Beyond Pricing analyzed the best places to invest in short-term rentals, based on occupancy and nightly price.
Surprised that the most popular cities for short-term rentals are in coastal cities — along with Washington D.C.?
When you look at the Airbnb homepage, they feature mostly houses overlooking beautiful oceans or lakes. Getting away to the beach, or at least the coast, is an American tradition. It’s only natural beach cities and Airbnb go hand-in-hand. (That’s why cities in Europe like Porto in Portugal are so popular with my clients as property investment choice.)
I use Beyond Pricing to manage pricing on several rentals, across several platforms.
They determined the top markets for short-term rentals (STRs) for 2023 based on 2 bedroom rentals, evaluating several quantitative factors:
- revenue per available night (RevPAN)
- occupancy rate
Those 2 factors also tie into how saturated a market is. Markets with a proliferation of short-term rentals will have lower nightly prices and lower occupancy.
The top STR markets this year
The first 3 are islands!
- Block Island, Rhode Island
- Hawaiian Islands
- Nantucket, Massachusetts
- Santa Barbara, California
- Austin, Texas – Are the short-term rentals full of people moving there looking for real estate?
- Portland, Maine – I know Portland, Maine very well and have some great real estate partners there to help you.
- South Bay of California, including Hermosa and Manhattan Beach. Look on the Airbnb site in that area. It’s really interesting how many rentals are hosted by Vacasa.
- Washington, D.C.
Is it essential to invest in the top cities for short-term rentals?
NO! As you can imagine, investors may flock to buy property in these cities. Then what?
- They become over-saturated.
- Prices go down.
- Regulation goes up.
Get expert advice on these top markets
- Get an introduction to local agents who know the short-term rental markets and are happy to work with investors.
- I’ve been a Superhost for 10 years and am happy to share thoughts. (Please use my Airbnb hosting referral link if you don’t have an account yet!)
7 things to think about before buying a property to rent short term:
- Check the current and potentially future short-term rental laws in the city, county and state where you are considering buying. It’s also important to check the laws if you plan to build an ADU with an idea of renting it short-term.
- Understand the long-term rental rules and real estate market…so if the STR market becomes over-saturated or for some other reason there is a slow down in reservations, you have a plan for paying your mortgage.
- Know your goal for buying it — your “why.:” (Is it simply as a revenue stream? Are you really up for it? What is Plan B if you can’t generate enough business? Why a short-term rental investment vs. other types of investments?)
- Know who will manage your short-term rental. A turn-key company such as Vacasa or a local management team? Thoroughly vet that team’s past and present!
- Think about location-specific issues: Are you up for buying on an island — and what is the flood factor of property there?As someone who owns a Maine summer rental where 95% of tourists visit the area from June – September, it’s been interesting tackling the challenges of managing the house off-season. You have to decide if you want to shut down the house by emptying the pipes and leaving the heat off. Or do you keep the house reasonably warm and let the water flow in case guests book? Beyond Pricing has been helpful in optimizing pricing for both the high season and off season.
- Consider the cost of outfitting the property for 5-star reviews. I spent about $3,000 to set up my Maine vacation rental, tapping into Wayfair, Amazon, Walmart, and Costco (drove a pickup truck from New Hampshire full of stuff)!
- Ask me for introductions to real estate agents who work with investors and work in the area you are targeting who are experienced in short term rental properties.