rate: 59.39%
Airbnb Rental Income: $5,991
Airbnb Cash on Cash Return: 7.12%
Walk Score: 57

10. Saugerties, Ulster County, NY

Median Property Price: $636,585
Average Price per Square Foot: $456
Days on Market: 162
Airbnb Rental Listings: 217
Airbnb Daily Rate: $311
Airbnb Occupancy Rate: 68.29%
Airbnb Rental Income: $5.346
Airbnb Cash on Cash Return: 6.05%
Walk Score: 80

How Does One Get into Investing in an Airbnb Property?

For first-time investors wondering how to get started in Airbnb property investments, here are some basic steps to follow:

Step 1: Know Your “Whys”

As an investor, you should always have clearly defined goals and objectives for each investment. Identify the reasons why you choose to invest in this type of property and list them down. Based on your list, set your goals and write down your objectives so you have something to measure and monitor your progress against.

Step 2: Perform Due Diligence

In the world of real estate investing, knowledge is power. The more you know about the market, the better strategies you can come up with. Fortunately, it is now easier to gather information and data about different real estate markets all over the country. All you need to do is log on to Mashvisor to access all the latest information on specific markets and utilize the tools to analyze all the necessary data to help you craft a well-designed short-term rental strategy.

Step 3: Work with a Team

If you think you can pull this off on your own, you’re only deceiving yourself. A successful investor knows the value of teamwork. They understand and appreciate the value of what other people can bring to the table to make their business venture successful and pleasant. From working with real estate agents to suppliers to contractors to property managers, the chances of success are always greater with collaboration.

Step 4: Identify the Type of Tenant You Want to Attract

Having an idea of the types of tenants you want to attract will help you streamline your property choices to ones that best suit their profile. Are you after families that are looking for an outdoorsy adventure type of experience? Or are you looking for yuppies looking to take a break from their busy lives and just enjoy some downtime? Or do you simply want to have renters that are willing to pay top dollar for your property? Your choice of property type and how you will manage it will depend on the type of tenant you have in mind.

Step 5: Find a Property that’s Suitable for Your Goals

The next step is to find the right property that fits your needs. Your goals, financial background, design preferences, target tenants, and other factors will determine which type of property you should choose. You first need to identify which markets and neighborhoods are worth looking into. Once you’ve narrowed your choices down to one neighborhood, start looking for the most profitable property based on your criteria. If you find one that satisfies your needs, make an offer and close the deal.

One important thing to remember is to always check the local laws and regulations on Airbnb rentals. This is part of your due diligence as an investor.

Step 6: Get a Good Vacation Rental Property Management Team

If you’re investing in a property outside your backyard (out-of-town or out-of-state), managing a vacation rental will be hard without a property management team. Look for a credible local property management company to partner with. They can take a huge burden off your shoulders as they can run the operations locally and keep your property occupied for a certain fee, of course.

Step 7: Stay on Top of Things

Even if you have a property management team running your vacation rental business, do your best to still stay on top of things. Keep yourself updated and proactively reach out to the local team and check in on the tenants during their stay. Be a hands-on type of investor. After all, it is your hard-earned money you’re protecting.

The Bottom Line

It’s easier to generate a positive cash flow when investing in an Airbnb property as long as you have the right data and tools to help you come up with the best short-term rental strategy. Mashvisor can help you locate the rental property aligned with your investment goals and financial capabilities. Sign up for a free trial on Mashvisor now and get 15% off on your subscription.

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