The Best US Cities for Airbnb Business in 2020

In the past decade, short-term rentals have emerged and solidified their position as the more profitable rental strategy in the majority of markets across the globe. The main reason for this is the high demand for vacation rentals from travelers and the ability to charge a higher nightly rate than with traditional, long-term rental properties.

At the beginning of 2020, savvy real estate investors are wondering how to take advantage of this lucrative real estate strategy. The best way to do this is to buy an Airbnb rental property in one of the top locations in the US housing market.

To help you out, we have put together a list of the 10 best US cities for Airbnb in 2020.

What Makes for the Best Markets to Invest in an Airbnb Rental Property?

There are a few different factors that have to come together in order to produce a top location for investing in a short-term rental. First, of course, is the demand from leisure tourists and business travelers. Naturally, busy cities with a booming economy and numerous tourist attractions welcome the most Airbnb guests. As a result, they experience a high Airbnb occupancy rate, which is one of the most important features for a high return on investment with this rental strategy.

Second, the best cities for Airbnb business are those which bring real estate investors a high return on investment. Such locations offer not only above-average occupancy rates but also high nightly rates. There are many different ways to measure profitability in real estate investing, and in this article, we focus on the capitalization rate or cap rate for short. The cap rate is one of the most popular metrics of return on investment in real estate which allows for easy comparison between different markets to decide on the best one to buy a rental property.

Last but not least, the top locations for buying an Airbnb property are those which place no or very few restrictions on renting out on a short-term basis. After the emergence of Airbnb and other similar home-sharing platforms, many US cities, as well as global metropolises, have started introducing severe restrictions on the operation of short-term rental properties in order to protect the local housing market and residents from the influx of out of state investors and visitors. Rules and regulations have been particularly restraining for non-owner-occupied short-term rentals

So, the 10 best places to rent out on Airbnb which we present below exhibit all these three important characteristics: a high Airbnb occupancy rate, an excellent return on investment, and full legality of non-owner occupied short-term rentals.

What Are the 10 Best Cities for Airbnb Investment in 2020?

Without further ado, here are the most profitable Airbnb locations for renting out on Airbnb in the US real estate market in 2020. The Airbnb data has been calculated and provided by Mashvisor, a real estate data analytics platform helping real estate investors find lucrative rental properties quickly and efficiently.

1. Milwaukee, WI
   – City Average Cap Rate: 7%
   – City Average Occupancy Rate: 54%
   – City Average Monthly Rental Income: $1,940
   – Median Property Price: $161,500
2. Columbus, OH
   – City Average Cap Rate: 6%
   – City Average Occupancy Rate: 57%
   – City Average Monthly Rental Income: $2,310
   – Median Property Price: $222,200
3. Indianapolis, IN
   – City Average Cap Rate: 6%
   – City Average Occupancy Rate: 52%
   – City Average Monthly Rental Income: $2,210
   – Median Property Price: $221,100
4. Memphis, TN
   – City Average Cap Rate: 6%
   – City Average Occupancy Rate: 63%
   – City Average Monthly Rental Income: $2,060
   – Median Property Price: $233,400
   
5. Philadelphia, PA
   – City Average Cap Rate: 4%
   – City Average Occupancy Rate: 54%
   – City Average Monthly Rental Income: $2,120
   – Median Property Price: $304,200
6. Kissimmee, FL
   – City Average Cap Rate: 4%
   – City Average Occupancy Rate: 70%
   – City Average Monthly Rental Income: $2,560
   – Median Property Price: $270,300
7. Phoenix, AZ
   – City Average Cap Rate: 3%
   – City Average Occupancy Rate: 57%
   – City Average Monthly Rental Income: $2,570
   – Median Property Price: $394,800
8. Eugene, OR
   – City Average Cap Rate: 3%
   – City Average Occupancy Rate: 53%
   – City Average Monthly Rental Income: $2,660
   – Median Property Price: $430,000
9. Dallas, TX
   – City Average Cap Rate: 3%
   – City Average Occupancy Rate: 59%
   – City Average Monthly Rental Income: $2,890
   – Median Property Price: $406,30
10. Atlanta, GA
    – City Average Cap Rate: 2%
    – City Average Occupancy Rate: 45%
    – City Average Monthly Rental Income: $2,250
    – Median Property Price: $426,400

Experienced real estate investors will quickly point out that a capitalization rate of less than 8% is not considered good for investing in a rental property. However, when deciding whether you should buy an investment property in any of the 10 best US cities for Airbnb business above, you should consider the fact that these are just city average values. Meanwhile, through diligent neighborhood analysis and investment property search investors can find income properties that offer a double-digit return on investment when rented out on a short-term basis.

Furthermore, the fact that renting out a non-owner occupied property on Airbnb is legal in these US cities doesn’t mean that Airbnb hosts don’t have to comply with certain rules and regulations. To the contract, the majority of these locations require registering a short-term rental property and paying taxes on rental income in order to operate an Airbnb business legally. Before you are ready to list your property for renting in any of these markets, you should check out the legal requirements in terms of licensing and taxing. This information is usually available on the website of the city council.

Making money on Airbnb starts with buying a property in a profitable market. If you plan to join the millions of successful Airbnb hosts in 2020, now you know where to look for a top-performing Airbnb rental property to maximize your return on investment.

Regardless of where you choose to invest in your next Airbnb property, it is imperative to make sure that you manage all aspects of your business effectively. Vacation rental software is a powerful tool to help you increase the efficiency of your business and grow it further to stay ahead of the curve. 

For example, vacation rental software such as iGMS will enable you to:

• Smoothly manage all of your listings on Airbnb, Booking.com, and Vrbo/HomeAway within a single interface; add other STR platforms using iCal;
• Communicate with your guests without any delays using a unified inbox and automated templates;
• Get more guest reviews by leveraging our review automation feature; 
• Set up tasks and manage your team in real-time;
• Handle direct bookings coming from your business site or other third-party channels;
• Receive payments and generate invoices via our integration with Stripe;
• Stay on top of your business performance by creating automated reports in minutes.
  Sign Up for Free

If you’re looking for a profitable Airbnb rental property to buy, check out Mashvisor, a real estate data analytics platform that helps investors find lucrative rental properties in a matter of minutes. You will find readily available data and analysis of hundreds of thousands of properties across the US. Mashvisor’s rental property calculator, property finder, and heatmap turn 3 months of research into 15 minutes. Moreover, enjoy 25% off your first subscription as an iGMS user.

Daniela Andreevska is Marketing Director at Mashvisor. Previously, she worked in economic policy research and fundraising. Daniela holds a Master’s degree in the Middle East and Mediterranean Studies from King’s College London.