Airbnb rentals tend to flourish when tourist destinations heat up in the summer months, so it likely will come as little surprise that Mashvisor’s top five markets are all in attractive destination locations. According to the real estate analysts at the rental data company, California cities dominated the short-term rental market in June of this year. “With the summer season quickly approaching, the real estate markets around the most popular tourist and vacation destinations are picking up,” observed Daniela Andreevska, a director at the company.
Based on CAP rate, rental income, and property price, the top markets for Airbnb rentals are:
- Joshua Tree, California
- Palm Springs, California
- Napa, California
- Anaheim, California
- Nashville, Tennessee
Aiming for the Metro Area May Not Be Enough
Because Airbnb rentals are short term in nature, this type of investment’s success hinges largely not just on identifying a good general area in which to invest, such as a city, but an optimal neighborhood as well. Andreevska noted in Anaheim, for example, “the Southwest Anaheim neighborhood offers an average CAP rate for short-term rentals of 6.3%, [and] in Nashville, Germantown has an average Airbnb CAP rate of 12%.”
Traditionally, real estate investors have considered an 8% CAP rate to be the recommended threshold for buying an investment. However, as inventories have tightened and purchase prices rise, this benchmark is no longer entirely relevant, Andreevska said. “It’s nearly impossible to find locations with average CAP rate above 8%,” she observed, but noted, “These numbers are just city averages, meaning it is possible to find investment properties with double-digit returns within them.”
What’s the Attraction for Your Airbnb Investment?
When evaluating a potential Airbnb investment, take a look around to determine what types of attractions might bring in visitors for short-term stays. For example, Joshua Tree is known for its incredible natural beauty, and many people come to hike in Joshua Tree National Park. Anaheim boasts Disneyland, popular pro sports teams, and great proximity to other locations for day trips, and Nashville is, of course, the home of country music.