Websites like Airbnb, VRBO, and HomeAway have paved the way for short term rentals to gain popularity among real estate investors. Today, one of the hottest markets for vacation rental investments is Michigan. In this article, we will talk about the best cities to invest in Michigan vacation home rentals. But first, let us go through the benefits of owning a vacation rental property.
Why Invest in Vacation Home Rentals?
A vacation home rental is a short term real estate investment that is rented out for short periods, usually less than 30 days. Owning an Airbnb rental property has several advantages over owning a traditional rental property, but the former requires a more hands-on management. Additionally, a vacation rental property has a higher tenant turnover and therefore requires more landlord involvement and availability. So why do we recommend investing in vacation home rentals?
1- The short term market is growing more than ever
The market for vacation homes in the US has been increasing at a high rate, which is influenced by the shift of vacationers’ preference from traditional hotel rentals to alternative short term rentals found on Airbnb, VRBO, and HomeAway.
2- A vacation rental investment generates a higher return on investment
Data analytics show that return on investment indicators such as cash on cash return and cap rate are much higher when a property is used as a vacation rental investment compared to a traditional rental property. However, location plays an important factor when it comes to owning an Airbnb rental.
Related: The 7 Best Places to Buy a Vacation Home in Florida
3- Online booking platforms make it easier to find tenants
Making money with vacation homes has never been easier thanks to online booking platforms like Airbnb. By using these platforms, your vacation rental investment is visible to thousands of vacationers.
4- You can always use the property for yourself
When you invest in a vacation rental property, you can always use that property as your vacation destination. So now is the time to consider investing in a vacation rental. Let’s check out the Michigan real estate market.
Why Invest in Michigan Vacation Home Rentals?
When it comes to investing in vacation homes, location is the most important factor to consider. Mashvisor’s investment property calculator shows that Michigan vacation home rentals are one of the top investments in the US housing market at the moment. Mashvisor collects data from reliable sources like MLS, Airbnb, and Redfin to analyze and evaluate investment property markets. The indicators used to measure return on investment and profitability include Airbnb rental income, Airbnb cash flow, Airbnb cash on cash return, and Airbnb occupancy rate.
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Michigan is a phenomenal location to own a vacation rental property that you can rent out when you are not using it to offset the costs of the investment. Michigan has plenty of advantages as a location for a vacation rental investment. The state’s natural beauty and rich history attract tourists from all over the world. The area’s comfortable summer warmth provides a perfect escape from extreme temperatures in Midwest and Southern states. For those reasons, investing in Michigan vacation home rentals is highly recommended.
Related: Michigan Real Estate Market 2018: Can You Make Money Investing Here?
Is it legal to invest in Michigan vacation home rentals?
As more property owners in Michigan use platforms like Airbnb, VRBO, and HomeAway to rent out their vacation homes, concerns have risen about the recent trends’ effects on the local real estate market. Such concerns include the impact of short term rentals on property prices and of course the effects on the local hotel industry. That’s why many municipalities in Michigan continue to clamp down on short term vacation rentals.
Investing in Michigan vacation home rentals is possible despite some strict Airbnb regulations in some cities. But fortunately for real estate investors, two bills were proposed last year that prohibit banning short term rentals. House Bill 4503 and Senate Bill 329 prevent local governments from banning short-term rentals and enacting zoning ordinances that restrict Airbnb rentals. So far, neither of those bills have moved through committee.
Despite the strict Airbnb regulations in some cities in Michigan, real estate investors can still invest in Michigan vacation home rentals in cities where Airbnb laws are not that strict.
Related: Buying a Short-Term Rental Property? Invest in the Most Airbnb Friendly Cities
Michigan Vacation Home Rentals: Where to Invest
As mentioned earlier, Mashvisor’s data and investment property calculator show that Michigan vacation home rentals are one of the best investments in the country. When we say “the best”, we mean that some cities in the Michigan real estate market scored the highest in terms of cash on cash return and Airbnb rental income. Without further ado, here is a list of the 5 best cities to invest in Michigan vacation home rentals.
Note that cash on cash return and cap rate are equal. This is because Mashvisor’s investment property calculator assumes all-cash investment for property purchases
1- Lansing, MI
- Median Property Price: $100,124
- Price per square foot: $76.00
- Airbnb Cash on Cash Return: 8.66%
- Airbnb Rental Income: $2,556
- Airbnb Cap Rate: 8.66%
- Airbnb Occupancy Rate: 53.5%
2- Dearborn, MI
- Median Property Price: $176,613
- Price per square foot: $120.50
- Airbnb Rental Income: $2,469
- Airbnb Cash on Cash Return: 7.48%
- Airbnb Cap Rate: 7.48%
- Airbnb Occupancy Rate: 59.4%
3- Kalamazoo, MI
- Median Property Price: $230,173
- Price per square foot: $104.70
- Airbnb Rental Income: $2,759
- Airbnb Cash on Cash Return: 7.31%
- Airbnb Cap Rate: 7.31%
- Airbnb Occupancy Rate: 57.22%
4- Traverse City, MI
- Median Property Price: $394,129
- Price per square foot: $234.70
- Airbnb Rental Income: $4,572
- Airbnb Cash on Cash Return: 7.13%
- Airbnb Cap Rate: 7.13%
- Airbnb Occupancy Rate: 65.37%
5- Grand Rapids, MI
- Median Property Price: $257,941
- Price per square foot: $150.70
- Airbnb Rental Income: $3,029
- Airbnb Cash on Cash Return: 5.42%
- Airbnb Cap Rate: 5.42%
- Airbnb Occupancy Rate: 68.79%
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