Top LocationsThe Top 15 Cities for Short-Term Rentals for Cap Rate by Hamza Abdul-Samad December 6, 2017February 7, 2019 by Hamza Abdul-Samad December 6, 2017February 7, 2019The return on investment (ROI) of Airbnb rentals is by far the most important piece of information needed to understand rental property performance. What exactly is real estate investment ROI? It is a metric (or multiple metrics) that tell real estate investors how profitable their investment properties are. One of the most common return on investment metrics is the cap rate.Capitalization Rate – In a NutshellThe cap rate (or capitalization rate) of an investment property is a real estate investment ROI that compares a rental property’s net operating income to its current market value. Calculating cap rate on investment property is easily done with an investment property calculator. The capitalization rate calculation is still simple enough to be computed manually as well using the following equation:Capitalization Rate = (Net Operating Income/Current Market Value) × 100% Net operating income (NOI) is the difference between the gross rental income of a rental property and its operating costs (taxes, maintenance, etc.). The current market value of a property is the fair market value of the property at the given time.What Is a Good Cap Rate?What is considered a good cap rate? Generally, anything around 8%-12%, with anything higher being better. However, it’s worth noting that local dynamics can heavily impact what a good cap rate actually is in a given market. Location (obviously) heavily influences cap rates. The type of property can also play a huge role. Multi-family properties, for example, inherently have lower cap rates than other types of properties such as single-family homes.Related: Location, Location, Location – Is Location Really All in Real Estate InvestingAs a result of all these factors, a good cap rate can vary significantly across the country. For instance, in some areas, a 6% capitalization rate is pretty good.Related: What’s a good cap rate for investment properties?Capitalization Rate and Short-Term RentalsOne of the few criticisms of capitalization rate is that it is not very useful with short-term rentals. Why? Net operating income heavily depends on annual rental income, which is not always calculated accurately with short-term rentals. Luckily, Mashvisor is able to accurately project the expected rental income of an Airbnb property. With this valuable piece of information, the cap rate of short-term rentals can be calculated, just as if they were long-term, traditional rentals.Top 15 Cities for Airbnb Rentals for Capitalization RateHere are the top locations for Airbnb cap rate. The capitalization rates on this list are average cap rates in these locations. Your actual cap rate in any of these cities would likely be higher. The cash on cash returns have the same values as the capitalization rates because the properties are assumed to be purchased fully in cash. If financed through a mortgage, your CoC returns will be higher. Also, like the cap rates, the cash on cash returns on this list are merely averages, actual values will be higher.1.) Dubuque, IAAirbnb Cap Rate: 10.43%Airbnb Rental Income: $1,921Airbnb Cash on Cash Return: 10.43%Median Property Price: $205,2502.) Traverse City, MIAirbnb Cap Rate: 8.83%Airbnb Rental Income: $2,865Airbnb Cash on Cash Return: 8.83%Median Property Price: $348,7013.) Oakland Park, FLAirbnb Cap Rate: 8.18%Airbnb Rental Income: $2,507Airbnb Cash on Cash Return: 8.18%Median Property Price: $247,7734.) South Bend, INAirbnb Cap Rate: 8.02%Airbnb Rental Income: $1,138Airbnb Cash on Cash Return: 8.02%Median Property Price: $134,9995.) Wareham, MAAirbnb Cap Rate: 7.84%Airbnb Rental Income: $2,521Airbnb Cash on Cash Return: 7.84%Median Property Price: $289,0006.) Tuscaloosa, ALAirbnb Cap Rate: 7.24%Airbnb Rental Income: $1,466Airbnb Cash on Cash Return: 7.24%Median Property Price: $237,6187.) Mountain View, CAAirbnb Cap Rate: 6.37%Airbnb Rental Income: $3,585Airbnb Cash on Cash Return: 6.37%Median Property Price: $1,108,9008.) Colorado Springs, COAirbnb Cap Rate: 6.36%Airbnb Rental Income: $2,245Airbnb Cash on Cash Return: 6.36%Median Property Price: $320,7079.) Anaheim, CAAirbnb Cap Rate: 6.3%Airbnb Rental Income: $4,026Airbnb Cash on Cash Return: 6.3%Median Property Price: $543,38710.) Blacksburg, VAAirbnb Cap Rate: 6.27%Airbnb Rental Income: $2,328Airbnb Cash on Cash Return: 6.27%Median Property Price: $410,29411.) Bloomington, INAirbnb Cap Rate: 6.25%Airbnb Rental Income: $1,662Airbnb Cash on Cash Return: 6.25%Median Property Price: $269,78712.) Waianae, HIAirbnb Cap Rate: 6.2%Airbnb Rental Income: $3,359Airbnb Cash on Cash Return: 6.2%Median Property Price: $561,47613.) Silver Spring, MDAirbnb Cap Rate: 6.12%Airbnb Rental Income: $2,133Airbnb Cash on Cash Return: 6.12%Median Property Price: $324,90014.) Arlington, TXAirbnb Cap Rate: 6.1%Airbnb Rental Income: $1,904Airbnb Cash on Cash Return: 6.1%Median Property Price: $253,84815.) Port Angeles, WAAirbnb Cap: 6.04%Airbnb Rental Income: $1,945Airbnb Cash on Cash Return: 6.04%Median Property Price: $275,000Related: 10 Most Profitable Airbnb Locations for Cash on Cash ReturnThings to Note About the 15 Best Cities for Airbnb Capitalization RateThe cap rates in these top locations do not all range in the ‘good cap rate’ range, but they are all good cap rates nonetheless. The highest capitalization rate is Dubuque, IA. Five cities have average cap rates from 7%-8%. The remaining cities have cap rates at 6% or above.The median property prices in the best cities for Airbnb cap rate are relatively inexpensive. Eleven of the fifteen cities have property prices that are below $350,000, which is about the national average. To make matters better, eight of those eleven cities have median property prices that are below $300,000.All of the 15 cities have high Airbnb rental income. All of these top locations have an Airbnb monthly rental income of at least $1,100, which is much more than the Airbnb average of about $924. Fourteen of the cities have an Airbnb rental income of over $1,400. Nine cities have a rental income of over $2,000.All in AllThe capitalization rate of a property is a must-have metric to understand real estate investment ROI. Investments in the cities on this list will pay themselves back rather greatly, to say the least.To find out more about real estate concepts like cap rate, or to find investment properties all over the US, be sure to visit Mashvisor! Start Your Investment Property Search! START FREE TRIAL AirbnbCap RateDubuque IAOakland Park FLTraverse City MITuscaloosa AL 0FacebookTwitterGoogle +PinterestLinkedin Hamza Abdul-SamadHamza is a long-time writer at Mashvisor. With a focus on real estate investing tips, concepts, and top investing locations, he aims to help all aspiring investors who come across his blogs to hit the bank with their investment property. Previous Post What Are the Best Real Estate Investment Strategies for Beginner Investors? Next Post Investing in real estate with no money is feasible but is it recommended? Related Posts 4 Top Housing Markets 2018 – US Housing Market Is This the Best Time to Buy Property in Florida for Real Estate Investing? 9 Best Neighborhoods to Buy a 2019 Orlando Real Estate Investment Is Investing in Airbnb San Antonio a Smart Move in 2019? Best Neighborhoods to Invest in Fort Lauderdale Real Estate Market Our Top Picks of Neighborhoods to Invest in the Tampa Housing Market 10 Best Beach Destinations for Buying a Vacation Rental in 2019 Chicago Housing Market 2019: Is It Really Looking That Bleak? NYC Real Estate Market 2019: 5 Current Trends You Need to Know Tampa Real Estate is a Hot Market in 2018! 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