When it comes to starting a short-term rental business, conducting effective market research can be the difference between success and failure. Many people think that they can just find a cute home in their market, and it will be successful because it looks nice. This couldn’t be further from the truth.
Starting a business utilizing Airbnb or similar platforms is exactly like any other real estate investment, which means you’ve got to do the upfront work or you risk making a mistake. Market research is a big part of the upfront work. You need to know whether or not your market is going to be profitable before you ever acquire a property and list it online.
You will need to be able to answer questions like what are the most profitable zip codes in your city? How much is the average rent? What can I charge per night? How many days of the month will my property be booked?
What will my expenses be? Which seasons are most profitable? Which local attractions do people want to be around the most?
Using Airbnb for Market Research
If you want a quick estimate on the potential revenue you might earn with your property, you can use the Airbnb Calculator available on BiggerPockets. It will give you a basic idea of how your property might perform in your specific city.
If you decide to move forward, then you will need to collect additional data to make a better decision on what type of property you want and which area.
To determine these things, first you’re going to want to open up the Airbnb website and type in your city. Then click the option for “Homes.”
Next select the option for “Entire Home”; this will automatically filter out options for shared rooms or private rooms. This is important because you should ideally be looking to rent out the whole place, which will end up being more profitable and easier to manage.
From here, you can also filter out the number of rooms. Set a maximum of four guests for a one-bedroom house and six for a two-bedroom house.
At this point, you will have filtered the results down to a much smaller number of homes that you can begin to analyze. If you want to take it a step further and narrow down your results to the best possible listings, you can select “Super Host” and “Plus Verified.” Then start off by examining the listings with the highest reviews to see what’s working for them.
Look at how much they are charging per night and run the numbers to see your potential profitability. If the average price per night is $150, then you can reasonably assume that if you rent the place out for 80 percent of the month, then you will make around $3,500 in revenue.
If you know how much rent and expenses are in your sub-market, then you can calculate how much your net profit will be at different occupancy rates. My advice is to find a property that will cashflow even if it’s only at 50 percent occupancy for the month. That way you can cover expenses during the off-season.
Learn Your Market
Once you know which general areas are experiencing success with short-term rentals, you can begin to learn about your local market and it’s various neighborhoods. You will want to find out which attractions people want to be around, such as parks, bars, shopping centers, and sports arenas.
Much of this you can find using Google and Yelp by simply searching for attractions in your market. Then cross-reference what you find with the top properties on Airbnb. Examine their headlines and descriptions to find out what they are marketing to their guests. It’s a good bet that they know what the people want based on their feedback from being in business.
A lot of the work has already been done for you, but knowing where to look is key. I hope you find this information useful on your journey to becoming an Airbnb entrepreneur!
Do you have any questions about researching your market? Or any questions about short-term rentals in general?
Leave them below in the comment section.