27 Dec Top 6 Airbnb Location for Rental Arbitrage Ranked from Worst to Best
How do you determine a profitable market? This is actually one of the most common questions that my readers ask me. In this post, my goal is to give you a digest of the top 6 worst and best markets ranked.
Airbnb Location: How Am I Getting the Data?
This data comes from Airdna’s blog. Just as a refresher, Airdna provides a tool to do Airbnb short-term market research. If you want to see my step-by-step blog post on how to use Airdna as a tool, please visit this blog. It’s good to note that this set of data was relatively recent and was published on 6/22/2017. Also, the rent data is provided by Zillow and only looked at rent data from 2-bedroom properties.
*Zillow is pretty accurate, but not 100%.
Let’s dig in!
Airbnb Location: The Graph Overview
The Y-axis is a guestimate of the potential rental revenue and the X-axis is the cost to rent a 2bedroom property. One thing to note is that the Y-axis is not 100% accurate, but it’s pretty accurate. For example, if you go to this link and enter your property’s information, it’ll give you an automated evaluation of your yearly potential revenue.
For my 1-bedroom apartment in Mountain View that fits 4 people, the data came back to be:
So, how accurate is this estimate? We will come back to it a little later.
Top 6 worst markets to rent and sublease:
- Jersey City, New Jersey – predicted rental profit: $7,100 dollars.
- Saratosa, Florida – predicted rental profit: $9,700 dollars.
- Baltimore, Maryland – predicted: $10,000 dollars.
- Scottsdale, Airzona- predicted: $10,600 dollars.
- Houston, Texas: predicted: $10,900 dollars.
- Salt Lake City, Utah: predicted: 11,000 dollars.
Top 6 best markets to rent and sublease:
- Key West, Florida – predicted profit: $35,000 dollars (who would have known?).
- Mammoth Lakes, California – predicted profit: $33,000 dollars (this is mostly seasonal).
- Kihei, Hawaii – predicted profit: $31,000 dollars (not a bad place to go and stay for yourselves).
- Cambridge, Massachusetts – predicted profit: $30,000 dollars.
- Santa Barbara, California – predicted profit: $29,000 dollars.
- Portland, Maine – predicted profit: $28,000 dollars.
A few things to note: it’s crucial to remember, however, that this analysis does not differentiate between high and low performing neighborhoods within each city. In reality, many cities that look like great investment opportunities are made up of some not-so-desirable neighborhoods. Equally, some cities that look like financial sinkholes have their share of cheaper, up-and-coming rental markets.
How accurate is this data compared to my actual data?
I started my first unit on the 6th of February and I’m writing this on the 27th of December, 2017. So far, my unit made close to 47,500 dollars. Now, because I still have 37 days left to go, we can assume that I’ll make another 4.3k on average( 47,500/11 months). The total will come out to be around 51,800 dollars for its first whole year.
Now, if we compare this number to the Airdna’s predicted revenue, it’s a little more than 5k off. This tells me that this prediction is 90% accurate. 90% accuracy to me is pretty good. However, there are a few other things that are off in regards to my “average daily rate” and “occupancy rate.” My average daily rate is definitely lower and my occupancy rate is definitely higher.
To conduct a deeper dive into each market I recommend subscribing to their Investment Explorer. With the ability to view the performance of over 100,000 individual rental properties along with postal code summaries and historical trends, the tool helps you to identify the standout neighborhoods that will ensure the best possible ROI for your budget and preferences.
**Some of you guys asked me to do a how-to guide on Airdna, so here it is: https://www.passiveairbnb.com/how-to-use-airdna-for-airbnb-market-research/
There you have it, folks! Happy hunting.
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