Is market demand on airdna meaningful?

Question

Hello BP community,

Looking to invest in a short term rental within driving distance of Charlotte NC, and I'm leveraging Airdna to target the right market and properties. I'm mainly looking at rental demand, ADR, average occupancy, and average revenue. I also see market trends on the number of active rentals by quarter.

The rental demand calculations isn't adding up to me. Blowing rock as an example has a 48 rental demand yet having a 59 % occupancy and average revenue of 4,900, while charlotte has a demand of 59 with 58 % occ and 2400 revenue. North Charleston has a rental demand of 86 with a 65 % occ and a 3500 revenue. Charleston has a rental demand of 74 yet a higher occ of 75 and revenue of 5500.

Is there a variable here that I'm missing, or is Airdna rental demand a flawed statistic that I shouldn't take too seriously?

Should I care at all about occupancy at all or just revenue?

Here is a little more info about my journey.

I am 24 with a solid w2 job (125 k base and 165 with commission) and I've caught the real estate bug. Currently do not own a home. Charlotte has great rental options close to downtown for about 1 k a month. Owning a property would mean living further away from the city, it would be hard to get any of my friends to live with me, so owning over renting would decrease my day to day experience. Looking to invest in Airbnb's within driving distance on a 2nd home loan. I've got about 55 k saved up, but with my low expenses and solid income, I can confidently save 25 k + a year.

I want to find a profitable market within driving distance (4-5 hours max). I am looking for properties in the 350 k range. Charlotte is not the best option due to an average airbnb market and high housing cost.

Here is my overall approach and I would love some general feedback.
I am leveraging airdna considering some of the statistics above to target a profitable airbnb market, then I am cross checking that with available homes and making the judgement call with whether the property I can afford, if set up correctly, can compete with solid listings making at least 60 k. (enemy method)

This investment must break even, and I am looking for safe options that don't necessarily need the highest upside. Looking for a single, not necessarily a home run. What property gives me the highest chance of making 60 k ( or 2x the down payment) so 250 k property, 50 k is acceptable, and a 400 k property, 80 k is the bar.

Upon conducting some research, I'm seeing that the general airbnb market trends don't always apply to me. Gatlinburg area is super profitable, but when I take closer look, 600 k + properties with panoramic mountain views are killing it, and a 300 k property would be a disaster.

Looking very closely into the Wilmington and North Charleston markets, potentially Myrtle beach as well.

Is there best practice on the minimum number of active listings in an area to deem it viable, or is perhaps a small market better as I can make a 350 k property pop?

I'm a little concerned that often the top 15 % suck up all the revenue, and a 300 k property is a huge risk without as much upside in a market with strong competition.

Thanks,

Patrick

Michael Baum · Answer

Hey @Patrick Forelli, if I were you this is what I would do.

I would leverage the FHA program, find and buy a duplex, triplex etc up to a 5 unit place. Live in one of the units and rent the others. Live for free and save up every dime.

Refinance the place after a year or so to a regular mortgage, move and rent the last unit and do it again. You can only have one FHA loan at a time. The low down makes it attractive.

This way you will live for free while building equity and a LTR base for your portfolio. Then start to look at STRs to expand.

Jon Martin · Answer

Agreed, "market demand" (however measured), and even whatever AirDNA spits out are only single data points. Demand is meaningless without knowing the supply. Which is why there is no "magic number", it's all relative. While helpful information, any single data point from a 3rd party provider should be taken with a grain of salt and looked at as a small piece of a larger picture. As for the various demand "scores" not making sense, that could be seasonality. Maybe demand is high enough in the summer for the resort towns to charge super high rates, but the rest of the year is low which levels out the total. Whereas people have a reason to visit Charleston, Savannah etc for all kinds of reasons throughout the year, but they don't have to spend $400/night for a room like they would in high season in a resort town, which simultaneously evens out the year round ADR and keeps seasonality low. Either way, you make an impressive salary for your age and are already thinking in the right direction, so good for you. In addition to what @Michael Baum said, I would look for homes with a walk out basement/private entrance and/or a sprawling ranch style where you can easily close off and convert part of your house to an STR. Don't worry about being the most baller pad in your market (you won't be, so don't stress it), you are focusing on subsidizing your living cost and can go bigger with the next one. Prioritize location specific amenities (views, walkability, proximity) as much as you can afford and make sure you provide a clean and inviting space and I imagine you will just fine within the context of your goals.

Sarah Kensinger · Answer

Considering the fact lenders use Airdna to see if they would lend on a STR I wouldn't be throwing away all their data. As we all know any type of data is never 100% correct, but Airdna and STRinsights are top game in the STR market and that would be due to their accuracy.

Keep digging into the STR world and learn all you can about markets. There is a sweet spot and if you pay attention, have patience and keep looking, you'll find it!

John Underwood · Answer

Ardna will only give you the 500 ft view.

You need to manually check an area once you have potential neighborhoods or areas your interested in.

Yes you need to care about occupancy. Areas that are saturated and for non special houses in those areas, they are not getting the bookings they once were.

Kai Kopsch · Answer

@Patrick Forelli, Congratulations on your initial post on BP! It's truly remarkable to see someone as young as 24 achieving such incredible success. Investing in real estate can also provide the added benefit of lowering your taxes. Just as Zillow's algorithm didn't guarantee success in purchasing a home, calculating your success in real estate investment using tools like Airdna will not end well.  When it comes to short-term rentals (STR), it's not just about the numbers on your first few properties. To truly succeed and maintain positive ratings, hands-on involvement is crucial. Building strong relationships with guests and choosing a strategic location are key factors. Consider purchasing a property near your own location so you can manage it yourself, and if things go well, establish a local team.

Sadly less than 4% of all BP members who have reached out to me in the past few years over the BiggerPockets featured agent program have overcome analysis paralysis and compared their deals to the extraordinary cash-flowing examples shared here in the forums.

Amy Shutes · Answer

I'm an investor and Realtor in the Charlotte Metro area.  I am happy to help in any way I can.  I can answer questions you might have.  Lake Norman and the Charlotte metro area have some great opportunities for short term and long term rentals.  I can also recommend some great property management companies, local lenders, and overall guidance that would make the experience much easier.

Mark Townsend · Answer

Happy to chat about the Wilmington market. It is my bread and butter.

Fiza Ah · Answer

North Charleston is NOT a safe option. There's elections happening and political change that could make short term rentals illegal this year, so I personally wouldn't bet on anything you couldn't cash flow on if turned into a long term rental.

Jacob D Adamczak · Answer

@Patrick Forelli Is it in North Charleston? If it is actively listed on the MLS, its is smart for them to block off the next few months in their calendar to allow showings, not have to disturb the guests, etc. SC mandates that the new owner honor 90 days worth of bookings and that can be a pain to transfer over, a lot cleaner to just not allow any more when you go to sell. I 100% think you should ask the agent for the past years (or longer if available) income history.  That is a common request and easily available for the owner or management company to provide.

Is market demand on airdna meaningful?

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