How to Conduct Vacation Rental Market Analysis

Buying vacation rental properties has become a popular investment strategy in recent years as their demand continues to grow. Many travelers prefer them to hotels because they tend to provide more comfort and space at a more affordable price. When done properly, investing in vacation rental property usually brings more rental income than traditional rentals. However, the vacation rental industry is a little more complicated and returns are never guaranteed. So, how do you ensure that you find a good vacation rental investment? The answer is vacation rental market analysis.

In real estate investing, location is the most important factor to consider. This is because it influences most aspects of income property investing including the listing price, expenses, rental income, occupancy rate, the optimal rental strategy, and ultimately the return on investment. Therefore, the best way to find a profitable vacation rental investment is to conduct thorough Airbnb market research.

In this blog, we walk you through the process of conducting a vacation rental market analysis. Read on to learn how it is done.

1. Find a Good City for Airbnb Investment

The first step in vacation rental market analysis is finding a good city for Airbnb investment. The best cities for Airbnb investment are usually those with popular tourist destinations, a relatively low supply of hotels, and a strong economy. In such a market, Airbnb prices tend to rise over time. In housing markets where there is a huge supply of hotels, real estate investors are forced to keep their rates low to attract more guests.

You should also study the Airbnb trends in the market. In cities where tourism is seasonal, there may be a high vacancy rate due to long off-peak seasons. This could have a negative influence on your return on investment. The best places for buying a vacation home rental are those with a steady inflow of tourists. Steady growth in the tourism sector also implies that the demand for Airbnb rentals in the city is on the rise. Also, search for property markets with affordable prices of Airbnb homes for sale. This will help to lower your mortgage payments.

The best way to research real estate markets is to look at vacation rental data for cities. You can check vacation rental market statistics for major cities in the U.S. housing market on Mashvisor’s blog. You will be able to get short-term rental data like Airbnb occupancy rate, average Airbnb rental income, average Airbnb cap rates, and average Airbnb cash on cash returns. With this information, you will have completed the first step in your vacation rental market analysis. By now you should have one or a few top-performing cities in mind.

Here Is One List to Check Out Now: Short-Term Rental Strategy: Best Cities for Airbnb Rental Income

2. Check the Short-Term Rental Regulations in the City

Finding a potentially profitable city for Airbnb investment is not the end of your market analysis. You still have to study the short-term rental regulations, which usually vary from city to city. Therefore, when looking for where to buy a vacation rental, it’s crucial to check whether the Airbnb regulations in your target city are favorable. This will also help you avoid getting into legal trouble in the future. For instance, Airbnb investing may be illegal or have some specific restrictions in some cities. The goal is to find a top-performing city with favorable short-term rental regulations.

3. Find the Best Neighborhood for Airbnb Investment in the City

Once you have found a good city for Airbnb investment in terms of performance and favorable Airbnb regulations, the next step in vacation rental market analysis is to find the best neighborhood. Even though the city may be generally good for Airbnb investment, not all neighborhoods may be as good. Therefore, you need to locate the top-performing neighborhood for Airbnb investment. This should be the one that appeals to tourists the most and has the highest ROI potential.

Look for a neighborhood that is close to tourist attractions like game parks, beaches, historical sites, mountains, city centers, etc. The neighborhood should also have good infrastructure, public transportation, a low crime rate, and amenities like restaurants, gyms, and shopping centers.

The best way to find a profitable neighborhood for vacation rental investment is to conduct a neighborhood analysis using Mashvisor’s heatmap tool. The heatmap tool uses Airbnb analytics to analyze neighborhoods in your city of choice. The map will then provide a visual representation of the Airbnb data using different colors to show different ranges.

Mashvisor’s neighborhood Airbnb data includes:

• Median listing price
• Airbnb rental income
• Airbnb cash on cash return
• Airbnb occupancy rate

Related: Airbnb Rentals: Finding Income Properties Using a Heatmap

4. Conduct Comparative Market Analysis 

Now that you have a lucrative neighborhood in mind, it’s time to find a profitable Airbnb property. When searching for a profitable vacation rental property, you first have to narrow down the Airbnb properties in the neighborhood to those that fit your budget and criteria. With our property finder tool, you can search for Airbnb properties in your target neighborhood that match your budget and criteria.

To avoid overpaying, you need to know the value of Airbnb properties for sale in relation to other comparable properties in the area (real estate comps). By comparing similar Airbnb properties in the neighborhood, you will be able to know which one is the best deal. You can compare the prices of Airbnb properties in your target neighborhood that are similar in terms of property size, the number of bathrooms/bedrooms, age, etc. Mashvisor allows you to easily access real estate comps for Airbnb properties in the U.S. housing market.

Related: Comparative Market Analysis: The Fastest Way to Get It Done

The Bottom Line

Location is the most important factor to consider when buying vacation rental property. Therefore, learning how to conduct vacation rental market analysis is crucial for every real estate investor. With proper real estate market research, you will be able to find the best places for buying an Airbnb rental and ultimately a profitable Airbnb rental property.

Mashvisor makes vacation rental market analysis easier for you. Be sure to use our tools to make more accurate investment decisions. Start your 7-day free trial with Mashvisor now.