MIAMI – Looking for the sunnier side of the short-term rental market? You’ll find it in Florida, home to three of 2024’s leading Airbnb cities. Tampa took the number one spot in a new study from Clever Real Estate, followed by Orlando and Jacksonville. Boston, Massachusetts, ranked fourth, and Miami rounded out the top five.
Clever and short-term rental investment platform Rabbu.com ranked the markets in the 50 biggest metro areas in the United States. The cities in the top five boast strong demand and an above-average number of suitable short-term rental properties. By contrast, San Jose, California, took the last spot on the list. In fact, four California cities were in the bottom 10, as were three from Texas.
Short-term rental market pulse check
The short-term rental market continues to grow strongly, with a projected value of $32.25 billion this year. Through Airbnb alone, property owners have earned more than $250 billion in revenue. The Clever study surveyed 1,000 Americans and found that 76% had a positive opinion of the company.
The survey found that American travelers have embraced Airbnb for extended stays and trips with children or pets. They also look to short-term rentals for larger living spaces, amenities like a kitchen or laundry room, a wider variety of property types, and greater privacy.
However, not all city and state officials share these warm feelings for rentals. Some local governments, such as those in Honolulu, Hawaii, and California’s Orange County, restrict rental stays shorter than a certain number of days. Even in Hillsborough County, Florida — home to Tampa — no homes are allowed to rent for less than a week.
Investors believe short-term rentals are a growth industry. However, buyers must understand local restrictions before purchasing a property. Short-term rental data provider AirDNA found that Airbnb investments make 67% more than long-term rentals.
Why is Florida so hot?
Given its popularity among tourists, Florida’s lead in the short-term rental market is unsurprising. Amusement parks, more than a thousand miles of coastline, numerous professional sports teams, and other cultural attractions make the state a popular destination year-round.
“Florida is very desirable,” explains Dr. Lei Wedge, associate professor in the Kate Tiedemann School of Business and Finance at the University of South Florida in Tampa. “We get lots of snowbirds in wintertime, so if you have a vacation rental, you’re almost guaranteed the whole winter will be booked. You also have spring breakers anywhere from early March to late April, so that’s going to be booked as well.”
AirDNA reports that coastal area short-term rentals were 17% more popular among tourists than hotels. The Tampa metro area includes well-known beach cities like Clearwater and St. Petersburg, as well as smaller coastal towns like Dunedin and Tarpon Springs. Miami visitors enjoy extensive waterfront access. Those in Jacksonville and Orlando are less than an hour from the beach.
Wedge also pointed to the many Fortune 500 companies with locations in the Tampa area, including Amazon, Citigroup, Johnson & Johnson, and Pfizer. The city’s short-term rentals attract businesspeople from the banking, insurance, and healthcare industries, among others, for longer stays.
Moreover, recent rapid population growth in Orlando, Tampa, and Miami echoes the short-term rental market trends — those who are relocating will often choose a short-term rental first to get to know the area and find a good realtor.
Which markets are bigger risks?
California also boasts scenic coastlines and plenty of attractions, yet only San Diego ranked among the leading Airbnb locations. Sacramento and San Jose were among the five least desirable short-term rental markets, along with Houston, San Antonio, and Birmingham, Alabama.
Wedge said property value is California’s main issue. In San Jose, the median sale price of a home is $1.4 million — well above other metro area markets. The Golden State is also home to several cities and counties cracking down on short-term rentals in recent years, placing restrictions on stay length and total number of rental properties. These regulations have made it difficult for some investors to afford their property, forcing them to abruptly put their homes back on the market, potentially even without an agent.
Texas presents a few problems for real estate investors. For one, the state has one of the highest property taxes in the country at 1.68%. In addition, it has lower-than-average occupancy rates among rental properties, which weakens their return on investment.
“Also, Texas is more spread out than states like Florida,” Wedge said. “When you’re closer to the attractions, it makes rentals more desirable. Even in Dallas, it can take you a couple of hours to get from one side of town to the other.”
What about a high ROI?
Florida isn’t the only market with opportunities for short-term rental investors. Two Ohio cities, Cleveland and Columbus, boast low median sale prices and relatively strong revenue. Clever ranked Cleveland as the top Airbnb city based solely on ROI.
Wedge says Providence, Rhode Island, also stood out as a strong market. The average home price might be higher than in other states, but she believes investors can collect higher rent. The study found that Kansas City, Missouri, and Hartford, Connecticut, also have high ROI potential.
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