Best markets to invest in Airbnb

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Best markets to invest in Airbnb

David Rutledge
Irvine, CA 路 Member since 2016 路 243 posts 路 59 votes

Hi everyone,

I have a number of long term rentals and I am looking to purchase another 3 properties that I want to use as STR on airbnb. I have converted a few of my long terms into STR and have been really happy with the results.

I am looking at a number of different markets to make this model work and I was wondering if I could get some insight from anyone who has some knowledge or experience doing STR in these areas.

The areas I am looking at are:

Davenport, FL, Tampa, FL, Memphis, TN, Chattanooga, TN, Gaitlinburg area, TN,due to the affordable prices and year round visitors

Indianapolis, IN, Kansas City, MO, Detroit, MI for the very affordable prices but I am unsure how these markets would perform year round.

I am also looking at college towns Columbus, OH, Ann Arbor, MI, Waco, TX to take advantage of year round attraction of the universities in these markets.

I have spent hours looking at different reports and opinions on these markets from Airdna and other experts but I would love to hear from people who are actually investing in these areas and have an intimate knowledge of what is going on from the perspective of an investor.

I live in CA and will be buying out of state. The main things I am concerned about are:

1) the affordability of the market (I would like to buy multi family properties for between 100K - 250K) 

2)Seasonality of the market (I would prefer there not be a huge difference in occupancy between the highest and lowest months)

3) regulations, I want to stay away from markets that have very strict regulations on STR like Nashville, Orlando etc..

Any type of insight hat I could get would be very much appreciated.

Thanks everyone.

David

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Most Popular Reply

Conner Bland
Flipper/Rehabber 路 Indianapolis, IN 路 Member since 2019 路 31 posts 路 19 votes
7y

@David Rutledge Indianapolis STR's perform decently year round in the Downtown, Broad Ripple, Fountain Square and Mass Ave areas. There's a hotel shortage right now in Indy which is helpful for STR's with events like Big Ten Championship, NCAA Tournaments, Convention Season and the Indianapolis 500, but there is a huge push for building more hotel accommodations downtown right now, so STR's in Indy might not be a great long-term solution. See link:

https://www.visitindy.com/indianapolis-planner-new-developments

One market to take a peek at if you haven't yet is Asheville, NC. HUGE NOTE - you HAVE to buy outside the city limits. There's a full ban on non-owner occupied STR permits inside city limits. They are also very limited geographically in how much hotel building they can do because of limited space and mountainous terrain, so both of these things keep the accomodation supply from massive year-over-year increases that drive down your prices like we're seeing in Tennessee and Texas. There's also rarely a dip in tourism in Asheville, so demand stays very strong no matter the economic environment. You can purchase small 3/1 bungalows right outside the city limits for $250k-$300k and I know first hand that operators can generate $5,000 - $7,500 per month in gross rental incomes.

Might be worth some analyzing!

Best

 

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  • Paul Sandhu
    Investor 路 The worst town to live in, KS 路 Member since 2016 路 4k+ posts 路 4k+ votes
    7y

    In my town I do 23 STRs with 83 beds.  Town population is around 9000.  There is a refinery in my town.  I rent my STRs to refinery contractors.  They all make a per diem which is supposed to cover a motel room and food for the week.  I charge what a motel would charge, but they get a kitchen, washer & dryer, smart tv, and privacy in their own bedroom.  There are a lot of foreclosures in this town.  $9500 is what banks usually take for a 3BR with CH/A.  I charge $600/week for the house with 3 guys.  

    Have to deal with riff raff, psychotic mutts, overdoses, prostitutes, burglaries, walking in on intruders and other general mayhem.  Piece be with you.

    5Reply
  • Luke CarlPro Member
    Rental Property Investor 路 Tennessee Florida 路 Member since 2016 路 4k+ posts 路 5k+ votes
    7y

    @David Rutledge  Search the forum this question is asked often you'll find all kinds of info. 

    My answer....

    Sevierville (gatlinburg) 

    and Coffeeville KS

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    3Reply
  • Avery CarlBusiness Member
    Real Estate Agent 路 USA 路 Member since 2016 路 909 posts 路 1k+ votes
    7y

    Hi David! I have 5 STR's in the Gatlinburg area. My advice is to stick to investing in true vacation rental markets like Gatlinburg, Panama City Beach, Big Bear, and several others to ensure the smallest chance of anti-STR regulations being imposed in the future. Vacation rental markets have depended on STR's for decades, well before the inception of Airbnb. Most of them figured out how to monetize STR's long ago via local occupancy tax. Those areas are going to be the safest bet for your STR dollars.

    As far as seasonality, Gatlinburg has about a 10 month high season, we see nearly year-round rentals. Purchase prices, although higher than they used to be, are still low in comparison to other markets. However, there are other markets where you can gross similar returns even with a shorter high season.  Hope that helps!

    Podcast Guest on Show How to Get More Airbnb Bookings This Spring and Summer Break
    6Reply
  • Sarah Lorenz
    Specialist 路 Ann Arbor, MI 路 Member since 2016 路 356 posts 路 191 votes
    7y

    If you are looking in the under $250,000 price range, it will be difficult to find something in Ann Arbor. You can barely get a single-family home for that anymore, and you would have to hunt for a long time to come up with a dumpy duplex. I don't know that they would be optimal for STR. You can get very high price per night rates in town on a number of special events, but that is generally for a larger homes with a lot of bedrooms. That is my area of experience, at least.

    2Reply
  • Conner Bland
    Flipper/Rehabber 路 Indianapolis, IN 路 Member since 2019 路 31 posts 路 19 votes
    7y

    @David Rutledge Indianapolis STR's perform decently year round in the Downtown, Broad Ripple, Fountain Square and Mass Ave areas. There's a hotel shortage right now in Indy which is helpful for STR's with events like Big Ten Championship, NCAA Tournaments, Convention Season and the Indianapolis 500, but there is a huge push for building more hotel accommodations downtown right now, so STR's in Indy might not be a great long-term solution. See link:

    https://www.visitindy.com/indianapolis-planner-new-developments

    One market to take a peek at if you haven't yet is Asheville, NC. HUGE NOTE - you HAVE to buy outside the city limits. There's a full ban on non-owner occupied STR permits inside city limits. They are also very limited geographically in how much hotel building they can do because of limited space and mountainous terrain, so both of these things keep the accomodation supply from massive year-over-year increases that drive down your prices like we're seeing in Tennessee and Texas. There's also rarely a dip in tourism in Asheville, so demand stays very strong no matter the economic environment. You can purchase small 3/1 bungalows right outside the city limits for $250k-$300k and I know first hand that operators can generate $5,000 - $7,500 per month in gross rental incomes.

    Might be worth some analyzing!

    Best

     

    6Reply
  • Robert Pfenninger
    Real Estate Investor 路 Waco, TX 路 Member since 2017 路 85 posts 路 39 votes
    7y

    @David Rutledge howdy from Waco, Texas! Waco is indeed a great place to invest for airbnb. Hard to find deals though with the national attention on the MLS. I do my own marketing though and have had a good bit of luck.

    2Reply
  • Lance Carlson
    Ann Arbor, MI 路 Member since 2019 路 9 posts 路 8 votes
    7y

    I think the general rule of thumb is that if you're purchasing a property for the sole purpose of AirBnb, that you should make sure it would still cash flow if it were strictly a rental property. That way, if you are unsuccessful AirBnbing it, you can still rent it out the traditional way. This can be hard to do in these AirBnb ripe places because the value of homes are so high like in my home town (Ann Arbor). If you want to cash flow here, you have to find a good deal.

    3Reply
  • David Rutledge
    OP
    Irvine, CA 路 Member since 2016 路 243 posts 路 59 votes
    7y

    Thanks everyone,

    Some really good food for thought.

    Conner, the over supply or saturation of certain markets is certainly something that worries and I like what you are saying about the limitations of building around Asheville. That is definitely something to think about and I haven't looked into that area at all. 

    Perhaps the Hendersonville area would be a good place to start.

    Thanks again for all the advice everyone.

    David

    1Reply
  • Pete Harper
    Rental Property Investor 路 Streetman, TX 路 Member since 2018 路 528 posts 路 495 votes
    7y

    @Robert Pfenninger Do you manage your own properties? I was looking at properties near Baylor University that might work for STR to fill in for student vacancies. I'm out of town looking for a local management company. I would appreciate any references.

    1Reply
  • Ola Dantis
    Multifamily Syndicator 路 Houston, TX 路 Member since 2016 路 1k+ posts 路 2k+ votes
    7y

    When we did Airbnb, we realized that seasonality + the concentration of other Airbnbs around our property really played a major role in how we regulate our prices. Eventually, this ongoing dynamic monitoring became an administrative burden. 

    Especially if you are buying out of state, I'd suggest that the properties are in proximity to the major tourist drivers in that cities. 

    Good luck 馃憤

    1Reply
  • Paul Sandhu
    Investor 路 The worst town to live in, KS 路 Member since 2016 路 4k+ posts 路 4k+ votes
    7y
    Originally posted by @Pete Harper:

    @Robert Pfenninger Do you manage your own properties? I was looking at properties near Baylor University that might work for STR to fill in for student vacancies. I'm out of town looking for a local management company. I would appreciate any references.

    STR + College Students =\= a good idea

    Student Housing + College Students = a good idea

    0Reply
  • Pete Harper
    Rental Property Investor 路 Streetman, TX 路 Member since 2018 路 528 posts 路 495 votes
    7y

    Paul, I'm curious why you say STR plus students are not ok? The unit is a duplex, I would take one of the vacant sides and use for STR. With close proximity to Baylor I figure I would get people coming in for games and events at Baylor. You also have the local draw of Magnolia with Chip and Joanna.

    0Reply
  • Joe Crupi
    Rental Property Investor 路 Member since 2019 路 103 posts 路 17 votes
    7y

    @Avery Carl @Lucas Carl

    I was looking at gatlinburg/sevierville (sp?) just the other day. Theres a big gap in the home prices, and sizes, there. Do you see a big difference in returns based on house size for the difference in price?

    0Reply
  • Avery CarlBusiness Member
    Real Estate Agent 路 USA 路 Member since 2016 路 909 posts 路 1k+ votes
    7y

    @Joe Crupi the good thing about this market is that all of the sizes are profitable. From studio cabins on up to 8 bedrooms, so there's something for every investor's comfort level. However, the 4 bedroom and up mark is where we start seeing a significant jump in ROI. Cabins with views will also cost a good 20% than a similar cabin without a view so keep that in mind. Views are a really nice bonus. However, the 20% increase in price does not translate over to a 20% increase in income. More like ~5-10% depending. Hope that helps!

    Podcast Guest on Show How to Get More Airbnb Bookings This Spring and Summer Break
    5Reply
  • Joe Crupi
    Rental Property Investor 路 Member since 2019 路 103 posts 路 17 votes
    7y

    @Avery Carl

    Very interesting. Looking at the big beautiful $600k+ houses wants me to jump on one, but knowing very solid profits can be seen on the less grandiose places is good news to hear.

    Out of curiousity, are there other local taxes that perhaps arent listed on sites like zillow/realtor that one would habe to worry about? I know some states have property taxes, but then charge separate taxes for schooling and stuff. Just want to know if these taxes are really that low or if theres more to the story. Thanks!

    0Reply
  • Avery CarlBusiness Member
    Real Estate Agent 路 USA 路 Member since 2016 路 909 posts 路 1k+ votes
    7y

    @Joe Crupi No hidden state taxes. You鈥檒l have property tax, which is very low in TN.  Sales tax (which Airbnb collects and pays separately from your booking, so you won鈥檛 have to account for that expense, as it never passes through your account. You will have to account for it on VRBO though). And then local occupancy tax which will be ~2.5% depending on if your inside either set of city limits or in the county.

    Podcast Guest on Show How to Get More Airbnb Bookings This Spring and Summer Break
    2Reply
  • Joe Crupi
    Rental Property Investor 路 Member since 2019 路 103 posts 路 17 votes
    7y

    @Avery Carl

    Hmm. I love a place with low property taxes and no income taxes. I may just have to move there as well!

    0Reply
  • Paul Sandhu
    Investor 路 The worst town to live in, KS 路 Member since 2016 路 4k+ posts 路 4k+ votes
    7y

    @Pete Harper what you are describing does not sound like the highest and best use for the STR. Sounds like it'll be occupied 2 or 3 nights a week at the most, some weeks it might be empty. If someone stays there one night, you still have to have it cleaned. I don't do any ST rental for less than 1 week. My cleaning lady grumbles if she has to clean up a place if somone just stayed there a night or two. But she does the work for free, and I get to sleep with her.

    2Reply
  • Amgad Fahmy
    Rental Property Investor 路 Columbus, OH (columbus oh) 路 Member since 2019 路 7 posts 路 0 votes
    7y

    @Paul Sandhu

    Just curious how much can you get from this property /month if you go with straight regular rent ?

    The better question, is there a market for long term rent on those properties?

    I have done regular rentals for a while and wanted to know how much STR is better percentage would be great

    Thanks

    0Reply
  • Paul Sandhu
    Investor 路 The worst town to live in, KS 路 Member since 2016 路 4k+ posts 路 4k+ votes
    7y

    @Amgad Fahmy If it was a monthly rental, it would rent for $450-$600 a month.  There are a couple of big IF's.

    IF you can find a good tenant.

    IF they have a steady employment.

    There are not that many good renters in this town.  Any responsible, hard working, income generating person is going to pack up their things and move out of this town the first opportunity they can.  They move to a bigger city where better jobs and better housing is located.  What's left in this town are the deadbeats and welfare recipients.  All of my renters already own their own house, but it's 3-12 hours away, and they make $2000-$3000 a week working here.  I rent to those people.  For them, $600 a week for a house is a bargain.

    0Reply
  • Alex Washburn
    Investor 路 Chattanooga, TN 路 Member since 2017 路 55 posts 路 28 votes
    7y

    @David Rutledge have you considered a foreign STR? When I was in California I bought in Costa Rica because to me there seemed to be little logistical difference between buying across the country or in another country.

    1Reply
  • Richard Tomlin
    Real Estate Agent 路 Indio, CA 路 Member since 2019 路 24 posts 路 8 votes
    7y

    @David Rutledge Hi David,

    Check out the Coachella Valley! My STR clients are doing very well.

    1Reply
  • Clifton Young
    Rental Property Investor 路 NE OHIO 路 Member since 2018 路 22 posts 路 21 votes
    7y

    @David Rutledge Columbus, Oh, is a great market for the radon you mentioned. Also, it is one of fastest growing cities in the US! Locations next to hospitals (osu,nationwide hospital) because they provide short term rental for med visitors or families of patients.

    I could talk about the Columbus market At length! Let me know if you want to connect to talk further.

    2Reply
  • David Rutledge
    OP
    Irvine, CA 路 Member since 2016 路 243 posts 路 59 votes
    7y
    Hi Richard,

    I had considered the Yoshua Tree or Yucca Valley area. but was not sure I would be able to get in at the price point I am looking at.

    Originally posted by @Richard Tomlin:

    @David Rutledge Hi David,

    Check out the Coachella Valley! My STR clients are doing very well.

    0Reply
  • David Rutledge
    OP
    Irvine, CA 路 Member since 2016 路 243 posts 路 59 votes
    7y

    Hi Clifton,

    Thanks for the message on my post. I have thought a lot about the draw of being so close to the university. I just pmed you

    Thanks

    David

    0Reply
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