Finding a profitable Airbnb property requires strategy and research. In this guide, we’ll outline five proven steps to help you find and purchase a profitable Airbnb property, so you can create a sustainable short-term rental business in today’s real estate market. We’ll cover why location is so important, how to improve the property to boost bookings, and how the purchase price and loan terms influence your net short-term rental income.
Choose a Location Where your property is located is one of the most important drivers of Airbnb profitability. When considering where to invest, you will need to balance high guest demand with property prices. Look for areas with:
High tourism or business activity. Nearby attractions, restaurants, or event venues. Limited competition. Favorable short term rental regulations. For example, you could begin by looking for neighborhoods near golf courses in the Phoenix Metro area.
Before choosing where to invest, check local zoning laws and HOA rules to make sure short-term rentals are allowed. Some cities have prohibitive restrictions so do your homework before you invest.
Define your Ideal Guest Before purchasing a property, think about the type of guests you want to attract. Are you targeting business travelers, families, vacationers, or remote workers? Each audience has unique preferences that will influence the type of property you should buy.
For example:
Business Travelers may prefer properties near convention centers, downtown areas, or airports.Families often look for homes with multiple bedrooms, outdoor space, and kid-friendly amenities.Vacationers prioritize properties near tourist attractions, beaches, or scenic areas.Remote Workers typically seek quiet spaces with strong Wi-Fi and comfortable workstations.Research the demographics of the area you’re considering to verify the type of property you intend to purchase can be tailored to your ideal guests.
Account for the preferences of your ideal guests when deciding on amenities. Go Above and Beyond on Amenities Once you’ve purchased a property, you’ll need to make it stand out from the competition. Investing in amenities can increase bookings and occupancy rates. High quality furniture matching the aesthetic of your property, comfortable bedding, and a fully equipped kitchen with modern appliances are all great ways to make your property more appealing to potential guests.
Another way to make your property stand out is to make it Instagram-worthy. While this may not make sense if you’re targeting business travelers - if you are focused on vacationers, including a wall mural or a space within the property where guests can take pictures makes a noticable difference in occupancy rates.
Many of our properties use wall murals to accomplish this, like the one below from one of our Scottsdale rentals . Be sure to include the cost of these finishing touches when evaluating your ROI potential.
A wall mural is a great way to make your property Instagram-worthy. Analyze Investment Costs Initial Investment The initial investment includes expenses like the down payment, closing costs, renovations, and furnishing. These costs can vary greatly depending on the property's location, size, and condition. It's essential to have a realistic budget and factor in unexpected expenses that may arise during the purchasing process.
Airbnb Startup Costs In addition to the initial investment, there are several startup costs to consider when launching your Airbnb:
Smart locks for secure and convenient guest access Cleaning supplies and equipment Linens, towels, and toiletries Insurance coverage specific to short-term rentals Professional photography to showcase your property Monthly Operating Expenses Once your Airbnb is up and running, you'll need to account for monthly operating expenses such as:
Utilities (electricity, water, internet) Property management fees (if using a short-term rental management company ) Maintenance and repairs Restocking supplies (toilet paper, coffee, etc.) Airbnb's service fees (typically 3-5% of the booking total) By understanding and planning for the costs to run your Airbnb , you can realistic financial projections for your Airbnb investment.
Evaluate Potential ROI Scenarios Before purchasing a property, run the numbers to determine its potential return on investment (ROI).
Average Nightly Rate Research similar Airbnb listings in your target area to determine a competitive nightly rate. Consider factors such as the property's size, amenities, and proximity to attractions. Keep in mind that rates may fluctuate based on seasonality and events in the area.
During spring training for Major League Baseball, properties near the Salt River Fields or Scottsdale Stadium see a surge in demand, allowing for higher nightly rates. Similarly, during the winter months, when snowbirds flock to escape colder climates, homes with heated pools or outdoor fire pits command top dollar.
Occupancy Rates Look into the average occupancy rates for short-term rentals in your desired location. This information will help you estimate your monthly income and determine if the property can generate enough revenue to cover your expenses and provide a profit. Tools like AirDNA and Mashvisor can provide valuable data on occupancy rates.
Break-Even Analysis Conduct a break-even analysis to determine how long it will take to recoup your initial investment and cover your operating costs. This analysis will help you evaluate the long-term viability of the investment.
Run different scenarios by changing the average nightly rate and the mortgage information to better understand what loan terms you will need to achieve profitability and how many monthly bookings you will need for the property to stay profitable. Use our Airbnb investment calculator to assist with this.
Property Purchase and Financing Choose a Real Estate Agent with Experience Buying and Managing Airbnb Rentals Work with a real estate agent who has experience with short-term rentals and understands the unique challenges and opportunities of the Airbnb market. These agents can help you find the best deals and provide valuable insights into local regulations and trends. For expert assistance, consider reaching out to The CT Brothers , who specialize in helping investors find profitable Airbnb properties.
Review Airbnb-Friendly Mortgage Options Not all lenders are keen on financing short-term rentals. Find a mortgage lender that supports your investment goals. Common financing options include:
Conventional mortgages with a higher down payment Cash-out refinancing on an existing property Partnering with other investors to pool resources Conclusion Embarking on your Airbnb investment journey can be both exciting and overwhelming. But by following these five proven steps, you'll be well on your way to finding an investment property that fits your goals. Remember to do your homework. Take the time to really understand your ideal guest, crunch the numbers, and seek out expert advice when you need it. And don't be afraid to think outside the box - sometimes the most unexpected properties can turn out to be the most profitable!
Of course, managing an Airbnb is no walk in the park. Between guest communication, cleaning, and maintenance, it can quickly become a full-time job. That's where partnering with an experienced property manager like The CT Brothers can be a game-changer. They'll handle the day-to-day operations, so you can sit back and watch your investment grow.
