Do you own or rent property in the woods, desert, or along the coast? Why not put up a luxury yurt for an Airbnb glamping business?
If you’re planning on investing in a short-term rental, one of the primary things you’ll need to consider is the market. Which area and demographic should you cater to? What market forces drive them? How will they affect your bottom line?
In this post, we’ll discuss 5 key factors to consider when choosing the best markets to invest in Airbnb.
First of all, investing in your own town or city will give you a “home court advantage”. You’ll have the familiarity and confidence when you’re the boots on the ground, and you’ll be able to attend to your guests’ needs right away.
You’ll be able to solve problems instantly because you already know how to find solutions and where to go for help.
Additionally, aside from being the “feet”, you’ll also be the eyes, ears, and heart. You’ll be in tune with the pulse of the market. You can see what’s happening in the local hospitality and real estate industries.
When you have intimate knowledge of the territory and the people, you’ll be able to predict what needs will arise and how you can supply those needs. You’ll know which products and services will be a hit or a flop.
Of course, part of finding the best markets to invest in Airbnb is also checking an area’s profitability. You’ll want a place that draws a sizable number of travelers. The city center, the beach, an amusement park, convention center, sports stadium, or national park.
Aside from the standard tourist attractions, visitors are also drawn to places with pleasant weather, walkability, and local charm. Amenities like shops, cafes and essential services are helpful, too.
The drive-to markets, or rural areas within driving distance of 1 to 2 hours from a city or port, have been seeing unprecedented demand for vacation rentals since the Covid-19 pandemic. These are rural, off-the-beaten path destinations that city dwellers like escaping to for hiking, biking, fishing, kayaking, horse-back riding, and target-shooting.
A 2021 Vrbo report stated that 4 of the top 5 trending destinations post-Covid are those near lakes, rivers, and streams. People who got tired of quarantining escape there to social-distance, go glamping, and enjoy the outdoors.
Check to see if there’s a shortage of affordable lodgings in those areas. If they aren’t saturated with short-term rentals — and they aren’t likely yet — then that’s a good opportunity for you.
Keep in mind seasonality, though. The popularity of attractions can rise and fall, as does the scheduling of events, festivals and tournaments. You’ll want to have a fallback during the slow seasons.
Read also: Unique Stays are So Hot Right Now! (And They’re Here to Stay!)
Find out the county laws for short-term rentals in the area you’re considering. Aside from requiring licenses and permits, some cities restrict the location and types of property you can list on Airbnb. Others limit the number of nights and occupants you can accommodate.
Still others require you to be residing on-site while guests are staying at your property.
Always pay attention to local ordinances because they can change from time to time. What can be a lucrative market today may not anymore next year.
If your chosen market is in a large city, find out if there’s a strong hotel lobby. Cities like New York, San Francisco, Chicago, Austin, and New Orleans have numerous hotels and some of the strictest laws against home-sharing.
To be on the safe side, go for the kind of property that you can lease on a long-term basis, in case restrictions make short-term renting less viable in the future.
What kind of guests do you want to cater to? Business professionals? Families? Millennials? Adventurers?
The clientele you’re targeting will determine the kind of structure you’re going to invest in. For example, younger guests might prefer a modern and stylish unit in a busy part of town. Older people and families will appreciate a quieter area with lots of outdoor space. And, maybe, pet-friendly amenities.
If you want to target business professionals, you’ll want an apartment or condo in the city center. Ideally, it’ll be within a 20-mile radius of the airport and located near convention centers, restaurants, shops, and a gym.
Proximity to a good hospital is also a plus. Traveling nurses, patients and families go to medical centers for health care. Look for a property within their vicinity that’s at ground level or that doesn’t have too many steps.
If you’re going to accommodate families or groups of friends, you’ll want a vacation home in or near a tourist hotspot. It has to have multiple bedrooms, a yard and garage, a well-equipped kitchen, and kid-friendly amenities such as a playpen, toys, and games.
As for adventurers, it’s mountain cabins, desert homes, and beach shacks that they want.
Ultimately, the type of property you decide on will determine the cost of your investment. And, ultimately, your ROI.
Read also: 5 Simple Strategies for Financing Your First Airbnb
To find the financial viability of your market, get data and analytics from Airbnb and sites like Airdna, Mashvisor, Transparent, and Alltherooms. They’ll give you the latest figures on occupancy rates, comparative rental income, revenue growth, and rental demand in the areas you’re considering.
Then, start looking for properties within your budget. You’ll want to know the following data on each of the units you’re considering:
Tools like Zillow, Realtor, Remax, Trulia, and HomeLight’s Home Value Estimator can help you find all the such necessary data. They provide home values, mortgage estimates, and demographics like local economy, employment, education and finance.
Once you’ve narrowed down your choices to a few select properties, find out how much positive cash flow you can generate from each one.
You’ll need to see if your projected income will cover your mortgage/rent payments, taxes, insurance, furnishings, utilities, and management fees.
Keep in mind that there may be additional and sometimes hidden fees that come with property acquisition. These are appraisal, inspection, closing, and HOA costs.
Here are some professional tips on how to analyze financial figures from Erica Muller, a veteran real estate agent for vacation rentals in Florida:
Investing in a short-term rental is a smart move. In spite of Covid-19, travel has picked up both in big cities and rural areas in recent months.
But as with any financial investment, you’ll have to do your due diligence.
Follow the above criteria when choosing your target market. Understanding these factors will help you make good, solid strategies in kickstarting your Airbnb business.
With careful research and planning, you’ll be able to find the property that best suits your personal and financial goals.
Ready to learn how we built & operate a $2M/year short term rental business, operate properties throughout the USA remotely, and acquired 70+ properties without owning any in just 2 years? Attend our free online master class to learn how you can do the same. Click here.