Owning a rental property and using platforms such as Airbnb to rent it is a great way to generate passive income streams — money not derived from active involvement such as a salary. Sure, this entails a potentially substantial initial financial investment, but the returns can be significant with little to no effort.
To put this in context, in the U.S, a “typical host” earned approximately $14,000 in 2022, according to Airbnb — and depending where your property is, these returns on investment can be even more profitable.
According to Alex Blackwood, CEO and co-founder, Mogul Club, there are a few factors you should consider when investing in an Airbnb, including price-to-rent dislocation, zoning and your target customer.
“When considering price-to-rent dislocation, you are comparing the affordability of the home in relation to the rental income it would, on average, receive,” he said, adding that the areas with strong price-to-rent dislocation are ones with higher rents as a percentage of the purchase price.
In addition, he said that when considering zoning, know that Airbnbs have received tremendous pushback from local governments.
“Looking into areas that either restrict Airbnbs or are in places in which you would only be part of a small number of people to have a license greatly impacts the ability to earn.”
Finally, when considering customers, Blackwood suggested thinking about the intended guests and frequent travelers to the area you are looking at will greatly impact the type of home you purchase and its occupancy.
“For instance, Nashville is known for bachelor and bachelorette parties, which means that if they are the intended customer, bigger homes are more likely to be rented.”
Here are some of the best cities to make money with an Airbnb rental, according to SpaceWise.
Austin, TX
- Median home price: $257,800
- Median monthly rent: $1,106
As SpaceWise noted, some of Austin’s attractions are its big music scene-the “city is known as the Live Music Capital of the World, drawing tourists from all over the country to the city’s 250 music venues,” and the slew of cultural events. Most notably, the city is host to SXSW.
Boston
- Median home price: $423,200
- Median monthly rent: $1,369
Boston is not only a great tourist spot for history lovers, but is also home to MLB’s oldest ballpark Fenway Park and Harvard University.
Breckenridge, CO
- Median home price: $456,300
- Median monthly rent: $1,255
This is one of the most known ski towns in the country.
In addition, it also has year-round activities for outdoor lovers, such as hiking and whitewater rafting, “so Airbnb owners don’t have to worry about the seasonality other ski towns may encounter.”
Chicago
- Median home price: $225,200
- Median monthly rent: $987
The city has a variety of festivals — such as Lollapalooza and the Chicago Jazz Festival — making it “a great place to buy a condo or vacation home to use as an Airbnb rental property,” according to SpaceWise.
Denver
- Median home price: $292,700
- Median monthly rent: $1,035
Denver attracts many tourists thanks to its myriad of festivals and events. In addition, it’s also worth looking for properties in the city’s suburbs as well, as many renters are looking for homes near the Rocky Mountain National Park for instance..
Honolulu, HI
- Median home price: $601,500
- Median monthly rent: $1,357
SpaceWise deems Honolulu “a traveler’s paradise, which makes it ideal for Airbnb rentals!”
While initial investments might be a bit higher in Honolulu, “guests are often willing to pay more for a vacation rental in such a perfect place!.”
Las Vegas
- Median home price: $184,900
- Median monthly rent: $985
Needless to say that Sin City attracts a massive amount of tourists each year.
Indeed, according to the Las Vegas Convention and Visitors Authority, there were a whopping 40.8 million visitors in 2023.
“A quiet Airbnb that’s close to but not on the Strip could be very appealing to potential renters!,” SpaceWise suggested.
Miami
- Median home price: $241,200
- Median monthly rent: $995
Miami is known for its great weather, beautiful beaches, and vibrant nightlife and arts scene- notably with the annual Art Basel event. In turn, this is appealing to both partygoers and families, making it an ideal place to buy a rental.
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