How to Find the Best Airbnb Vacation Rental Property to Buy

If you're considering investing in an Airbnb rental, there's good news, according to AirDNA, Average Daily Rates (ADRs) are projected to increase by 2.1% in 2025, with Revenue Per Available Room (RevPAR) expected to grow by 2.9%. This means that short-term rentals remain a strong and profitable investment opportunity.

But while the numbers look promising, turning a vacation rental into a high-performing income stream is easier said than done. Finding the right property requires careful research, a strategic approach and a keen understanding of the market. From choosing the best location to evaluating profitability, there are several key factors that can make or break your investment.

This article will walk you through everything you need to know about finding and purchasing a profitable Airbnb property, helping you navigate the process with confidence.

Is Buying an Airbnb Property Still Worth It?

Before diving into how to find the perfect Airbnb investment, let’s tackle a crucial question: Is Airbnb still profitable in 2025, despite increasing competition and stricter regulations?

The short answer is yes. Short-term rentals continue to be a lucrative strategy and the data proves it.

In the second half of 2023, the average monthly Airbnb revenue in the U.S. was $4,608, according to data. With inflation driving prices higher in 2024, that number has likely increased. Compare this to the average U.S. long-term rental income of $1,535 per month (based on Apartments.com data) and it’s clear — Airbnb hosts typically earn three times more than traditional landlords. Even after factoring in the higher costs of running a short-term rental, Airbnb investments often come out ahead.

But revenue is just one piece of the puzzle. When we look at return on investment (ROI), the trend continues. An analysis by Mashvisor of vacation rental markets with median property prices under $1 million found that in 2023, the nationwide average Airbnb cash-on-cash return was 3.23%, with an average cap rate of 3.28%. In comparison, long-term rental properties had an average return closer to 2.70%.

However, not every Airbnb property is a guaranteed goldmine. Profitability varies widely by market and individual property. For example, in 2023, the average Airbnb cash-on-cash return in Atlanta, GA, was just 0.06%, while in Northlake, IL, it soared to 7.94%.

Even within the same city, one short-term rental property could barely break even while another generates double-digit profits. Location and property selection are everything, success in short-term rentals isn’t just about picking any home — it’s about finding the right home in the right market.

Key Factors to Consider When Buying an Airbnb Property

Investing in an Airbnb rental isn’t as simple as buying the first property that catches your eye and hoping for the best. A profitable vacation rental requires careful research and strategic decision-making.

To maximize your success, here are the most important factors to consider before making a purchase:

• Budget: Factor in your savings, income, expenses and an emergency fund for unexpected repairs or downtime. Stick to a budget that covers your mortgage and costs without risking your financial stability.

• Property prices: Look for markets where home prices align with your budget and financing plan while ensuring positive cash flow and a solid ROI.

• Guest type: Choose a property that suits your target audience — business travelers prefer city condos, while families seek spacious homes near attractions.

• Market demand: Analyze local tourism trends, seasonality, major events and guest preferences to gauge Airbnb demand and profitability.

• Market supply: Check how many Airbnb listings exist, their occupancy rates and whether the market has room for new rentals or is oversaturated.

• Airbnb laws: Research local short-term rental regulations to confirm Airbnb is allowed and understand any restrictions that may impact your investment.

These big-picture factors lay the foundation for a successful Airbnb purchase. Now, we’ll dive into how to evaluate them in detail.

Assessing your Airbnb investment budget

A successful Airbnb investment starts with a solid financial plan. Before diving in, you’ll need to understand the costs of purchasing and running a vacation rental — and how you’ll finance it.

Here are the key expenses to factor into your Airbnb budget:

Startup costs for your Airbnb investment

Getting your Airbnb up and running comes with several upfront expenses. Key costs to consider include:

• Down payment: Typically 20% or more for rental properties (about $73,000 based on the average U.S. home price of $363,438).

• Closing costs: Around 3-6% of the loan amount, covering lender and legal fees.

• Property tax: Varies by location and property value.

• Furnishing & interior design: Expect to spend $15,000–$40,000 on furniture, décor and essentials.

• Security & smart tech: Includes smart locks, security cameras and home automation for safety and convenience.

• Supplies & other essentials: Linens, toiletries, kitchenware and other guest necessities.

• Vacation rental insurance: Protects against property damage and liability.

• Professional services: Photography, deep cleaning and licensing/permit fees to comply with local regulations.

• Management tools: Costs depend on whether you self-manage or hire an Airbnb property manager.

Your total startup cost will vary based on location, property size, furnishing level and management style. Check out our article Ultimate Checklist for Preparing Your Rental Property for New Guests for a full breakdown of everything you need to get your rental guest-ready!

Ongoing costs of running an Airbnb

Running a successful Airbnb comes with recurring expenses, but with smart planning, these costs can be easily managed while keeping your rental profitable. Standard expenses include Airbnb host fees (3% of booking revenue), marketing, cleaning, laundry, restocking supplies, property taxes and short-term rental insurance. You’ll also need to budget for permit renewals, maintenance and occasional repairs to keep your property in top shape. If you choose to hire a professional Airbnb manager, their fees typically range from 25-40% of booking revenue — a worthwhile investment for those who prefer a hands-off approach.

While expenses vary depending on your location, property size and management style, maintaining a well-run Airbnb can lead to consistent income and long-term success.

Financing your Airbnb investment

Finding the right financing option is key to launching a successful Airbnb business. While a few investors can buy properties with cash, most rely on mortgages or alternative financing solutions. A conventional mortgage typically requires at least 20% down, but other options may better suit your needs depending on the loan amount, purpose (purchase vs. renovation), interest rates, repayment terms and your credit score.

Flexible financing with Hostaway Capital

Hostaway Capital makes it easy for vacation rental investors to secure fast, flexible funding for buying, renovating or expanding their properties. Eligible U.S. customers who have used Hostaway for at least six months can access financing based on business performance, with offers that grow as your revenue increases. Powered by Parafin and Celtic Bank, Hostaway Capital provides a seamless approval process and competitive rates, helping investors scale their Airbnb business with confidence.

Identify your ideal Airbnb guests

Finding the perfect Airbnb property starts with knowing who you want to host. Different guest types look for specific features, so catering to the right audience can maximize bookings and profits.

• Solo travelers: Prefer cozy, well-decorated spaces that immerse them in local culture.

• Couples: Seek romantic getaways near restaurants and attractions.

• Families with kids: Need spacious homes, outdoor areas and family-friendly amenities.

• Group travelers: Want large homes with social spaces like pools and hot tubs.

• Wedding parties: Require luxurious, character-filled venues with outdoor event space.

• Business travelers: Value small, well-located homes with workspaces and strong WiFi.

• Digital nomads: Prefer quiet rentals with an office setup and long-stay comfort.

• Pet owners: Look for pet-friendly properties with clear rules.

• Travelers with disabilities: Need accessible homes with ramps and support features.

• Foreign visitors: Appreciate multilingual guides and local experiences.

Defining your ideal guests helps you focus your property search and choose a home with the right features to attract high-demand bookings.

Choosing the right Airbnb market

Location is everything in real estate — and vacation rentals are no exception. To find a profitable Airbnb property, you’ll need to carefully evaluate potential markets based on key factors:

• Property values: Ensure home prices align with your budget, as the down payment is your biggest upfront cost.

• Tourism trends: Analyze visitor numbers, seasonal demand and whether tourism is growing or declining.

• Target guests: Understand who visits the area and what types of properties and experiences they prefer.

• Competition: Research Airbnb listings, their occupancy rates and which amenities are most in demand.

• Accessibility & attractions: Look for neighborhoods near business hubs, tourist sites and public transport.

• Safety: Choose an area with a low crime rate to attract more bookings and protect your investment.

• Rental income potential: Check average daily rates and occupancy levels to ensure strong cash flow.

• Property appreciation: Invest in a market with a history of rising property values for long-term gains.

By considering all these factors, you can choose a market that maximizes both short-term profits and long-term returns.

Understanding vacation rental laws and regulations

Once you’ve found a promising Airbnb market, it’s crucial to verify thatvacation rentals are legal and not heavily restricted. Regulations vary widely across states, counties and cities, often imposing specific requirements on hosts to protect local residents and housing affordability.

Key Airbnb regulations to check:

• Licensing & registration: Many areas require a business license and permits, often with renewal requirements.

• Taxes: vacation rentals may be subject to state, county or city taxes, such as transient occupancy or lodging taxes.

• Zoning rules: Some markets allow Airbnbs only in specific zones (e.g., commercial areas).

• Ownership restrictions: Certain cities permit only primary residences as short-term rentals, sometimes requiring hosts to be on-site.

• Guest & stay limits: Regulations may cap the number of guests per bedroom or restrict rental days per year.

• Safety requirements: Properties may need smoke detectors, carbon monoxide alarms and fire extinguishers to comply with local laws.

• Noise & party rules: Some areas enforce strict noise limits and prohibit large gatherings.

Selecting the Right Airbnb Property for Investment

Once you’ve defined your budget and target audience, the next step is to identify properties that align with your investment goals. With a list of potential homes, conducting a detailed short-term rental analysis will help you determine which option offers the best profitability.

There are several ways to find promising Airbnb properties. Working with a real estate agent specializing in investment properties can provide expert guidance, while online platforms like Zillow, Trulia and Realtor.com offer extensive listings. Additionally, Airbnb property managers and local hosts may know of owners looking to sell. Other strategies include driving around neighborhoods for “For Sale” signs or tapping into personal networks for potential leads.

By exploring multiple sources, you can find an Airbnb property that fits your strategy and maximizes your return on investment.

Evaluating Potential Properties

Once you’ve identified properties that meet your general criteria, the next step is to analyze their profitability. A thorough short-term rental analysis will help ensure that your investment generates strong returns.

• Daily rates: While nightly prices fluctuate, the average daily rate (ADR) should be high enough to ensure consistent revenue.

• Occupancy rate: The property should be in demand yet unique enough to attract bookings. Together with ADR, this determines your total income and profit.

• Rental income: Monthly income is calculated by multiplying the ADR by the occupancy rate, giving you a clear picture of potential earnings.

• Startup and operating costs: Expenses should align with your budget and not exceed expected revenue to ensure long-term financial stability.

• Cash flow: A profitable Airbnb should generate positive cash flow, meaning your income significantly outweighs your expenses.

• Cap rate: The capitalization rate (rental income ÷ property value) is a key ROI metric. Ideally, aim for a cap rate of 8-12% to balance profit and risk.

• Cash on cash return: This metric (cash earned ÷ cash invested) helps measure return. A strong Airbnb investment should have a cash-on-cash return above 8%.

Analyzing these factors manually can be overwhelming, especially for beginners. Using an Airbnb calculator can provide quick, data-driven insights to estimate potential performance. Alternatively, consulting with a real estate professional can help ensure a smart, well-informed investment decision.

Start Your Airbnb Investment Journey with Confidence

Finding the perfect Airbnb property takes research, strategy and a keen eye for opportunity. By understanding your target audience, choosing the right market, evaluating financials and staying compliant with regulations, you set yourself up for success.

With vacation rentals remaining a profitable investment in 2025 and beyond, now is the perfect time to take action. Whether you're buying your first property or expanding your portfolio, a well-chosen Airbnb can generate steady income and long-term value.