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How to Choose the Perfect Airbnb Investment Property for You

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Last updated on
April 23, 2019

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In recent years, Airbnb rentals have quickly become a popular choice for tourists and vacationers looking for temporary lodging. Due to this strong demand, vacation rentals have become an attractive option for real estate investors. We’re not surprised to see more and more investors turning to short-term rentals as the returns they can offer are robust!

If you too want to enjoy the financial benefits of owning an Airbnb investment property, then keep reading to learn how to choose the perfect property for you.

1. Pick Your Location

As with any investment property, location is the most important factor when selecting your perfect short-term rental. Locations with tourist attractions such as beaches, mountains, or a national park are typically desirable for Airbnb real estate investing. However, it’s important to take seasonality into account when picking the best place to buy an Airbnb investment property. You don’t want to own a short-term rental which sits empty and does not generate any income during the low season – it’ll cost you more money than it will earn you.

We recommend investing in locations where tourists and other visitors are present year-round. Such areas will have a consistent yet strong demand for Airbnb rental properties. Additionally, you want to make sure that the location has less supply in the form of hotels or other short-term rentals. This will assure that your rental will enjoy a high Airbnb occupancy rate. Naturally, Miami and San Diego are two of the best locations for buying an Airbnb investment property in 2019 because of the high demand. Following are some important figures on these two locations according to data from Mashvisor, a real estate data analytics company.

#1 Miami, FL

  • Median Property Price: $567,000
  • Airbnb Rental Income: $3,390
  • Airbnb Occupancy Rate: 56.5%
  • Cash on Cash Return: 2.7%

#2 San Diego, CA

  • Median Property Price: $739,800
  • Airbnb Rental Income: $3,760
  • Airbnb Occupancy Rate: 58.5%
  • Cash on Cash Return: 2.4%

2. Beware Short-Term Rentals Regulations  

Before buying a property to rent out on Airbnb in any location, real estate investors must check the laws and regulations regarding short-term rentals there. For one thing, some cities ban Airbnb rentals. Others allow you to rent out on Airbnb only if you’re the primary resident of the property. As a property investor, you may face legal issues if you choose to buy an Airbnb investment property in these cities. So, when you’re looking for the best Airbnb property, make sure it’s located in an Airbnb-friendly area where laws and regulations are not likely to affect your return on investment.

3. Investment Property Type

The best type of property to buy and rent out on Airbnb is the one that makes you the most money. However, this largely depends on the location, as well as the type of Airbnb guests you’re targeting. For example, if you’re interested in owning an Airbnb investment property to rent out to solo travelers or couples, then a condo or an apartment located in the city center is your best option. On the other hand, if you prefer to rent out to families or big groups of friends, it’s best to go with vacation homes or beach houses.

4. Check Your Budget and Expenses

Every rental property comes with costs and expenses that will affect your return on investment. While short-term rentals can definitely be profitable, they can also cost more. So, to find the perfect Airbnb investment property, you need to set a budget and break down your costs carefully. First off, property values are on the higher side, which makes it difficult to cover the higher mortgage payments during the low season. Besides mortgage payments, you need to factor in monthly expenses such as:

  • Property tax
  • Insurance
  • Furniture and utilities
  • Property management fee
  • Cleaning service fee
  • Maintenance fee
  • Vacancy provision

If these monthly expenses exceed your monthly rental income, it becomes easy to start losing money. So, again, the perfect Airbnb property for you is the one that you can afford and that fits in your budget.

5. Airbnb Performance Prediction

With a traditional, long-term rental, you get a fixed return in the form of rent every month. With short-term rentals, however, you’ll need to set a nightly rate and adjust it based on seasonality, special events, neighboring competition, and travel trends. Meaning, Airbnb property investors don’t get a fixed monthly return. This can make buying short-term rentals a risky investment, but you can reduce this risk with the help of Airbnb analytics.

Airbnb analytics helps real estate investors predict future outcomes, thus allowing them to make wise investment decisions with confidence. Essentially, Airbnb analytics provides data that help you analyze the returns and performance of properties based on:

  • Comparable Rental Income
  • Estimated Rental Expenses
  • Cash Flow
  • Cash on Cash Return
  • Cap Rate
  • Airbnb Occupancy Rates

With these 5 things in mind, you’re one step ahead in choosing that perfect Airbnb investment property!

If you’re looking for a profitable Airbnb rental property to buy, check out Mashvisor, a real estate data analytics platform which helps investors find lucrative rental properties in a matter of minutes. You will find readily available data and analysis of hundreds of thousands of properties across the US. Mashvisor turns 3 months of research into 15 minutes. Moreover, as an exclusive offer for readers of the Houst blog, you can now enjoy 25% off your first subscription.

Eman Hamed is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions.