Buying Property for Airbnb: Your How-To Guide

A successful Airbnb business starts with purchasing the right property to rent out on a short term basis. There are a lot of factors and considerations that go into this decision to maximize your revenue and profit. This guide will take you through all the elements that you need to take into account when buying property for Airbnb, from deciding on the right time to the step-by-step purchase process.

We'll cover these important topics:

How to find the right time to buy property for Airbnb: Factors to take into account when determining the best time to buy your vacation rental property.
What to consider when buying an Airbnb property: We'll discuss the most important aspects and points to analyze and include in your decision.
Best practices when buying Airbnb property: We'll provide you with proven tips and tricks for investing in a profitable Airbnb deal.
Finance options to buy property for Airbnb: We'll look at the traditional and less traditional financing options that both beginner and experienced Airbnb investors have access to.
Who can help you buy property for Airbnb: We'll cover the real estate professionals that can support you and offer you practical help in launching your short term rental business.
How to buy property for Airbnb: We'll go through the steps that go into buying a short term rental property.

Ready to get started and looking for the best way to buy a property for Airbnb? Check out Summer Investing. Our experienced Acquisitions Team will guide you through the process to find the right property for your budget, investment goals, and preferences.

How to find the right time to buy property for Airbnb

Timing is crucial when it comes to making a profitable Airbnb investment. The decision to buy a vacation rental property should be based on a combination of global, national, local, and personal factors. It’s not just about favorable economic and industry conditions—it’s also about ensuring that the timing aligns with your own readiness to embark on this exciting venture.

These are the main factors to consider when deciding if now is the right time to purchase an investment property to list on Airbnb, Vrbo, and other short term rental website:

Airbnb industry trends and projections: First and foremost, look at general trends in the global and national short term rental market. Is the number of Airbnb listings going up or down? Are average daily rates (ADR) increasing or decreasing? How are occupancy rates performing? It only makes sense to buy a property for Airbnb if the industry is currently growing, and things are looking well for the foreseeable future.
Travel and tourism industry: Second, analyze the condition of the travel and tourism industries in general. Are people traveling at the moment? Which destinations do they prefer? Are they choosing traditional hotels or vacation rentals? The right time to invest in an Airbnb is when travel and tourism are already growing and are expected to continue expanding.
Local housing market factors: In addition to nationwide trends, you also need to take a look at the performance and status of the local market where you plan to buy an Airbnb property.
Macroeconomic performance: Another aspect to consider is the state of the economy. When the financial system is stable, and the economy is doing well, people are more likely to travel out of state and stay at Airbnb properties overnight. Strong economic performance could be an indicator that now is a good time to get started.
Real estate market cycle and seasonality: The U.S. real estate market goes through cycles, which means there are better and worse times to buy a property. Keep an eye on the signs that the current market is a buyer's market or that a buyer's market is coming as that's the best time to invest in real estate. Watch out for things like an increasing number of listings for sale, stagnant or dropping house prices, longer days on market, and others. In terms of time of the year, usually the best seasons for buyers are late fall, winter, and early spring when demand is slower, there are more options to choose from, and sellers may be willing to make more concessions.
Interest rates: Since you'll probably need to take a loan to finance the purchase of your Airbnb property, check out interest rates to decide if this is the right moment to borrow money. If you go for a long-term, fixed-rate mortgage, it's particularly important to choose a time with relatively low mortgage rates. If you plan to get an adjustable-rate mortgage loan, then you can be a bit more flexible in terms of timing. Of course, these factors may be out of your control and shift slowly.
Local Airbnb supply and demand forces: Before buying a property for Airbnb, ensure that the market where you plan to invest is doing well and experiencing strong performance. The Airbnb business is highly local, so you need to consider both global and local trends when deciding on the right time. Use our free Airbnb estimator tool to get an idea for local performance.
Recent and upcoming regulatory changes: You should check whether local authorities have recently adopted any new Airbnb laws and whether they are discussing this issue at the moment. If state, county, and city authorities in your local market are considering introducing new short term rental regulations, it might be the wrong time to invest in Airbnb.
Your financial situation: Analyze your savings, income sources, and ongoing expenses to find the right time to purchase a short term rental property. You need to have enough money for a down payment, a good enough credit score to take out a loan, and a stable source of income to make sure you can make the monthly mortgage payments.
Your time availability: Finally, you need to take into account your job situation and other commitments. Becoming an Airbnb host requires dedication which might be challenging for a person with a full-time job and a family to take care of. Alternatively, you can hire one of the best Airbnb management companies in your area to help ease the workload.

By carefully evaluating these factors, you can make an informed decision about when to buy a property for Airbnb and maximize your chances of success.

Factors to consider when buying Airbnb property

Take into account a number of other indicators and considerations to get started on the right footing when thinking about investing in an Airbnb. The most important factors to consider in this situation include:

Budget: Analyze your finances in order to determine the budget that you can afford for the purchase. Account for all expenses, not only the sale price or the down payment. Other startup costs include closing fees, property fixes and repairs, and furnishing the home. Unless you have a detailed and accurate budget, you risk being unable to launch your business.
Investment goals: You should set up specific, quantifiable investment goals and objectives to know where to invest and what property to buy. Your goals should be based on your financial situation as well as what is feasible in the current Airbnb market.
Location: Your Airbnb investment is only as good as the market where it's located. Location is the single most important factor for the success of a short term rental property as it dictates property prices, demand from guests, daily rates, occupancies, operating expenses, income, cash flow, and ROI. Conduct diligent research and analysis to choose one of the top short term rental markets in the U.S.
Competition: It's important to invest in an active Airbnb market with a lot of rental activities, while avoiding markets that are already oversaturated with listings. Moreover, analyzing what your competitors are doing right and wrong can help you finetune your criteria for property to buy.
Demand and seasonality: You need to find out how many visitors come to the city where you're planning to invest and when they come. Find a market that enjoys a lot of tourists, preferably year-round. While there is some seasonality in all vacation rental locations, it's less of a concern in markets that attract visitors throughout the year, such as Florida or California.
Airbnb laws and regulations: How conducive is the local market to running an Airbnb business? Take into account short term rental regulations at the state, county, and city level and make sure that non-owner occupied Airbnbs are allowed and relatively unrestricted.
Average income and profit: You should conduct detailed short term rental market analysis and Airbnb investment property analysis to know how much income you can generate from a property and what recurring expenses you can expect. Ultimately, the expected revenue and return on investment should be the main factors behind your decision where to invest and which property to invest in.
Property management: It's also a good idea to decide on the optimal short term rental management model in your case before buying a property. Do you have the time and the skills to be a DIY Airbnb host? Do you have a co-host to share responsibilities with? Are you investing away from home so you need to hire a professional Airbnb manager? Finding someone to manage your Airbnb property should be on your mind before the purchase.

All these factors are equally important when preparing to buy an Airbnb property and should not be ignored for a high-profit investment decision.

Best practices when buying Airbnb property

Investing in a short-term rental is all about making smart, data-driven decisions—not letting emotions guide the process. The goal is to find the location and property with the highest potential for revenue, not just one you personally love.

Here are proven best practices successful investors use when buying an Airbnb property:

Conduct an Airbnb market analysis: You should start by analyzing your selected market focusing on factors like number of listings, prevailing types of short term rentals, most popular amenities, and average performance in terms of nightly prices, Airbnb occupancy rate, revenue, and profit. You also need to study the number of visitors that come to the city, the reason they come (leisure vs business), when they come (seasonality), and their expectations and preferences. Airbnb data tools can help you through this process.
Understand the competition: You need to know your competition in detail in order to perform better than them. What property types are there? How many bedrooms and bathrooms do they have? What Airbnb amenities do they offer? How much do they charge per night? How frequently do they get booked? What's their lead time? How do they market their listings?
Review Airbnb rules: You have to be familiar with the existing local vacation rental regulations as well as any upcoming changes before buying an Airbnb property. Check out the websites of county and city authorities, consult with a local legal expert, or talk to a local Airbnb manager.
Choose the best financing option: How you finance your investment property plays a key role in its affordability and potential return. Explore various loan options to find the one that best fits your financial situation—unless you're able to pay in cash.
Learn about tax implications: There are multiple taxes that go into owning a second home and renting an Airbnb. Understand what taxes you will need to pay, what rates apply, and what deductions you might be eligible for. Typical taxes include local transient occupancy tax (TOT), sales tax, rental income tax, and property tax.
Narrow down your Airbnb property search criteria: Before you get into how to find Airbnb properties for sale, set up specific criteria for your investment. Based on your market analysis and Airbnb research, decide on the optimal property type, size, available amenities, precise location, and price range.
Use Airbnb data and analytics software tools: There is so much data and analysis that go into buying the right property for Airbnb that you need to get access to the best short term rental analytics tools. While AirDNA and Mashvisor are popular choices among Airbnb investors, Summer Forecast offers an unmatched amount of data, detail of analytics, and level of accuracy among Airbnb data providers. The platform provides intuitive and actionable data and insights to help investors accurately predict and maximize their Airbnb revenue.
Rely on trusted professionals: To buy an Airbnb property, you need a team of professionals to support you throughout the process. These include real estate agents, lenders, home inspectors, real estate appraisers, interior designers, property managers, and more. Make sure that you work with proven professionals with high-level expertise to get the best possible results.
Tap into your real estate investing network: Reach out to your network of investors, Airbnb hosts, and others in the industry. They might have invaluable advice to share, current data and insights, and knowledge of available investment opportunities.
Decide on who will manage the property: When buying a short term rental, know who will manage your property as this should be one of the factors that drive your investment decision. For instance, if you plan to act as the Airbnb host, you might want to buy a small, simple property close to home. If, on the other hand, you are thinking of hiring a professional property manager, you can invest in a larger, luxury property away from home, provided that you have the necessary budget.

With these top tips and tricks, you'll be well prepared for buying an Airbnb investment property with the potential to drive maximum revenue and profit.

Finance options for buying property for Airbnb

When purchasing a vacation rental, you have to choose the most appropriate financing method for your situation. While some investors resort to traditional options like mortgages, there are plenty of alternatives from which hosts can choose.

Cash: Sometimes investors are able to pay for the property in cash. This usually happens in more affordable markets, with smaller properties, and/or to more experienced investors with larger cash reserves.
Conventional mortgage: Taking out a mortgage loan is a popular option among investors with good credit scores and history who have enough savings for a 20% down payment. Conventional mortgages benefit from reasonable interest rates and potentially long repayment periods, but terms are not very flexible.
FHA loan: First-time homebuyers who want to rent out a room on Airbnb can qualify for a loan from the Federal Housing Authority (FHA). These loans come with low down payments, interest rates, and minimum credit scores. However, they cannot be used to buy an investment property; they have to be used for a primary residence.
Hard money: Airbnb investors can borrow money from specialized institutions that use the property as a collateral. Hard money loans require generally high down payments and interest rates accompanied by short loan terms. Terms can be flexible. They are generally a good option for buyers who have most of the money in cash and need to borrow a small amount.
Private money: Private money loans are similar to hard money loans but originate from private individuals rather than established institutions. Terms and conditions are even more negotiable, so they are a feasible option for investors who face few other opportunities and have good contacts.
Cash-out refinance: Cash-out refinancing allows short term rental property investors who own a property that is being financed to change the existing mortgage with a larger one and use the loan amount to pay for two properties. The newly borrowed loan amount is limited to the equity which the buyer already holds in their primary home. Interest rates are higher than with a conventional mortgage, and the repayment period is generally extended too. Just ensure that you don't financially overstretch yourself with this option.
Home equity loan: With a home equity loan, you can borrow a lump sum against the equity that you own in your primary home, so that's a working option for existing homeowners. The borrowed amount can be used as a down payment on an investment property or for filling in the gap if you have most of the purchase price in cash. Again, ensure that you don't financially overstretch yourself with this option.
Home equity line of credit (HELOC): Investors can use the HELOC strategy to get funds over a draw period (of usually ten years) based on the equity they have in their home or other investment property. Over the draw period, they pay only interest, after which they start repaying the principal as well. Interest rates are higher than with conventional mortgages, and this option works only for existing homeowners or rental property owners.
Seller financing: You can buy an Airbnb property by having the seller act as the lender and you paying monthly or annually mortgage to them rather than to a financial institution. The terms depend entirely on the agreement between you and the seller, which makes conditions very flexible. If you opt for this method, make sure you have a structured agreement which details all terms such as amount of payments, loan term duration, what happens in case of default, and others.
Self-directed IRA: You can use a self-directed IRA to purchase a property for Airbnb, but the property must be held within the IRA and all revenue and expenses need to go through the IRA. This strategy typically requires a higher down payment, of about 30%-40%.
Business loan: Since buying an Airbnb property amounts to starting a real estate investment business, you might qualify for a business loan which is different from a real estate loan. Qualifying for such a loan requires having a solid business plan to present to the financial institution. While terms are somewhat flexible, interest rates are comparable to mortgage rates, in the range of 6%-7% at the moment for Small Business Administration (SBA) 504 loans.

To choose the most appropriate finance method, study your different options and talk to both large national and small local lenders as they tend to have different terms and conditions.

Who can help you buy property for Airbnb

To buy the best property for Airbnb, you'd need to tap into your short term rental investing network as the process requires the help of many experts.

The following real estate professionals can help you successfully invest in a vacation rental:

Investor-friendly real estate agents and brokers: Realtors who specialize in short term rental investments can help you not only find an Airbnb property to buy but also choose the most profitable option and navigate the process without unnecessary hiccups.
Real estate attorneys: Consulting with a lawyer who focuses on real estate transactions and matters ensures that all legal procedures are followed during the purchase process. Moreover, they can help you understand applicable short term rental legislation and make sure your Airbnb business is launched in line with local regulations.
Real estate accountants or tax advisors: Accountants and tax advisors can help you prepare a budget as well as understand what taxes you will need to pay when buying and owning an Airbnb property and what implications that has on your financial situation.
Lenders: It's important to approach different types of lenders and discuss various options to choose the one that fits best your financial situation and the property you're planning to buy.
Airbnb property managers: Short term rental property managers are a valuable source of both potential deals (properties their clients might be selling) and understanding local Airbnb rules. They can also give general recommendations on what types of properties and what addresses perform the best in your local market.
Airbnb investors and hosts: You should definitely consult with existing investors and hosts in the area to understand how good it is for investing, to ask for available properties for sale, and to discuss strategies. Experienced investors are usually surprisingly willing to help those who are just getting started.
Home inspectors: A professional home inspector will analyze the home you're considering buying in detail and provide you with an accurate estimate of its required fixes and repairs.
Real estate appraisers: An appraiser can provide you with the exact value of the property so that you don't overpay. An appraisal is also required to qualify for a loan and determine the loan amount.
Interior designers: An interior designer who works with vacation rentals can evaluate whether a home has the potential to be converted into a short term rental. Moreover, they can give you actionable recommendations on design ideas or just do a complete makeover for optimal results.
Summer: Want to make it easier? You can also partner with the Summer Acquisitions Team to find and buy the right Airbnb property for your investment goals. Summer can help you define your investment criteria, access listings that match your goals, get readily available projections and analytics, and obtain renovation and design ideas. Once you've selected a property, we can make recommendations on the best professionals to work with during the purchase process. Finally, we can design and manage the property for you, from end to end.

Because you need so many people to buy an Airbnb investment property the right way, it's crucial to start building and growing your network as soon as possible. Don't wait until the moment you are ready to purchase to look for your support network of professionals.

How to buy property for Airbnb

While the process of buying a property to rent out on Airbnb might seem complicated for beginners, eventually it boils down to following a few steps to achieve positive results each and every time.

Here are the steps you need to follow when investing in a short-term rental, whether it’s your first property or your tenth:

Work out a budget in line with your finances
Set up clear investment goals
Explore financing options and choose the best one for you
Research potential markets based on your budget and investment goals
Conduct detailed market analysis to understand what revenue and ROI you can expect
Study the competition to learn what they are doing right and wrong and draw conclusions about your own business potential
Check out state, county, and city Airbnb rental laws and regulations
Search for available listings for sale including online marketplaces, local newspapers, real estate agents and brokers, investing forums, and your own network, focusing on properties that meet your criteria
Perform in-depth investment property analysis on your short-listed options
Consult with a home inspector, an appraiser, a property manager, an interior designer, and other professionals to confirm that it's a good choice
Work with a real estate agent to help you navigate and finalize the purchase

As long as you follow these steps and pay attention to each part of the process, you can buy a property with a strong potential for Airbnb revenue!

Frequently asked questions (FAQs)

How profitable are Airbnb properties?

The profitability of short term rentals varies widely from one city to another, from one neighborhood to another, and from one property to another. There are many factors that go into determining the ROI of an Airbnb investment. Generally speaking, short term rentals can be significantly more profitable than their long term counterparts as long as you find the right market and buy the best property. Investors are frequently able to achieve double-digit returns.

What is a good ROI for Airbnb?

One of the most widely used metrics of ROI in real estate is the capitalization rate (cap rate), and a good cap rate for vacation rentals is anything between 8% and 12%. Anything below 8% is too low for the potential that Airbnb holds, while values above 12% are usually too risky.

Where to buy Airbnb property?

The best cities for Airbnb depend on multiple factors, such as property prices, nightly rates, occupancy, operating expenses, and legal regulations as well as your budget, expectations, and goals. You need to conduct detailed market research and analysis to choose the top locations. Typically, the best vacation rental markets welcome visitors year-round, host both natural and tourist attractions, have affordable home prices, and have lenient regulations. Cities across Florida, California, Texas, and Arizona have traditionally been some of the best places to invest in Airbnb.

How to buy an Airbnb property with no money?

There are many different ways to finance the purchase of a short term rental property, some of which require little to no money down. You can consider an FHA loan (with a 3.5% down payment requirement), seller financing, house hacking (to qualify for homeowner loans), partnerships, and leveraging home equity (if you already own a home). If you have absolutely no cash to invest, you could look into Airbnb arbitrage rather than buying a property to rent out.

How to invest in an Airbnb property?

Investing in a property for Airbnb is a multifaceted process that requires many considerations: from choosing the best market and selecting the right financing method, all the way to buying a top-performing property and managing it efficiently. Successful investments depend on access to the best software tools and the right professionals to assist you along the way.

How to buy and set up an Airbnb?

Buying and setting up an Airbnb property takes a number of steps. You have to start by identifying a good location. After that, you have to look for a property for sale with a strong potential and make sure that you follow all legal and other requirements in the process. Once you've purchased the property, you should hire one of the best Airbnb design and furnishing companies to prepare your property for welcoming guests. Finally, you have to decide whether to manage your property on your own or hire a professional Airbnb manager. Throughout the process, you should have access to the best professionals and the best software tools to maximize your results.

Bottom line

Investing in a property to rent on Airbnb has the potential to be a highly lucrative endeavor, especially when approached with care and strategy. The journey to finding the perfect property in a thriving market involves multiple factors and steps, but with the right guidance, tools, and connections, you can unlock incredible opportunities. Our guide is designed to empower you with the knowledge to make smart, informed decisions at every stage.