Investing in short-term rentals (STRs) in areas with high capitalization rates can provide excellent opportunities for investors looking to maximize their returns. These markets offer strong investment potential along with attractive cap rates.
What are cap rates?
Our latest tool, Chalet Intel, provides comprehensive insights and strategies tailored to investors at all experience levels. It includes a calculator, regulation overview, and much more for each market discussed. Links will be provided for each market, allowing you to conduct a more detailed analysis on your own.
1. Detroit, Michigan
Detroit, MI, known as the Motor City, has a rich history in the automotive industry and a vibrant arts scene, with attractions like the Detroit Institute of Arts and the Motown Museum.
Detroit has experienced a slight decrease in home values by -0.90%, with the average home price now at $68,379. The city maintains a competitive edge with an average daily rate (ADR) of $118.00 and an occupancy rate of 53%, leading to an annual revenue of $21,392 from 1,222 active listings. The average gross yield is an impressive 26.07%, complemented by a cap rate of 15.64%.
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2. Cleveland, Ohio
Cleveland, OH, located on the shores of Lake Erie, boasts attractions like the Rock and Roll Hall of Fame and a thriving theater district.
Cleveland has seen a notable increase in home values by 5.80%, with the average price reaching $100,734. With an ADR of $107.00 and an occupancy rate of 59%, the annual revenue is $21,992 from 2,126 active rentals. The gross yield is 18.19%, and the cap rate is 10.91%.
To delve deeper into Cleveland’s investment potential, check out Chalet Intel.
3. South Bend, Indiana
South Bend, IN, known for being the home of the University of Notre Dame, offers a mix of collegiate charm and historical landmarks.
South Bend has seen a significant increase in home values by 8.00%, with the average price at $169,081. The market shows promise with an ADR of $214.00 and an occupancy rate of 46%, generating annual revenues of $31,552 from 599 active rentals. The gross yield stands at 15.55%, with a cap rate of 9.33%.
For more insights into South Bend as a rental market, explore the free South Bend Airbnb Investor Guide and South Bend Rental Regulations.
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4. Memphis, Tennessee
Memphis, TN, is renowned for its rich musical heritage, including landmarks like Graceland and Beale Street, attracting music lovers from around the world.
Memphis has experienced a slight drop in home values by -4.50%, with the average home price now at $144,347. The city’s ADR is $123.00, with an occupancy rate of 57%, resulting in an annual revenue of $26,176 from 1,755 active listings. The gross yield is 15.11%, and the cap rate is 9.07%.
For more comprehensive insights into Memphis as a rental market, explore Chalet Intel.
5. Coachella, California
Coachella, CA, known for its annual music festival, is also a gateway to Joshua Tree National Park, attracting a large number of tourists throughout the year.
Coachella has seen a 4.10% increase in home values, with the average price now at $412,875. This market thrives with an ADR of $462.00 and an occupancy rate of 51%, translating to an annual revenue of $74,207 from 433 active rentals. The gross yield here is 14.98%, with a cap rate of 8.99%.
Check out our Coachella Airbnb Investor Guide for a deeper dive into our analysis of this short-term rental market or visit Coachella Rental Regulations to explore the Airbnb laws and regulations.
6. New Orleans, Louisiana
New Orleans, LA, offers a unique blend of music, cuisine, and vibrant festivals, such as Mardi Gras, making it a perennial favorite among tourists.
New Orleans has experienced a decline in home values by -7.10%, with the average price at $241,369. The city’s ADR is $169.00, with an occupancy rate of 60%, leading to an annual revenue of $36,925 from 7,017 active listings. The gross yield is 12.75%, and the cap rate is 7.65%.
To explore investment opportunities in New Orleans, visit Chalet Intel. Our guides offer the knowledge and tools you need to make informed decisions and maximize your returns.