Best Cities for Air BnB Investing in 2023

[Zach Edelman]

Hey guys, 

I just read an article on the Best Markets to Invest in Air BnBs for 2023 and wanted to share my findings/summarize the article, and see what the BP community thought.

Here were the article's best markets, divided into three categories:

Metro Markets:

Nashville, TN:

- Nashville continues to provide good investment opportunities for short term rental investors due to its vibrant music scene and and group-friendly shenanigans that Broadway street can offer visitors. Nashville also has a strict STR policy which contrary to popular belief, can actually be good for investors.

- The city passed a law in 2018 that allows for the operation of short-term rentals in certain/specific areas of the city, While it can limit the supply of licensed rental properties, it allows investors to be able to know ahead of purchasing an STR, that if the STR they are buying is already licensed and approved to operate as an STR, it will likely stay that way. Secondly, if you are lucky enough to secure an asset with an STR license, from day one of owning the asset, you have a degree of safety with there being barriers to entry for more competitors to enter the space. You are getting yourself into a scenario without a lot of question marks/risks from a regulation perspective.

Houston, Texas (this surprised me):

- Of all the metro markets that would immediately pop to one's head if you were to ask anyone in the STR space, "name a strong Metro STR market, 3,2,1...go." it's very unlikely that anyone would say Houston, TX. However, Houston is a very strong market for Air BnB investors in 2023 due to it's several popular tourist attractions, likelihood to create business-related travel to the city, and the market's strength in the "seasonality" department.

- Houston was actually rated 99/100 by Air DNA on the "seasonality" metric, which means this market offers low seasonal variability. While this is common for metro markets, Houston's warm weather + strong business climate allow investors to ensure that their STR is going to be in a strong position to get bookings year round.

Flyable Vacation Markets:

Waikiki, Hawaii

- Waikiki, Hawaii is a world renowned vacation destination that is known for its beaches, resorts, and vibrant nightlife, which naturally can create demand for STRs, especially in areas near the beach and tourist attractions.  

- The supply of STR's in Waikiki is limited to zoning laws and other regulations. This is advantageous for investors as just like for Nashville (see above), investors can know ahead of time what they're getting into from a regulations standpoint, which offers less mystery/ambiguity as far as what is versus isn't allowed for obtaining bookings, and means they are probably less likely to get rug pulled down the road, since regulations are already in place. They also can also know that if they are fortunate enough to acquire an STR that is already properly licensed/zoned, there are rather safe from competitors entering the space due to the regulatory barriers of entry. 

- AirDNA gives Waikiki, HI a rare "A" market grade for 2023. This includes an extremely strong 98/100 seasonality score, and an average occupancy rate of 86%. Year-round bookings, strong regulatory environment with rules and regulations clear and in-place, what's not to like?

Jackson, Wyoming

-  Jackson is a picturesque mountain town located in the heart of the Rocky Mountains and surrounded by natural beauty, making it a popular destination for travel. 

- There are only a few hotels and resorts in Jackson, and naturally only a few STR properties. High demand, low supply = $$$$

- Jackson, WY is certainly a popular spot for wealthy people to vacation and as a result boasts extremely high rental rates. Air DNA reports an average monthly rental revenue of $7,665, including a very impressive $15,282 per month in July. With average daily rates of over $550, it is clear why Jackson, WY can be a very lucrative place to acquire an STR. For those looking to buy an STR and get bookings that you'll be able to brag about on Social Media or to your friends, this might be it.

Drivable Markets:

Galveston, Texas

- Galveston, just being a coastal island in the great state of Texas is naturally set up for success as an STR market. In addition to it's great location, it has a thriving tourism industry with numerous attractions, including amusement parks, museums, and beaches.

- Galveston has a year-round tourist season, as warm weather can go into as late in the year as October in November. 

- There are 11 cities in the United States with a 2023 population over one million, with three of these eleven being within driving distance of Galveston: Houston (~2.3 million), San Antonio (1.4 million) and Austin (~1 million). Beach/Access to Ocean + Reachable by car for a large number of people = large likelihood of demand as an STR destination.

Chattanooga, Tennessee (this also surprised me):
- Chattanooga is a thriving city that has seen a lot of growth in recent years, and is actually a fairly popular tourist destination due to its scenic beauty, outdoor activities, and cultural attractions. 

- Chattanooga has many popular tourist attractions: such as the Tennessee Aquarium and Lookout Mountain. 

- Chattanooga is in close proximity to a plethora of large cities: It is roughly a one hour, forty five minute drive from Atlanta, GA, a two hour drive from Nashville, TN, a hour and a half drive from Knoxville, TN, a two hour drive from Birmingham,, AL, and a hour and a half drive from Huntsville, AL. This naturally positions the market to capture a good amount of bookings, simply due to the shear amount of people that can reach the city by car.