How to analyze a market before buying an STR investment property

Category: Multi-Property & Scaling

By: Anika Sharma

Posted: 2025-12-01T18:16:58.852Z

I'm ready to buy my first STR investment property but want to make sure I'm buying in a good market. I've been looking at a few different cities but I don't know how to evaluate whether a market is actually good for STR. What data should I look at? And what tools do you use for market analysis?

Reply by Emily Chen:

Market analysis is the MOST important step in STR investing. Here's my framework: **Step 1: Regulatory check (eliminates ~50% of markets)** - Google "[city] short-term rental regulations" - Check if STR permits are available (some cities have caps or bans) - Look for pending legislation that could restrict STR activity - Join local Facebook host groups and ask about the regulatory climate **Step 2: Demand analysis (use AirDNA)** AirDNA (https://airdna.co) is the gold standard for STR market data: - **Average daily rate (ADR):** What are properties like yours charging? - **Occupancy rate:** 60%+ is good, 70%+ is great - **Revenue per available rental (RevPAR):** The best single metric for comparing markets - **Seasonality:** How much does revenue fluctuate? Markets with 12-month demand are safer. - **Supply growth:** If new listings are growing 20%+ year/year, the market may be saturating **Step 3: Financial analysis** Use DealCheck (https://dealcheck.io) to model the investment: - Purchase price - Down payment + closing costs - Estimated mortgage payment - Conservative revenue estimate (use AirDNA 25th percentile, not average) - Operating expenses: cleaning, maintenance, insurance, utilities, software - **Target: 15%+ cash-on-cash return** after all expenses **Step 4: Competitive analysis** Search Airbnb for your property type in the target market: - How many competing listings exist? - What do top performers look like? (photos, amenities, reviews) - Is there a gap you can fill? (unique amenities, underserved guest segments) - What's the average review score? (<4.5 = guest dissatisfaction = opportunity) **Step 5: On-the-ground visit** Before buying, VISIT the market: - Drive neighborhoods at different times/days - Check walkability, restaurant/activity proximity - Talk to local hosts (coffee meetup or Facebook group event) - Meet potential cleaners and handymen **Red flags in a market:** - 🚩 Lots of new construction (oversupply incoming) - 🚩 Regulatory battles in the news - 🚩 Declining tourism trends - 🚩 AirDNA showing declining RevPAR year-over-year - 🚩 Average occupancy below 50%

Reply by Tony Russo:

AirDNA is essential but don't rely on it alone. Their data is directionally correct but not perfectly accurate (they estimate revenue for non-public listings). My additional data source: talk to 3-5 hosts in the market. Facebook groups are gold for this. Ask: "What's your actual revenue for a [X BR property] in [market]?" Hosts are surprisingly honest in private conversations, and their real numbers are more reliable than any tool's estimates.