Choosing the right Airbnb market isn’t something you can guess your way through. Location drives occupancy, cash flow, and long-term returns. Investors who ignore market research often end up with a property that sits empty or one that barely covers expenses. If your goal is maximum ROI, you need to evaluate the fundamentals before you buy.
Below are seven practical tips to help you identify Airbnb markets to invest in that make sense for real returns.
1. Look at Local Tourism Demand
Tourism is the backbone of most Airbnb markets. Without consistent visitors, you’re left competing with other short-term rentals for a smaller pool of guests. Cities with strong leisure travel, business travel, or event traffic tend to perform better.
Use sources like state tourism boards, city visitor data, and hotel occupancy reports. High annual visitor counts signal demand. For example, Orlando attracted over 70 million visitors last year. Markets with that kind of draw keep Airbnbs booked year-round. On the other hand, a small town without major attractions may only bring in seasonal traffic, leaving you with long vacancies.
2. Check Short-Term Rental Regulations
Some of the most popular Airbnb destinations also have strict restrictions. You don’t want to buy only to learn that new ordinances block your ability to operate.
Research city and county laws on short-term rentals. Key questions: Are permits required? Is there a limit on the number of nights? Does the area have zoning rules that affect STRs?
New York, for instance, banned most short-term rentals under 30 days unless the host is present. Los Angeles requires registration and imposes limits. Meanwhile, states like Florida and Arizona are far more flexible. Investors who skip this step risk fines, shutdowns, or lawsuits.
3. Evaluate Average Daily Rates (ADR) and Occupancy
Revenue potential depends on two numbers: how much you can charge per night and how often your place stays booked. Tools like AirDNA, Mashvisor, or AllTheRooms can give you estimates.
High ADR means you can generate more revenue from fewer nights. Strong occupancy means a steady stream of bookings. You want a market that offers a balance of both. If ADR is high but occupancy is low, you’ll struggle to cover costs. If occupancy is strong but ADR is too low, you’ll work harder for less profit.
As an example, Nashville Airbnbs often show occupancy rates above 60% with ADRs around $200. That combination translates to strong monthly revenue.
4. Understand Seasonality
Markets tied heavily to a single season can produce uneven cash flow. Ski towns may boom in winter but sit empty in summer. Beach towns can thrive in summer but slow down during cooler months.
This doesn’t mean you should avoid seasonal markets. It means you need a clear plan. Investors often miscalculate by projecting peak-season revenue across the entire year. That mistake can wreck ROI.
Check annual demand curves. If you’re okay with higher vacancy during off-season, budget accordingly. In some cases, diversifying into a market with year-round appeal may be safer.
5. Factor in Local Real Estate Prices
Buying into the wrong price bracket makes it harder to hit positive cash flow. A market can look attractive on the surface, but if property prices are too high relative to rental income, your returns shrink.
Run the math. Compare median home prices with expected revenue. If the gross rent multiplier (purchase price ÷ annual gross income) is far above 12–15, cash flow may be tight.
For example, some parts of California have strong tourism but home prices over $1 million. Even with high nightly rates, breaking even becomes tough. By contrast, Midwest or Southeast markets with lower purchase prices can yield stronger ROI with moderate demand.
6. Study Competition and Supply Growth
An Airbnb market with too many rentals is just as risky as one with too few travelers. Supply growth outpacing demand cuts into occupancy and drives down ADR.
Look at how many listings exist now and whether the number is rising quickly. In hot markets, investors often flood in, which can oversaturate demand.
One way to gauge this is by monitoring hotel construction. If hotels are being built at scale, it’s a sign that professional operators believe in the market’s long-term demand. But if Airbnb listings are rising faster than visitors, your unit may underperform.
7. Consider Financing Options and Cash Flow Flexibility
Even the best market won’t matter if you can’t finance the property properly. Short term rental loans are different from standard mortgages. They’re designed to factor in projected Airbnb revenue instead of just your personal income. This can help new and seasoned investors qualify for properties they couldn’t get with conventional financing.
Choosing the right Airbnb market should go hand-in-hand with choosing the right loan structure. If financing costs are too high or terms are mismatched, cash flow takes a hit. Before you buy, compare loan products that fit the property’s rental profile.
The Benefits of Working with an Expert Loan Partner
New investors often underestimate the importance of financing support. Partnering with a real estate investment loan company like Brrrr Loans can provide structure and clarity. They specialize in short-term rental loans, which are built around the way Airbnb properties actually generate income. For someone new to this space, working with a lender that understands STR cash flow, vacancy cycles, and revenue forecasting can prevent costly mistakes. Having experts in your corner makes scaling smoother and reduces the chances of overextending financially.
Final Thoughts
Picking the right Airbnb market is less about guesswork and more about disciplined research. Start with demand and regulations. Add in ADR, occupancy, and seasonality. Make sure the numbers line up against property costs and financing. Watch supply trends closely. And lean on partners who understand the mechanics of short-term rental loans.
Airbnb investing can be profitable, but only when the fundamentals align. A smart market choice can create reliable income streams. A poor choice can leave you chasing losses. Use these seven tips as a starting point, and you’ll be better positioned to find Airbnb markets to invest in that deliver strong ROI.
Published by HOLR Magazine.