Getting access to vacation rental data and doing a proper vacation rental market analysis are important aspects investors should not forget.
Buying vacation rental properties has become a popular investment strategy in recent years as their demand continues to grow. Many travelers prefer to stay in vacation rentals than in hotels because they tend to provide a more comfortable and homey space at a more affordable price. When done with proper vacation rental analytics, 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? This is where vacation rental analysis comes in.
In real estate investing, location is the most crucial factor to consider, and it can either make or break your investment. It is because location 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 and how to use vacation rental analytics for investing.
What Are Vacation Rental Analytics?
Vacation rental analytics are a collection of short-term rental data and insights from various home-sharing platforms like Airbnb, HomeAway, and VRBO. The vacation rental data presented in this short term vacation rental analysis show the trends of the short-term rental market based on concrete figures such as occupancy rates and average rental income. The vacation rental market data is crucial in helping prospective investors make more informed decisions.
Why Are Vacation Rental Analytics Important?
The role of analytics in vacation rental market is crucial as it can help determine if a particular investment property is worth your time and money. If you’re an investor searching for a potential vacation rental property to invest in, being able to access the vacation rental data and analytics is important as it can help you decide which short-term rental property can provide the most profits.
There are many reasons why investors need to do real estate market research and analysis before buying any investment property, such as the following:
- Make the right investment decisions: If you are planning to invest in Airbnb rentals, it’s essential to research the property’s short-term rental analytics so you can properly strategize your investment and earn more revenue.
- Become competitive: With proper vacation rental analytics, you will be able to understand the market well and know your competitors more. It can help you gauge your property amid the competition and become more successful.
- Maximize earnings: Utilizing the vacation rental data and analysis will help you get a general overview of the potential cash return of an investment property. It can help you maximize your potential income by setting your pricing correctly based on the seasonality of the business.
Why You Need to Use Vacation Rental Analytics Tools
The process of doing your own real estate market research and analysis can be a daunting and tedious task. However, it is doable as long as you are willing to spend more time gathering all the necessary information that you need and creating your own analysis based on the insights you find.
Keep in mind, though, that collecting real estate data and insights manually can be prone to unnecessary errors. Such errors can result in making the wrong investment decision. It is the primary reason why it’s important to use the right vacation rental analytics tool to help you find the important real estate information that you need.
Here are other reasons why you should conduct analytics in vacation rental using real estate analytics tools like Mashvisor:
- Accuracy: Using the right short-term rental analytics software can provide accurate and up-to-date real estate market data based on in-depth research and analysis. You don’t need to gather such important information manually because all the data that you need will be automatically provided. The information includes the occupancy rate, rental income, expected expenses, cash on cash return, cap rate, neighborhood comps, and more.
- Ease of use: The best software for vacation rental analytics can help make your research a lot easier. You don’t need to spend a lot of time finding the necessary data and calculating your potential returns because the required figures will be provided. You can also customize the information based on your personal preferences. For example, Mashvisor provides an Airbnb calculator that allows you to input additional expenses and financing information so you can get an overview of your potential cash flow.
- Organized: If you don’t want to create your own spreadsheet where you input all the crucial figures that can affect your investment, then you will benefit from using a vacation rental analytics tool. The best real estate market analysis software presents an investment property’s insights in an organized and easy-to-understand manner. In such a way, you don’t need to dig deeper to see the data that you require.
Steps in Conducting Vacation Rental Market Analysis
Once you find the right vacation rental analytics software, it would be easy to conduct a vacation rental market analysis. You can follow the simple steps below to help guide you with the process:
1. Find a Good City for Airbnb Investment
The first step in vacation rental 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. It 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 US 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.
Related: 40 Best Cities for Airbnb Income in 2022
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.
It 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’ve found a good city for Airbnb investment in terms of performance and favorable Airbnb regulations, the next step in vacation rental market analysis by neighborhood 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. It 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 US housing market.
Related: Comparative Market Analysis: The Fastest Way to Get It Done
Other Things to Consider When Doing Vacation Rental Analysis
To ensure that you’re making the right investment decision, you need to know how to interpret the vacation rental data and insights that you get from your vacation rental analysis. Knowing these numbers is not enough if you don’t understand how they can affect your investment’s profitability. When analyzing a short-term rental, consider the following important factors:
1. Occupancy Rates
The property’s occupancy rate is a crucial factor that can determine whether or not an income property can generate enough cash flow from renters. Vacation rentals are a seasonal business, so you can expect that the property will not be occupied 100% in a year.
Knowing what occupancy rates are acceptable in your preferred location is essential. It can also help you price your vacation rental correctly so it can generate enough cash flow to cover those times that the property is vacant.
2. Expenses
If you are using Mashvisor as your vacation rental analytics tool, you will be provided with the basic expenses associated with the property. It’s important to know these expenses so you can strategize on the best way to improve your income. You can also plan which costs to cut so you can maximize your returns.
3. Revenue
The success of your vacation rental investment can be measured by the average daily rate you can charge for the property and the average monthly rental income that the property generates. Seeing the income and expenses side by side is a great way to determine whether the investment property can provide sufficient positive cash flow to sustain the business.
The Bottom Line
Location is the most important factor to consider when buying vacation rental property. Therefore, learning how to conduct vacation rental analytics is crucial for every real estate investor. With the proper vacation rental data analysis, 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 find accurate vacation rental data and make informed investment decisions.
Sign up for a 7-day free trial with Mashvisor now.
