Airbnb Bliss: Top 10 Cities Where Vacation Rentals Rake in the Most Cash (via Realtor.com)
The short-term rental market is going through its first big push back from legislators and communities. As popularity for short-term rental investments rises, some markets are becoming saturated, and, as a result, neighbors and other's affected by the influx of tourists in their communities (as well as the rise in home prices) are becoming more than disgruntled.
It makes sense. But, does this mean the time has passed for short-term rentals? Not by a long shot. We are still just beginning. What it does mean, however, is that you need to do your homework. If you're looking at purchasing a home as a short-term rental investment, there are some things you need to consider prior to doing so.
👉 How much can you get for a traditional, long-term rental if legislation makes that necessary?
👉 Is the market saturated?
👉 Can you match or beat competitors' prices?
Consider those, along with the data and rankings found in this article, and you can move forward in getting a slice of the short-term rental pie.
For more than a decade, short-term home rental websites such as Airbnb, HomeAway, and VRBO have helped everyday Americans squeeze some serious cash out of their homes—whether families renting out empty bedrooms or investors offering up multiple properties in prime tourist neighborhoods, leasable by the night. Easy-peasy! But those carefree good times may be coming to an end.
The motto of Silicon Valley may be to move fast and break things—but sooner or later the bureaucrats catch up. That’s the current reality for the short-term rental industry, now weathering an unprecedented storm of restrictive new regulations from city councils across the country.
Tensions between unregulated rentals and cities have been simmering for years, spurred by pissed-off neighbors and pushback from landlords and hotel operators. Now they're boiling over.
This year Las Vegas and Washington, DC, will phase out full-home rentals on sites like Airbnb with no owner present, which make up more than 70% of their current markets. New Orleans enacted legislation in January that will push these units out of historic residential neighborhoods. And a number of smaller cities are anticipated to follow their lead.
So does this mean the days of big profits from Airbnb rentals are over? No! But during this time of change, Airbnb hosts need to do their homework. They need to know their local laws, including what’s coming down the pike; they need to ensure they’re investing their nest eggs in markets where demand and appreciation are likely to remain strong. That’s why the realtor.com® data team searched out the strongest—and most profitable—short-term rental markets right now.
The main rule in approaching the short-term rental market these days: Have a strong backup plan.
If Airbnb is in your plans, "do the math before purchasing a home. Look at how much you could get for a traditional, long-term rental if legislation comes into town and makes that necessary," says Peter Lorimer, a real estate broker who stars on the Netflix series "Stay Here," which helps folks spruce up the properties they list on Airbnb and HomeAway. "Make sure it isn’t a saturated [market]. Look at the daily rates of competitors, and see if you can match or beat them."
For now, the short-term rental business is still going gangbusters: 97% growth in America's 100 largest cities over the past three years. That's more than 360,000 active rentals! Time will tell whether that number drops precipitately with the new restrictions—often enforced with steep fines that can surpass $10,000 a day.
To find the top places to own an Airbnb-type rental, we pulled data for those 100 largest cities. We used February data from AirDNA, a real estate data company that collects data on more than 10 million Airbnb and HomeAway rentals. We looked at the following criteria* to create our ranking:
Average short-term rental daily rate, monthly revenue, and occupancy rate
Rental demand score for each market
Average Airbnb host rating
Three-year increase in short-term rentals
Per capita number of short-term rentals
Monthly average short-term rental income as a ratio of a monthly mortgage payment**
Median list price (the lower, the better)
One-year home appreciation
We had a few caveats: We filtered out markets like New York and Los Angeles, where monthly mortgage costs are higher than the typical short-term rental income earned—it has to be a good investment after all. Also, the daily rates are averages, which get skewed higher by luxury rentals.
OK? Let's check out where you can still make bank off your Airbnb rental.
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