Great Spots to Purchase Out of State Airbnb Rental Property

There’s no way—with heavy taxes and high housing prices—that you’re going to be able to pay off a mortgage using Airbnb for properties in big cities like San Francisco, New York, or Los Angeles. At least, not with any speediness.

(This is not to mention all of the regulations and restrictions that certain of these cities place on short-term “non-hosted” rentals, where paying visitors can rent out an entire property without the owner present on the premises.)

Better to explore the options outside of our country’s major metropolitan centers on the east and west coasts. As recent history has shown, we ignore the so-called “flyover” states at our own peril!

There are plenty of attractive vacation destinations where property can be scooped up at a reasonable rate, and where you can legitimately expect to not only earn back the money you invested in the property in the first place, but also a solid enough income on top of that as well.

Check out the gross annual Airbnb rental profits and estimated mortgages associated with the cities below and decide which one suits you best for a rental property purchase. (This information, it should be noted, is supplied by AirDNA and Zillow.)

Las Vegas, NV

Annual Airbnb Rental Profit: $26,717

Annual Estimated Mortgage: $9,408

Ah, Sin City! Turns out, it’s good for more than just playing the slot machines and seeing Britney perform live. After you deduct mortgage expenses, if you own and rent out a property using Airbnb in Las Vegas, you can anticipate earning somewhere in the neighborhood of $17,000.

That’s a pretty decent amount, as far as so-called “passive income” goes. (A misnomer if there ever was one, you’ll definitely be called on to fix and pay for broken or damaged things relating to the property—if you’re the entrepreneurial type, however, you can outsource these responsibilities to a capable property manager who will serve as your agent in your stead.)

But remember, zoning regulations and restrictions vary from community to community, so it pays dividends to be informed on the front end of this kind of real estate transaction to know exactly what you’ll be forking over to keep your little homesharing operation going strong.

Memphis, TN

Annual Airbnb Rental Profit: $19,379

Annual Estimated Mortgage: $8,701

$10,000 isn’t too shabby a rental income to be making in a city like Memphis, arguably the barbecue and blues capital of the world. With tourists flocking to the area to enjoy these staples of southeastern American culture, you can likely expect even more than this estimated sum if you market your property correctly and are strategically positioned near the hot spots.

According to the Knoxville News, Memphis property owners netted approximately $7 million in 2017, seeing about 68,000 visitors in total. Like its fellow Tennessee cities, Nashville and Knoxville, Memphis has passed a short-term rental ordinance.

In terms of regulations, Memphis is not exactly the wild west, but property owners do have more lax restrictions on short-term rentals as a result of this ordinance—with a 3.5% tax and a $2 room fee leveled on hosts/property owners.

Palm Springs, CA

Annual Airbnb Rental Profit: $44,232

Annual Estimated Mortgage: $18,797

Of the three location options outlined here, Palm Springs—where Airbnb owners can expect to earn approximately $25,000 per year from their property—is by far the most attractive option, at least in terms of rental income.

It must be mentioned, however, that there are quite a few regulatory hurdles to clear before you can deposit that lump sum into your savings account.

Airbnb outlines all the fine points in great detail, as they pertain to Palm Springs property owners, on their website. But here are a few key points:

  • You’ll be charged a Transient Occupancy Tax (TOT) – This applies to short-term rentals, as well as hotels, traditional vacation homes, and other property types that serve as lodging for those who are traveling or making abbreviated stays
  • You’ll need a TOT Permit and a Vacation Rental Registration Certificate to start renting – Both of these applications can be accessed online; this is basically the city’s form of due diligence, their way of ensuring that you are registered in their system and that they can make sure you are paying the taxes that you owe on your rental income

Don’t beat yourself up over not having the supposedly “hot” rental property in those big coastal cities. You’ll be much better off, financially speaking, by investing in real estate that you can rent in up-and-coming destinations where mortgages aren’t quite so steep. Happy house hunting!