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10 Least Profitable Cities To Renovate and Rent Out Homes on Airbnb

July 9, 2024

4 min Read

Written by Vance Cariaga

Edited by Daria Uhlig

Happy manual worker welcoming young couple to their renovated apartment.

skynesher / Getty Images

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Short term rental company Airbnb has seen its share of ups and downs through the years, especially since the COVID-19 pandemic rattled the travel industry. One viral tweet last year suggested that Airbnb is in a state of “collapse” due to revenue declines in large cities, which likely scared off more than a few investors.

The news this year has been similarly rocky. In early May, Airbnb’s stock price fell by the most in a year after the company gave “lackluster” guidance for a second straight quarter, indicating that growth in travel spending would slow ahead of the peak summer season, Bloomberg reported.

But Airbnb does have its defenders. An article earlier this year on Motley Fool noted that while Airbnb is “facing pushback in some cities,” the company “continues to put up strong financial results.”

Motley Fool cited data showing that Airbnb managed 448 million nights and experiences bookings in 2023, a gain of 14% from the previous year. The company posted annual revenue of $9.9 billion and free cash flow of $3.8 billion — up 18% and 12%, respectively.

While stock market investors try to figure out what the future holds for Airbnb’s share price, property investors must narrow their focus to individual cities. As with any real estate investment, location will go a long way toward determining whether your Airbnb investment earns a profit or puts you in a financial hole.

People who want to rent out properties to Airbnb customers must consider the cost to buy the property and then renovate and maintain it. You also need to consider how much you can rent it for and how many potential customers you can reach.

Renovation costs alone can be a major expense. A 2023 blog from California-based Management One listed the following estimated costs for typical rental home renovations:

Kitchen: $7,500-$25,000+
Bathroom: $2,500-$15,000+
Flooring: $2-$10 per square foot, depending on type
Exterior painting: $1,500-$5,000
Landscaping: $1,000-$10,000

Markets with high home prices also tend to have high renovation costs. If you want to rent out an Airbnb that requires renovation, some markets are better than others.

To identify the best and worst short-term rental markets of 2024, Clever Real Estate collaborated with Rabbu.com, a Charlotte-based short-term rental investment platform, to analyze the 50 biggest metro areas. It ranked them according to factors such as median home sale price, return on investment, Airbnb occupancy rate and the percentage of listings suitable for Airbnbs.

Based on those rankings, here are 10 of the least profitable cities to renovate and rent out homes on Airbnb. All have median sale prices above $400,000, and all but Washington, D.C. landed in the bottom half of Clever’s 50-city rankings.