When owning rental properties, real estate investors get to choose between two main rental strategies: traditional rentals (long-term rentals) and Airbnb rentals (short-term rents). Which rental strategy you should go with depends on many factors such as your personal preferences, availability as a landlord, your location, the local laws and regulations, and many others. If after some careful real estate analysis and considerations, you decide that short-term rentals are the right choice for you, then you will definitely want to figure out the most profitable Airbnb locations in the US housing market.
Related: The Ultimate Guide to the Airbnb Investment Property
Then it’s your lucky day as here we’ve prepared a list of the top 9 most profitable Airbnb locations across the US real estate market.
But first we have to answer two important questions:
What Does “Most Profitable Airbnb Locations” Mean?
Being profitable and making money is the ultimate goal of all real estate investors, regardless of whether they invest in the traditional rental strategy or Airbnb rentals. Any real estate investor knows that there are many ways to measure profitability in real estate investing, which means that there are different ways to define the “most profitable Airbnb locations”. While cap rate – short for capitalization rate – might be the most popular real estate measure of profitability, here we focus on the Airbnb cash on cash return (CoC return, for short) as the more accurate real estate metric of profitability. Cash on cash return, unlike cap rate, takes into consideration the method of financing rental properties in its calculations. So, the most profitable Airbnb locations are those with the highest cash on cash return.
What Data Do We Use?
In our list of the top 9 most profitable Airbnb locations, we use data from Mashvisor’s rental property calculator, which covers the first couple of months of 2018. Mashvisor data is not only easy to obtain but also highly reliable as it is based on traditional and predictive analytics for cities, neighborhoods, and properties across the US housing market.
Top 9 Most Profitable Airbnb Locations
Here we come to the list of the top 9 most profitable Airbnb locations in the US real estate market at the beginning of 2018. You will note that all these places offer an Airbnb cash on cash return of above 10.
1. Newton, NJ
- Airbnb Cash on Cash Return: 14.0%
- Airbnb Rental Income: $4,350
- Median Property Price: $211,000
2. Guntersville, AL
- Airbnb Cash on Cash Return: 12.8%
- Airbnb Rental Income: $1,590
- Median Property Price: $90,000
3. Wainae, HI
- Airbnb Cash on Cash Return: 12.2%
- Airbnb Rental Income: $2,920
- Median Property Price: $180,000
4. Orick, CA
- Airbnb Cash on Cash Return: 11.6%
- Airbnb Rental Income: $2,120
- Median Property Price: $137,000
5. Bellmead, TX
- Airbnb Cash on Cash Return: 11.6%
- Airbnb Rental Income: $2,180
- Median Property Price: $127,000
6. Wells, NY
- Airbnb Cash on Cash Return: 11.2%
- Airbnb Rental Income: $1,550
- Median Property Price: $88,000
7. Wallace, ID
- Airbnb Cash on Cash Return: 10.4%
- Airbnb Rental Income: $1,850
- Median Property Price: $125,000
8. Avondale, MO
- Airbnb Cash on Cash Return: 10.3%
- Airbnb Rental Income: $1,330
- Median Property Price: $85,000
9. Hatch, UT
- Airbnb Cash on Cash Return: 10.1%
- Airbnb Rental Income: $3,120
- Median Property Price: $239,000
Related: 10 Most Profitable Airbnb Locations for Cash on Cash Return
What Are the Key Characteristics of the Top 9 Most Profitable Airbnb Locations?
While it’s definitely important for real estate investors to know the top 9 most profitable Airbnb locations in the US housing market at the beginning of 2018, it is also important to see what makes these places so profitable. So, let’s take a look at the common key characteristics of these locations:
1. Not Your First Choice for Real Estate Investment Destinations
It is safe to conclude that our list of the most profitable Airbnb locations is not comprised of the first places which come to mind when you think about real estate investing destinations. These are not your typical 24-hour cities or the most popular tourist destinations. Nevertheless, these are the 9 locations in the US housing market which according to Mashvisor’s rental property calculator will yield double-digit Airbnb CoC return.
2. Cheap Property Prices
Maybe this one comes as a surprise, maybe not. Anyway, none of these top 9 most profitable Airbnb locations features median property price of above $240,000. This means that the places in our list are cheap when it comes to buying an investment property. If you think about it – and as a real estate investor you should be thinking about these things – that’s where the high profitability comes from. The CoC return calculation takes the cash investment into account, and the cash investment when buying an investment property is usually a proportion of the property price (a minimum of 20% down payment is required for a mortgage). Thus, the cheaper the investment property – whether traditional or Airbnb, the higher your return on investment. And the lower the median property price in a real estate market, the more profitable the location for buying an investment property.
3. Varying but Good Airbnb Rental Income
The second factor to consider when calculating the CoC return is the rental income which your investment property generates. The most profitable Airbnb locations in our list generate monthly Airbnb rental income in the range $1,330 to $4,350. Actually this range of rental income is amazing when you consider the low median property price in these locations. And that’s exactly how and why these locations offer the highest profitability in the US real estate market for Airbnb rentals – in terms of Airbnb cash on cash return.
4. No Geographical Focus
Last but not least, any real estate investor will notice that these most profitable Airbnb locations are spread out across the US. There is no geographical focus.
Mashvisor’s Airbnb Profitability Data
After seeing the expected CoC return on Airbnb rentals in these locations, you must have started thinking about buying an investment property for the sole purpose of renting it out on Airbnb. In this case you will be happy to hear that Mashvisor has a number of tools to make the process not only simpler but also more profitable. Mashvisor’s heatmap will help you locate the most profitable neighborhoods within these top Airbnb investment cities based on CoC return, rental income, and occupancy rate. Mashvisor’s Airbnb profit calculator, a variety of the rental property calculator, will help you search for the best investment properties to rent out on Airbnb in the cities and neighborhoods of your choice. Mashvisor’s real estate investment tools will help you save days and weeks of research and calculations by providing you with readily available figures. No more need for tedious real estate market analysis and investment property analysis!
Related: The Guide to Using an Airbnb Profit Calculator
To conclude, be a smart real estate investor, and don’t just focus on the hot, well-established real estate markets when buying an investment property to rent out on Airbnb. To the contrary, use the best real estate investment tools to find the most profitable Airbnb locations at all times, and to locate the top performing Airbnb rental properties there.
To start your free trial with Mashvisor today, click here.