How to Choose the Right Location for Your STR Investment
The location of your short-term rental (STR) plays a critical role in determining its success. A well-chosen location attracts more guests, generates higher occupancy rates, and ensures steady revenue. However, selecting the right market involves analyzing multiple factors, from local demand to regulations. This guide breaks down the key considerations for choosing the perfect location for your STR investment, helping you make informed decisions that maximize returns.
Why Location is Crucial for STR Success
1. Drives Guest Demand
Popular destinations with strong tourism or business activity attract more visitors.
2. Influences Pricing Power
Properties in prime locations can charge higher nightly rates.
3. Impacts Occupancy Rates
Accessibility and proximity to attractions boost bookings year-round.
4. Determines Long-Term Viability
Areas with favorable market trends and regulations offer greater stability.
Key Factors to Consider When Choosing an STR Location
1. Local Tourism and Demand
Understand the area’s appeal to potential guests.
How to Evaluate Demand:
Research popular attractions, events, or activities in the area.
Analyze visitor statistics, such as annual tourism numbers or business travel trends.
Identify underserved niches, like family-friendly accommodations or pet-friendly properties.
Tools to Use:
AirDNA for market data.
Local tourism board websites for event calendars and visitor demographics.
Pro Tip:
Look for destinations with year-round appeal, such as beach towns with off-season activities or cities hosting regular conferences.
2. Regulations and Zoning
Ensure the area is STR-friendly and complies with local laws.
What to Research:
Zoning laws governing short-term rentals.
Licensing or permit requirements for operating an STR.
Tax obligations, such as transient occupancy taxes.
Pro Tip:
Avoid areas with strict restrictions or ongoing legal battles regarding STRs.
3. Proximity to Amenities and Attractions
Convenience is a top priority for guests when choosing accommodations.
Location Features to Consider:
Walkability to restaurants, shops, and entertainment.
Proximity to major attractions, such as beaches, parks, or cultural landmarks.
Access to transportation hubs, like airports or train stations.
Pro Tip:
Highlight nearby amenities and attractions in your listing to boost appeal.
4. Local Market Trends
Choose a location with strong growth potential and demand stability.
What to Analyze:
Average daily rates (ADR) and occupancy rates in the area.
Seasonality trends and their impact on bookings.
Competitive analysis of similar properties.
Tools to Use:
Mashvisor for property analytics.
Zillow or Redfin for real estate trends.
Pro Tip:
Look for emerging markets with increasing tourism or infrastructure development.
5. Accessibility and Transportation
Guests prioritize locations that are easy to reach and navigate.
Considerations for Accessibility:
Proximity to major highways, airports, or public transit.
Availability of parking, especially in urban or remote areas.
Nearby bike or walking paths for eco-conscious travelers.
Pro Tip:
Highlight transportation options in your listing to reassure potential guests.
6. Climate and Seasonality
Weather can significantly influence guest demand and property usage.
How to Evaluate Climate:
Identify peak seasons and off-seasons based on weather conditions.
Assess whether the area offers year-round activities to offset seasonality.
Pro Tip:
Invest in properties with strong shoulder seasons (periods just before and after peak season) to ensure steady bookings.
Types of STR Locations to Consider
1. Urban Centers
Why Choose Urban Locations:
High demand from business travelers, tourists, and event attendees.
Access to diverse amenities and attractions.
Challenges:
Higher property prices and competition.
Potentially stricter STR regulations.
Best For:
Hosts targeting short stays and frequent turnover.
2. Vacation Destinations
Why Choose Vacation Markets:
Consistent demand during peak seasons.
Opportunities to cater to families, groups, or luxury travelers.
Challenges:
High seasonality and fluctuating demand.
Maintenance costs for properties in remote areas.
Best For:
Hosts offering unique amenities, like waterfront views or ski-in/ski-out access.
3. Suburban Areas
Why Choose Suburban Locations:
Affordable property prices and steady demand from relocating families or staycationers.
Less competition than urban centers.
Challenges:
Lower ADR compared to urban or vacation markets.
Limited appeal for short-term stays.
Best For:
Hosts focusing on long-term stays or family-friendly accommodations.
4. Emerging Markets
Why Choose Emerging Markets:
Lower property acquisition costs.
Opportunities to capture demand before the market becomes saturated.
Challenges:
Uncertainty about long-term viability.
Limited infrastructure or amenities.
Best For:
Investors willing to take calculated risks for higher potential returns.
Financing Considerations for STR Locations
1. Property Prices
Evaluate affordability based on your budget and financing options.
Pro Tip:
Compare property prices across multiple markets to find the best value.
2. Operating Costs
Factor in expenses like taxes, utilities, and HOA fees.
Pro Tip:
Research local utility rates and insurance requirements to estimate operating costs accurately.
3. Potential ROI
Calculate the return on investment (ROI) to determine profitability.
Formula for ROI:
ROI=(Net Annual IncomeProperty Cost)×100\text{ROI} = \left( \frac{\text{Net Annual Income}}{\text{Property Cost}} \right) \times 100ROI=(Property CostNet Annual Income)×100
Pro Tip:
Aim for an ROI of at least 8-12% to ensure long-term profitability.
Case Studies: Successful STR Locations
1. Mountain Cabin in Asheville, NC
Key Features: Proximity to hiking trails and a vibrant arts scene.
Result: High occupancy rates during peak seasons, with strong off-season appeal for remote workers.
2. Beachfront Condo in Destin, FL
Key Features: Direct beach access and family-friendly amenities.
Result: Consistent bookings during summer months, with repeat guests returning annually.
Common Mistakes to Avoid
Overlooking Regulations
Investing in areas with restrictive STR laws can jeopardize your business.
Underestimating Costs
Ignoring expenses like property taxes or maintenance can reduce profitability.
Neglecting Market Research
Failing to analyze demand trends and competition leads to underperforming properties.
Conclusion
Choosing the right location for your short-term rental is one of the most important decisions you’ll make as an investor. By evaluating factors like local demand, regulations, and market trends, you can identify locations that align with your goals and offer strong potential returns. With thoughtful planning and research, the right location can set the foundation for a successful and profitable STR business
