You Don’t Want to Own a Vacation Rental in This Iowa City

Let it be known if I somehow ever get enough money to own not one but two pieces of property, I'm not using one of them as a rental. I'm far too paranoid about damage and delinquent renters, not to mention I like having my stuff in order. But if I were ever to consider the possibility of owning a vacation rental, I'd pause before doing it in these cities...

New research from LawnStarter looked at the best and worst cities in which to own a vacation rental. As of right now, college towns and smaller cities present property owners the best opportunity to own rental homes. Big cities dropped significantly in the rankings, with a city in Iowa managing to rank in the bottom-five of the list.

The Key Factors:

LawnStarter looked at a variety of factors in ranking these cities, including: legal restrictions on short-term rentals, occupancy rates, and revenue potential. They also examined operating expenses like housekeeping services and utilities, among 18 total metrics.

Here's a breakdown of some of the findings that LawnStarter unearthed:

College towns offer a unique advantage to running a short-term rental (STR) — a consistent market of families needing flexible options when visiting (and celebrating) their favorite scholar. Cities like Durham, North Carolina (No. 1), Milwaukee (No. 3), and Mobile, Alabama (No. 4), finished at the top with high occupancy rates and high revenue potential, as well as the fewest legal restrictions.

 

A total of 30 California cities landed in the bottom half of our ranking — including Los Angeles (No. 173), San Francisco (No. 178), and Huntington Beach in last place — mainly due to high Initial Investment and Operating Expenses, on top of stern legal restrictions. With housing shortages impacting local residents, many Golden State cities have cracked down on STR legality to encourage long-term leases and local homeownership. The state government is also considering taxing STRs.

Des Moines is "AirbnBust:"

Des Moines, IA managed to finish in the bottom-five of this list, ranking as the fourth-worst place to own a vacation rental property. It ranked pitifully low in several categories:

• Revenue Rank: 182
• Initial Investment Rank: 79
• Operating Expense Rank: 175
• Entertainment Rank: 89
• Guest Safety Rank: 17

Inflation Not Helping Matters:

LawnStarter found that, like everything else, vacation rental properties and their ROI has been greatly affected by inflation:

Order and Inflation: Despite strict regulations and low occupancy rates, hosts can rake in the dough in Los Angeles (No. 173). LA has busted thousands of illegally operating STRs, and active hosts are taking advantage by hiking up rates. The City of Angels had the 11th-highest average daily rate over the past year at $216.

New York Nightmare:

LawnStarter also noted how despite New York being a hot bet for Airbnb homes at one point, a recent crackdown resulted in the removal of thousands of listings:

Until early September 2023, New York (No. 118) was an Airbnb empire, claiming the 3rd-highest average annual revenue — $46,406 — and the most attractions. However, a recent clampdown caused the removal of nearly15,000 local listings from Airbnb between August and September 2023.

See the full results of LawnStarter's 2023 guide to the best and worst cities to own a vacation rental here.