Vacation rental properties have been booming over recent years, and short-term rentals are bringing in passive income to those who own them. But just how much?
Consumers who want to jump into the Airbnb, VRBO, or other short-term rental market will have to pay high prices for the property, due to the state of the housing market. But once they own and turn their property into a short-term rental, how much could they possibly earn?
Short-term rentals reached their highest average annual revenue on record in 2021: $56,000, according to AirDNA, a short-term data analyzer. Numbers, obviously, can vary drastically depending on locality.
Real estate experts predict that number to drop in 2022 by about 5%. They predict an increase in the supply of short-term rentals will stabilize the sector.
The Motley Fool puts that total revenue number in more perspective by subtracting estimated property management fees—which they put at 30% or about $16,800 for the year. As such, they estimate an average annual revenue of about $39,200 (in using last year’s revenue number for their projection).
Property manager fees can vary widely. The Motley Fool estimates them at 25% to 30% for the average vacation rental.
Last summer, realtor.com®’s research team identified the hot spots with the most profitable real estate markets for those wanting to purchase a property to list on short-term rental sites like Airbnb or VRBO. They found that smaller resort towns in remote locations that offer a big connection to the outdoors are surging in demand. Many are also within driving distance of larger cities. The top seven areas showing some of the most profits in short-term rentals, according to realtor.com®’s findings, were:
- Joshua Tree, Calif.
- Sea Isle City, N.J.
- Lincoln City, Ore.
- Sedona, Ariz.
- Blue Ridge, Ga.
- Leavenworth, Wash.
- St. George, Utah