Owning an Airbnb investment property is, without a doubt, a great way to earn extra money. But, is Airbnb a good investment considering all of the regulations? In recent years, many cities across the US have regulated Airbnb rentals in the form of restrictions and limitations on the number of days a property can be rented out.
But don’t let this get you down. There are still many great places to invest in Airbnb without needing to worry about regulations, making Airbnb a great real estate investment.
Why Is Airbnb a Good Investment?
1- The short term rental market is growing
Keeping up with market trends is the key to success when it comes to real estate investing. Recent studies show that the short term rental market, which includes Airbnb properties among others, is expected to grow 7.9% annually. Airbnb rental properties are becoming more and more appealing to vacationers and travelers, as they offer several advantages when compared to traditional hotel rentals.
Therefore, to answer the question “Is Airbnb a good investment?”- the answer is a solid yes. As Airbnb grows in popularity and attracts more and more guests, buying a vacation rental property seems like a reasonable investment in cities where Airbnb is not heavily regulated.
As an Airbnb investor, you should aim to find an investment property in a prime location that guarantees a high occupancy rate throughout the year.
2- Higher rental income
It is no secret that Airbnb rentals have a higher potential for profits than traditional long term rentals. Since Airbnb rentals are rented out on a nightly basis, the price per night is much higher than that of a long term rental. Even when taking into consideration several factors such as vacancy cost and occupancy rate, your Airbnb investment would still make more profit.
Related: What Kind of Airbnb Occupancy Rate Can You Expect?
When it comes to owning an Airbnb rental property, location is the decision maker of how profitable your investment will be. Airbnb guests value proximity to amenities and attractions. Therefore, when searching for Airbnb property to buy, you should take into consideration the audience you are targeting.
3- Duality of use
A major advantage of owning an Airbnb property is that you can use it as your secondary residence where you can spend your vacations. Part-time real estate investors find this convenient as they can earn money from a property and still be able to use it whenever they want. Airbnb allows you to choose which dates your rental property is available, something you cannot do when following a long term rental strategy.
Cities to Avoid When Investing in Short Term Rentals
Back to our main question. Is Airbnb a good investment? Surely not if you intend to invest in an Airbnb rental in one of these cities.
1- New York
Airbnb regulations are quite strict in New York City. For example, it is illegal to rent out properties for less than 30 days unless the owner or the permanent tenant is residing in the property at the same time.
2- San Francisco
Adopting a similar policy as New York, Airbnb rentals are only allowed if the hosts are residents in the property. Moreover, you are only allowed to rent out your property for 90 days per year.
3- Santa Monica
Santa Monica is best known for wiping out 80% of its Airbnb listings after enforcing tough Airbnb regulations. The regulations require Airbnb investors to live on the property, get a business license, and collect 14% occupancy tax to be paid to the city.
Related: Top 3 Cities in the US with Strict Airbnb Regulations
Airbnb Is a Good Investment If You Use an Airbnb Profit Calculator
The Airbnb profit calculator is your best friend when looking for Airbnb properties for sale. The tool, which is an investment property calculator, can you help you evaluate the performance of any listed property.
How is Airbnb a good investment with an Airbnb profit calculator? The tool calculates basic real estate metrics that can help you decide if the property is worth it or not. Using real estate analytics and other comparable properties, the tool is able to predict the Airbnb occupancy rate and rental income as well as calculate cap rate, cash on cash return, and cash flow.
Using an Airbnb profit calculator can help you grow your real estate investment business. Thanks to the cash flow analysis provided by the tool, you can easily determine how soon you can grow your real estate business.
Where Is Airbnb a Good Investment?
Using Mashvisor’s Airbnb profit calculator, we found the 5 best cities for Airbnb investment where operating a short term rental is legal and profitable.
1- Airbnb San Antonio
Airbnb rentals in San Antonio are not regulated and the city has many affordable investment properties to offer.
- Median price: $287,760
- Airbnb rental income: $2,159
- Airbnb cash on cash return: 3%
- Airbnb occupancy rate: 49%
Related: San Antonio Real Estate Is a Top Market for Airbnb Investments
2- Airbnb Indianapolis
The lack of strict Airbnb laws and affordability of housing makes Indianapolis one of the best cities to invest in short term rentals.
- Median price: $212,852
- Airbnb rental income: $1,888
- Airbnb cash on cash return: 4%
- Airbnb occupancy rate: 44%
3- Airbnb Palm Springs
Is Airbnb a good investment in Palm Springs? Despite the recent regulations, the city remains a good destination to buy a short term rental property. The high occupancy rate and Airbnb rental income are only overshadowed by a high median price of properties.
- Median price: $680,824
- Airbnb rental income: $4,342
- Airbnb cash on cash return: 4%
- Occupancy rate: 57%
4- Airbnb Fort Lauderdale
Short term rentals in Fort Lauderdale are a good investment given the high demand for vacation rentals in the city. Despite the regulations, investing in Airbnb in Fort Lauderdale remains profitable.
- Median price: $659,772
- Airbnb rental income: $2,953
- Airbnb cash on cash return: 1%
- Occupancy rate: 51%
5- Airbnb Key West
Is Airbnb a good investment in Key West? Look at the numbers below and be the judge. If you can afford an investment property that nears a million dollars, you will make an outstanding income of almost $9000 per month.
- Median price: $973,004
- Airbnb rental income: $8,710
- Airbnb cash on cash return: 7%
- Occupancy rate: 71%
To start looking for and analyzing the best Airbnb investment properties in your city and neighborhood of choice, click here.
The Bottom Line
The question should not be “Is Airbnb a good investment?” What you should be asking now is where to invest in Airbnb properties! Use Mashvisor to find short term rentals with a high return on investment now.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
