How to Analyze A Market for Short Term Rentals: A Complete Guide

Short-term rentals have become increasingly popular over the past few years, thanks to the rise of platforms like Airbnb and VRBO. With short-term rentals, you can earn significant income by renting out your property for a few days or weeks at a time. However, investing in a short-term rental property is not as simple as buying a property and putting it up for rent. You need to ensure that you invest in the right location to maximize your return on investment.

Here is a comprehensive guide on how to analyze a market for short-term rentals:

1. Identify Your Target Guests

Before investing in a short-term rental property, you need to identify your target guests. Different types of guests have different preferences when it comes to location, amenities, and price. For instance, if you want to attract families with children, you need to invest in a property located near family-friendly attractions like theme parks, museums, and zoos. On the other hand, if you want to attract young couples or solo travelers, you need to invest in a property located near nightlife, shopping, and entertainment districts.

2. Research the Local Regulations

Before investing in a short-term rental property, you need to research the local regulations. Some cities and states have strict regulations on short-term rentals, including zoning laws, occupancy limits, and licensing requirements. Failure to comply with these regulations can result in hefty fines and legal issues. Therefore, it’s essential to research the local regulations and ensure that you comply with them.

3. Analyze the Occupancy Rates

To determine whether a market is suitable for short-term rentals, you need to analyze the occupancy rates. High occupancy rates indicate that there is a high demand for short-term rentals in the area, which means that you can earn significant income from your investment. You can research the occupancy rates by checking the data on platforms like AirDNA or Inside Airbnb.

4. Evaluate the Competition

Before investing in a short-term rental property, you need to evaluate the competition. Check out the other short-term rental properties in the area and see how they are priced, what amenities they offer, and how they are marketed. This will help you determine whether you can compete with them and how you can differentiate your property.

5. Check the Local Events Calendar

To maximize your occupancy rates and income, you need to invest in a property located in an area with many local events. Local events like festivals, conferences, and concerts can attract a significant number of tourists, and short-term rentals can be in high demand during these events.

6. Evaluate the Accessibility of Your Short Term Rental Property

Investing in a short-term rental property located in an accessible location can significantly impact your occupancy rates and income. You need to evaluate the accessibility of the property, including the proximity to public transportation, highways, airports, and major tourist attractions.

7. Check the Crime Rates in the Local Area of Your Short Term Rental Property

To ensure the safety of your guests, you need to invest in a property located in a safe neighborhood with low crime rates. You can research the crime rates by checking the data on platforms like SpotCrime or NeighborhoodScout.

8. Analyze the Seasonality of the Area Where Your Short Term Rental Property Is Located

Some markets are highly seasonal, meaning that demand for short-term rentals fluctuates depending on the time of year. For instance, a market located near ski resorts may experience high demand during the winter months but low demand during the summer months. You need to analyze the seasonality of the market to determine whether it’s suitable for short-term rentals.

9. Evaluate the Price-to-Rent Ratio of Your Short Term Rental Property

Before investing in a short-term rental property, you need to evaluate the price-to-rent ratio. This ratio compares the price of a property to the rental income it generates. A low price-to-rent ratio indicates that the property is more affordable and has the potential for a higher return on investment. You can calculate the price-to-rent ratio by dividing the purchase price of the property by its potential annual rental income.

10. Seek Help from Professionals for Your Short Term Rental Property

Investing in a short-term rental property can be a complex process, and it’s essential to seek professional help. A real estate agent or property manager who specializes in short-term rentals can provide you with valuable insights into the local market, help you find suitable properties, and manage the property on your behalf.

Short Term Rental Property FAQs:

  1. What is a short-term rental? A short-term rental is a type of rental property that is rented out for a few days or weeks at a time, typically through platforms like Airbnb or VRBO.
  1. How do I identify my target guests? To identify your target guests, you need to consider factors like age, interests, and travel purpose. For instance, if you want to attract families with children, you need to invest in a property located near family-friendly attractions.
  1. What are the local regulations for short-term rentals? The local regulations for short-term rentals vary by city and state, but they typically include zoning laws, occupancy limits, and licensing requirements.
  1. How do I analyze occupancy rates? You can analyze occupancy rates by checking the data on platforms like AirDNA or Inside Airbnb. High occupancy rates indicate that there is a high demand for short-term rentals in the area.
  1. How do I evaluate the competition? To evaluate the competition, check out the other short-term rental properties in the area and see how they are priced, what amenities they offer, and how they are marketed.
  1. What should I consider when checking the local events calendar? When checking the local events calendar, you should consider the type and size of the events and their potential to attract tourists.
  1. What should I evaluate when analyzing accessibility? When analyzing accessibility, you should evaluate the proximity to public transportation, highways, airports, and major tourist attractions.
  1. Why is it important to check crime rates? Checking crime rates is important to ensure the safety of your guests and protect your investment.
  1. What is the price-to-rent ratio? The price-to-rent ratio compares the price of a property to the rental income it generates, and it’s an essential factor to consider when investing in a short-term rental property.
  1. Why should I seek professional training when investing in a short-term rental property? Seeking professional training can provide you with valuable insights into your performance, as well as help you find suitable properties. At Entrepreneur’s University you can receive this training path with your membership.

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