Senior Loan Officer
Brian Decker
Published on December 29, 2021


Did you know that most people become millionaires through real estate? Investors can select from various assets. Recent trends in vacation rental properties suggest an opportunity is up for grabs. The reason for this is real estate can offer better cash-on-cash returns than traditional long-term investments, while also providing a different type of investment strategy, which is key to a well-balanced portfolio.

Investing in vacation rental properties is incredibly profitable. These rentals come with excellent passive income potential. Buying Airbnbs and converting them into vacation rental properties expands your profit potential.

Investing in Airbnb properties has not only changed my family's life by providing an amazing stream of passive income, but it's also provided so many real estate investors and past clients of mine an unbelievable newfound love of investing in real estate.

The pandemic introduced many travelers to Airbnb and VRBO-type vacation rentals. This altered behavior built demand for Airbnb listings that remain dominant today. Investors came to recognize Airbnb’s potential to outperform the market.

Here are my four steps for buying your first Airbnb:

  1. Securing your financing.
  2. Finding your perfect Airbnb market.
  3. Finding deals within that market.
  4. Analyzing your property.

We’ve already covered the first two steps in separate articles, so make sure you start there. Now we’ll focus on finding deals within your market.

Here are the strategies I use to buy vacation rental properties.

Discovering the Best Type of Property

Some markets and properties provide more opportunities than others. Certain property types will perform well in some cities and poorly in other areas.

AirDNA assigns a grade to each city’s real estate market. When looking to buy Airbnbs, focus on A+ markets. These markets provide a healthy combination of appreciation and high cash returns.

AirDNA also lets you review rental demand for an area. Flat rental demand can indicate no recently built rentals. Declining rental demand will concern savvy investors.

When discussing property types, I mean the number of bedrooms in a rental. You can use AirDNA to track the performance of properties based on the number of bedrooms.

AirDNA lets you track Airbnb occupancy rates across different property types; again, I like to search specifically based on the number of bedrooms.

You also gain access to additional metrics, such as the average daily rate, which will help you price your Airbnb property competitively.

If two-bedroom properties yield higher occupancy than three-bedrooms, Air DNA will inform you. You can see the occupancy rates across houses ranging from 1-5 bedrooms.

AirDNA assigns a grade to each city’s real estate market. When looking to buy Airbnbs, focus on A+ markets. These markets provide a healthy combination of appreciation and high cash returns.

AirDNA also lets you review rental demand for an area. Flat rental demand can indicate no recently built rentals. Declining rental demand will concern savvy investors.

You can see how rentals perform each month. This data helps you anticipate vacancies and when to raise your prices.

Once you discover the best property type, you can narrow your search. For example, don’t waste your time with 4-bedroom properties when 2-bedroom properties perform the best.

AirDNA is an expensive tool. You pay into a monthly subscription for each city you wish to track. Our team will actually run these analyses for our clients after they are pre-approved for financing, so they don’t have to pay a monthly AirDNA subscription.

How to Find Hot Spots

Once you understand which market and property type yield the highest occupancy, we drill down into hot spots of that market. Each city contains several parts. Some parts of the city present higher potential to investors. One of our favorite property investing tips is to look for hot spots within a city.

Hot spots indicate which parts of a city yield optimal returns. Luckily, you can discover hot spots without visiting or living in the city. This capability significantly expands your investing horizons.

Mashvisor assists with investing in vacation rental properties. This free resource unveils the best locations for Airbnb properties.

Mashvisor’s heat map lets you see the best- and worst-performing parts of a city. Hot spots allow you to narrow your search further and buy Airbnbs that generate profits.

Investing in Vacation Rental Properties: How to Find Them

AirDNA helps you find great cities and discover the ideal property type. Mashvisor enables you to find hot spots to narrow your search. The next step is finding ideal properties.

Narrowing your property search also narrows your agent search. Local real estate agents can find properties in the area that fit your criteria.

You can ask an agent to look for two-bedroom properties in a specific part of the city or suburbs. These specifications reduce the agent’s workload. It also reduces the amount of non-qualifying properties you come across.

You can also use AirDNA to find properties in the area. Mashvisor helps you refine the search. It is a complementary tool to AirDNA’s dashboard.

Saving Up for a Vacation Rental

When searching for properties, consider how much you can afford. You will need a 20% down payment for most investment properties.

Some cities yield similar returns for 2-bedroom and 3-bedroom properties. Investors with lower budgets should opt for 2-bedroom properties to save money. Fewer bedrooms usually indicate a lower down payment.

Investors can also look outside of the city for more attractive deals.

If you want to buy a vacation rental property soon, start reviewing your expenses. Look for ways to cut your monthly spending so you can put more money into the bank.

You can also invest your extra cash into other assets so that they can appreciate. You can then sell some of those assets when it comes time to make the down payment.

Many investors work on a side hustle to generate extra cash. Vacation rental properties act as a side hustle income that becomes passive over time. Practicing with a side hustle now while earning money will put you in a better position as an investor.

Conducting a yearly financial health check-up will give you a better perspective. You can assess how you manage your money and improve in the future.

Should you Buy Airbnbs?

Investing in vacation rental properties offers higher profit potential than traditionally rented properties. Listing your property on Airbnb makes it easier to attract tenants. It’s harder to find long-term tenants, and those relationships can yield legal complications.

Airbnb properties require more upkeep than traditional properties. You need to refurbish and clean the property in between guests. However, you can hire a cleaning service to assist with this step.

It’s not essential to live near your Airbnb rental. You can live on the East Coast and manage Airbnb rentals on the West Coast.

Looking for an Airbnb Loan?

I hope this helps you with investing in vacation rental properties. Next up, I'll teach out how to analyze your property.

I know some people worry about affording a vacation rental. We’ve got a solution to that problem: an Airbnb loan. If you’re looking to get your Airbnb loan, apply with us today.

Our team has experience in investment loans, and we can help you get the best deal for your circumstances.

Get started today so that you can start making the income you deserve.

Follow me on Instagram and Facebook @thebriandecker for more expert tips on how to create your own cash flow with Airbnb rentals.

Senior Loan Officer
Brian Decker Senior Loan Officer
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