Finding a home has been very difficult lately. Is it worth buying as a short-term rental? Yes – but not everywhere – suggests a report from AirDNA.
Short-term rental revenue fell in 2023 after two years of intense growth, but researchers at AirDNA expect that revenue to rise again in 2024. To find the 25 best places in the country to buy a short-term rental, they created an “updated index” of Airbnb and Vrbo rental data for entire single-family homes (the source of this week's chart).
What may surprise you is that vacation homes in profitable areas are not always expensive. The typical home price (derived from the Zillow Home Value Index as of December 2023) was around $160,000 or less in two of the 25 areas on the list; under $250,000 in seven; and below the national median home price (approximately $418,000) in '17.
“A big part of this is the sharp rise in property values in the more traditional vacation rental markets, which have also been very attractive to people living and working remotely during the pandemic,” said Jamie Lane, chief economist at AirDNA. In other words, higher demand in the most desirable vacation areas drove up property prices and reduced rental profits.
As a result, he said, smaller cities “where we haven't seen as much home value appreciation” are seeing higher profits from short-term rentals.
In fact, expensive areas popular as second homes and vacation destinations — Mr. Lane cited Joshua Tree, California, Breckenridge, Colorado, and California's Coachella Valley as examples — are conspicuously absent from this year's list.
The study only considered markets with 500 or more listings. Areas where there are laws prohibiting short-term rentals were also left out. When ranking each market, 2023 rental demand and sales growth since 2022 accounted for half of the assessment; The other half was based on an “investability” score, determined largely by comparing typical property values relative to potential short-term rental profits.
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