There are two basic rental strategies for real estate investors: traditional (long-term rents) and Airbnb (short-term rents). Which one works best for you depends on many factors.
First of all, your personal preferences: are you willing to be a traditional landlord or are you looking for something different? Second, your location: does your city provide many jobs (and thus people are willing to rent homes) or is it a popular vacation attraction? Third, legislation: what do laws say about short-term rentals? And so on and so forth. If after considering all these and many more features, you decide Airbnb is the right strategy for you, then you will definitely want to know the MOST PROFITABLE AIRBNB LOCATIONS in the US.
10 Most Profitable Airbnb Locations
Let us make two clarifications before we start:
1. What does “most profitable” mean?
There are many ways to measure profitability in real estate investing, which means that there are different factors to rank the most profitable Airbnb locations. For our purposes here, we will focus on the cash on cash (CoC) return. This is one of the most popular metrics in real estate investing, but you will rarely hear people using it outside this specific area. A great advantage is that it is easy to calculate.
2. What data do we use?
In our ranking of the most profitable Airbnb locations we will use Mashvisor data from the last few months of 2016, which is highly reliable and easy to obtain. You just need to go to the Mashvisor website, where you will gain access to important actual and predictive figures for cities, neighborhoods, and properties across the US.
So, let’s look at the 10 most profitable Airbnb locations according to Mashvisor – i.e., the cities with the highest CoC return:
1. Breckenridge, CO
- Airbnb CoC Return: 22.8%
- Airbnb Cap Rate: 28.5%
- Airbnb Occupancy Rate: 37.2%
- Airbnb Monthly Rental Income: $2,485
- Median Property Price: $168,000
2. Catskill, NY
- Airbnb CoC Return: 16.3%
- Airbnb Cap Rate: 22.1%
- Airbnb Occupancy Rate: 40.6%
- Airbnb Monthly Rental Income: $2,779
- Median Property Price: $170,000
3. Oklahoma City, OK
- Airbnb CoC Return: 15.7%
- Airbnb Cap Rate: 21.8%
- Airbnb Occupancy Rate: 48.9%
- Airbnb Monthly Rental Income: $1,754
- Median Property Price: $163,500
4. Hyde Park, NY
- Airbnb CoC Return: 14.1%
- Airbnb Cap Rate: 19.5%
- Airbnb Occupancy Rate: 28.1%
- Airbnb Monthly Rental Income: $3,399
- Median Property Price: $224,500
5. Panama City, FL
- Airbnb CoC Return: 13.0%
- Airbnb Cap Rate: 17.2%
- Airbnb Occupancy Rate: 54.6%
- Airbnb Monthly Rental Income: $2,644
- Median Property Price: $177,000
6. Narrowsburg, NY
- Airbnb CoC Return: 12.8%
- Airbnb Cap Rate: 19.2%
- Airbnb Occupancy Rate: 31.6%
- Airbnb Monthly Rental Income: $2,208
- Median Property Price: $147,000
7. Castroville, CA
- Airbnb CoC Return: 12.8%
- Airbnb Cap Rate: 16.1%
- Airbnb Occupancy Rate: 38.6%
- Airbnb Monthly Rental Income: $6,710
- Median Property Price: $489,500
8. Charleston, SC
- Airbnb CoC Return: 12.7%
- Airbnb Cap Rate: 16.2%
- Airbnb Occupancy Rate: 53.7%
- Airbnb Monthly Rental Income: $3,693
- Median Property Price: $299,900
9. Joshua Tree, CA
- Airbnb CoC Return: 12.5%
- Airbnb Cap Rate: 17.0%
- Airbnb Occupancy Rate: 47.5%
- Airbnb Monthly Rental Income: $2,545
- Median Property Price: $179,700
10. Lancaster, PA
- Airbnb CoC Return: 12.3%
- Airbnb Cap Rate: 18.0%
- Airbnb Occupancy Rate: 39.3%
- Airbnb Monthly Rental Income: $1,934
- Median Property Price: $137,500
Key Features of the 10 Most Profitable Airbnb Locations
There are a few important stories which these most profitable Airbnb locations based on CoC return tells us:
1. Not Typical Real Estate Investment Cities
None of them are the typical 24-hour cities where real estate investors tend to focus. Therefore, you as a real estate investor should not limit yourself to New York City, Chicago, San Diego, Miami, Las Vegas, etc. but should keep your eyes open for smaller and LESS POPULAR LOCATIONS, as they can generate you some excellent profit.
All these most profitable Airbnb locations are cheap. None of them exceeds $500,000 as the median property price, and actually only Charleston, SC has this above $400,000. All the other cities are below the $300,000 benchmark. Are you surprised? You shouldn’t be. That’s exactly where these cities’ profitability comes from. The CoC return – as well as the cap rate – take your in cash investment or the property price into consideration. The CHEAPER the investment property, the HIGHER YOUR RETURN, given than your property generates some reasonable rental income.
3. Good (but Varying) Rental Income
The average monthly Airbnb rental income in these most profitable Airbnb – ranging between $1,754 and $6,710 (Castroville, CA) – locations is OK, to say the least. Indeed, when you factor in the property prices in these cities, the rental income is GREAT. That’s why they offer such high profitability.
4. Varying Occupancy Rate
The Airbnb occupancy rate in these cities VARIES between 28.1% (Hyde Park, NY) and 54.6% (Panama City, FL). The higher end of this range is good, while the lower one is rather too little. Still, with these not-so-impressive occupancy rates, the 10 cities listed above are the most profitable for Airbnb according to Mashvisor data. That’s because profit is a function of your investment (the property price), rental income, and expenses. It is interesting to note that other Mashvisor metrics (not included here) clearly point out that for all of these particular cities, Airbnb is the optimal rental strategy, in terms of CoC return, cap rate, and rental income.
5. Very Profitable for CoC Return and Cap Rate
These 10 most profitable Airbnb locations are REALLY PROFITABLE, whether we look at the CoC return or the cap rate. Actually, it doesn’t make much of a difference if we rank the top Airbnb cities based on CoC return or cap rate. The results are nearly the same. Only Castroville, CA is out of the top 10 – at position #11 – according to the cap rate. The top 4 locations remain the same.
6. No Geographical Focus
The most profitable Airbnb locations are SPREAD THROUGHOUT the US. You cannot establish any geographical pattern for these cities. The same holds true for the landscape and the climate.
Airbnb Profitability Data on Mashvisor: City, Neighborhood, and Property
If you have now started considering the option of buying a rental property in one of those most profitable Airbnb locations, you will be happy to hear that there are many ways in which Mashvisor can help you, by providing a range of metrics and analytics. In addition to the city-level data summarized above, you will be able to look at specific neighborhoods and obtain the same kind of information, divided by Airbnb and traditional renting. This will be of great help in deciding on the most profitable and most appropriate for you neighborhood once you’ve picked your city. That’s very important for out-of-state real estate investing as you will not be so familiar with the city and its areas. Finally, after you have your neighborhood picked up too, you can look at specific properties available there and get the predictive and comparative figures for them. The Mashvisor investment property calculator will save you days and weeks of research and calculations which traditional investment property analysis with spreadsheets will require.
In sum, don’t make the same mistake as thousands of real estate investors who pay attention only to the large, established real estate investment markets or who would only buy income properties in their own city (or at least state). After all, once the big popular markets overcrowd, they will stop being so profitable. Be open-minded. For your next rental property, explore these top 10 most profitable Airbnb locations.