Diving headfirst into the world of real estate can be intimidating. But Airbnb real estate investing is one strategy that is gaining a lot of popularity among beginner investors. It is because owning an Airbnb investment property is a great way to get started since it provides endless opportunities for making money.
However, before buying an Airbnb rental property, you need to conduct proper Airbnb market research. Through Airbnb market research, you can understand the short-term rental market and find the best investment property to help you achieve your financial goals.
How to Do Market Research for Airbnb?
Doing an Airbnb market research is the best way to increase your investment’s chances of success. Airbnb market research can tell you what to expect from the future of your Airbnb rental property and how that property is expected to perform compared to similar properties around it.
Of course, it means that you will need to gather large amounts of data for comparison and analysis. Luckily, you can get Airbnb data from Airbnb’s website since they provide a lot of data for public viewing.
Additionally, Airbnb’s platform keeps track of each property’s historical performance and even provides an analysis based on that performance tracking. However, if you’re looking for how to research Airbnb markets, you will find multiple Airbnb market research tools online that can help you.
Mashvisor’s Airbnb market research tool, for example, gathers data from Airbnb to provide market research for Airbnb properties around the US in an easy-to-use interactive tool.
But how exactly do you conduct a market research for Airbnb?
Here are the steps you need to consider when conducting Airbnb market research:
1. Identify a Good City to Invest In
The first step of the Airbnb market research process is to find a good city for an Airbnb investment. Location is the most important factor in real estate investing since it will determine your return on investment. The best cities for Airbnb investment are typically popular travel destinations enjoyed by tourists or business travelers. A good city for real estate investing should also have a strong economy, shopping centers, good transportation, and other essential amenities.
You should also consider the Airbnb trends in the cities. Some cities receive tourists in certain seasons alone. It means that you will experience vacancies during off-seasons. Will you be able to afford these vacancies? You also want to examine the economics of the city. Steady growth in the tourism sector is an indication that there will be Airbnb growth in the city.
Finally, you need to check out the return on investment data for a particular city. Are Airbnb rentals making money there? To find profitable Airbnb locations, you can look at the Airbnb statistics by city.
So, where can you find reliable city data? On Mashvisor’s blog! Be sure to visit our blog to access the latest Airbnb analytics for major cities in the United States. In our location analysis articles, you’ll get the following for different US cities:
- Airbnb Occupancy Rate Data
- Average Airbnb Rental Incomes
- Average Cash on Cash Returns and Cap Rates
With this information, the first step of your Airbnb market research will be complete and you’ll have a profitable city or two in mind. But there’s still one major factor to check out: Airbnb regulations.
2. Study the Airbnb Regulations of the City
Airbnb regulations have tightened in many areas around the United States. So, after choosing a suitable city, the next step in your Airbnb market research is to study the short-term rental regulations of the city. Since Airbnb regulations usually vary from city to city, you need to know whether those of your selected city will allow you to achieve your investment goals.
For instance, are you allowed to operate a non-owner-occupied Airbnb rental in the area? What are the policies concerning Airbnb guests? What are the tax regulations? By having a good understanding of the local Airbnb regulations, you will be able to assess how they are going to affect you and you’ll avoid getting into trouble with the law.
There are some cities with very stringent regulations against Airbnb use. Such cities may not be good for Airbnb real estate investing. Cities with flexible Airbnb regulations are more desirable locations to invest in. You can approach your local city council to learn about your city’s regulations regarding Airbnb.
Related: 5 Cities Where Airbnb Is Illegal
3. Conduct a Neighborhood Analysis
After finding a good city to invest in, the next step in Airbnb market research is to find the best neighborhood in the city. Neighborhoods within a city may have different investment potential. While one neighborhood may be the most popular tourist destination, another may fail to be visited by even a single tourist the entire year. Therefore, you need to assess the neighborhoods and find one with the best Airbnb investment opportunities.
A good neighborhood for Airbnb real estate investing is one that appeals to tourists. Tourists are looking to stay in close proximity to attractive sites and other popular places such as beaches, game parks, city centers, etc.
To find a profitable neighborhood, you can quickly perform neighborhood analysis using Mashvisor’s Airbnb Heatmap. With the heatmap tool, you can find a profitable neighborhood in the city of your choice by using filters like listing price, Airbnb rental income, Airbnb cash on cash return, and average Airbnb occupancy rate.
Mashvisor’s Heatmap
You can then use Mashvisor’s Property Finder to identify Airbnb properties in your neighborhood of choice that match your search criteria and budget.
Related: Neighborhood Analysis in Real Estate Investing
4. Conduct Comparative Market Analysis
By now, you’ve identified a few Airbnb rental properties in your neighborhood of choice. The next step of Airbnb market research is to perform a comparative market analysis. It is a form of Airbnb investment analysis that involves finding the value of a rental property by looking at a few Airbnb rental properties in the area that are similar to the one you are interested in (real estate comps).
But why are real estate comps important to Airbnb market research? Well, through real estate comps, investors are not only able to avoid bad real estate deals and purchasing overpriced properties, but they can also gain an understanding of how similar properties are doing in the local real estate market.
Rental comps can help you check out local rental rates, for example, before ever making the purchase. And you need to check the rental rates of comparable Airbnb properties in the area before eventually setting your prices.
So, where do you find these comps? The search for real estate comps can be quite time-consuming. However, you can use Mashvisor’s Airbnb profit calculator to quickly get comps for every listing on the platform.
Related: Comparative Market Analysis: The Fastest Way to Get it Done
Airbnb vs Traditional Rentals – Which One Is Better?
A common question that beginner real estate investors often ask themselves is, “Should I invest in a traditional or an Airbnb rental property?”
While short-term rentals continue to increase in popularity as investment properties, long-term rentals are still the most common type of real estate property. It means that choosing between the two can be challenging, as each type of rental property comes with its own advantages and disadvantages for investment.
As an investor, if your ultimate goal is to maximize your profits even if it means increasing the risk, short-term rentals are a better choice in most markets. However, if you’re looking to make a safe investment with steady growth and returns, then traditional rentals are the best.
With that in mind, it is often advised not to make up your mind until you’ve conducted rental market research to see which type of rental is best in that particular market.
Market Research for Airbnb vs Traditional Rentals
Doing rental market research for rental properties follows the same steps mentioned above, regardless of the type of rental property you want to invest in.
So, when doing Airbnb market research, you can do the same for traditional rentals, as well. It means that you’ll need to gather data from different sources when it comes to traditional rentals.
Alternatively, you can use Mashvisor’s platform to gain access to both types of data, as well as automatic comparisons between the two in your Airbnb market research tool.
The biggest difference between doing rental market research for Airbnb vs traditional rentals is that the occupancy rates can fluctuate much more in Airbnb properties. However, other factors can also influence the decision-making process.
For example, when researching a market for Airbnb properties you’ll need to choose your location based on the area’s tourist attractions. When doing so for traditional rentals, however, you will instead want to focus on family-oriented attractions, such as schools, grocery stores, and pharmacies, to name a few.
Additionally, traditional rentals experience a relatively stable occupancy rate year-round.
Airbnb rentals, on the other hand, are known for being seasonal. It means that short-term rentals can see very high demand in certain seasons and no demand at all in other seasons. So, if you decide to invest in an Airbnb rental, it’s important to keep the above differences in mind while doing rental market research.
If you find a traditional rental that looks like a prime investment property, it might be in your best interest to divert from your plan and seize the new opportunity if you’re comfortable with it.
Property Management
One of the most important differences between Airbnb and traditional rentals relates to rental property management.
Simply put, traditional rentals only require a fraction of the rental property management that short-term rentals need. It is because:
- Airbnb rentals have a high turnover rate.
- Short-term guests are less likely to take good care of the property.
As an Airbnb host, you can expect guests to be checking in and out of your property on a weekly or daily basis. Every time a guest checks in or out of the property, it is your responsibility to collect the rent and the keys and make sure that no serious damage was done to the property.
Additionally, since short-term guests feel less attached to properties that they’re only spending a few days in, they will often neglect taking good care of the property and might leave it in a messy state.
Luckily, rental property management services are available anywhere in the US. Although they come at a considerable cost of around 5%-10% of your monthly rental income, the services they provide can save you a ton of time and effort.
The Bottom Line
Learning how to perform Airbnb market research is the first step to finding a profitable investment property. Similar to buying traditional investment properties, acquiring an Airbnb rental property also requires the same amount of thorough research. Through market research, real estate investors are able to get critical data that helps them to select the best property, set competitive rates, and even market the property.
There are many options to choose from and you need to find the best one. Be sure to use Mashvisor’s tools in your Airbnb market research to automatically find profitable investment opportunities and reduce investment risk.
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