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Top 3 cities in Florida to invest in short-term rentals

By Milo

February 14, 2024 6 min read

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Top 3 cities in Florida to invest in short-term rentals

In 2024, the Florida real estate market continues to stand as a beacon for investors looking to tap into the lucrative world of short-term rentals. With its sprawling beaches, vibrant cities, and year-round sunshine, Florida remains an irresistible draw for both domestic and international tourists, thereby creating a fertile ground for Airbnb and similar investment ventures. The state's real estate market is witnessing a robust growth trajectory, buoyed by a strong demand for vacation rentals. Recent statistics indicate a year-over-year increase in median property prices, yet the market remains appealing due to its higher-than-average rental income potential.

Experts attribute this growth to several key factors: Florida's enduring appeal as a vacation hotspot, an increasing trend towards domestic travel, and the state's friendly regulatory environment for short-term rentals. Moreover, the advent of remote work has spurred a new wave of 'digital nomads' seeking temporary residences in scenic locations, further propelling the demand for short-term accommodations. Forecasts for the market remain optimistic, with projections indicating a steady increase in both property values and rental demand. This promising outlook underscores the potential for significant returns on investment for those entering the Florida short-term rental market in 2024, making it an opportune time for investors to consider adding Florida properties to their portfolios.

Recent data underscore the significance of high occupancy rates, favorable rental income, and tourist influx in Florida's market. As of November 2023, the Average Daily Rate (ADR) for short-term rentals in Florida showed seasonal peaks, especially in March and December, indicating strong demand during specific periods. The highest Revenue per Available Room (RevPAR) was recorded in March 2023, suggesting that strategic pricing during peak seasons can optimize investment returns. The occupancy rate peaked at 67% in July 2021, demonstrating the potential for high yield during tourist seasons. Meanwhile, the active listings have increased, reflecting a growing market. However, the average bookings trend downwards from March 2021 to November 2023, pointing towards an evolving demand landscape.

These insights reveal that successful short-term rental investments in Florida hinge on selecting cities with strong tourist appeal, regulatory support, and market conditions that favor high occupancy and rental income. Understanding these dynamics, backed by up-to-date market data, allows investors to make informed decisions, capitalizing on the opportunities within Florida's diverse and vibrant rental landscape.

Top cities in Florida for Short-term Rental Investment in 2024

Expanding on the analysis of the top 3 cities in Florida for Airbnb investments in 2024, let's delve deeper into why Kissimmee, Key West, and Orlando are prime locations for investors seeking profitability in the short-term rental market.

Kissimmee

Kissimmee is an attractive investment locale due to its strategic position adjacent to world-class attractions such as Disney World and Universal Studios. This proximity ensures a consistent influx of tourists, contributing to a robust occupancy rate of 59%. The city's average nightly rate of $330.4 underscores its ability to command premium pricing, especially during peak seasons from June to July. Properties in Kissimmee are varied, offering potential investors a range of options from single-family homes to condos, many of which are designed to cater to the family tourism market. The average home value of $373,138 in Kissimmee is relatively affordable compared to other high-tourism areas, providing a lower barrier of entry for new investors. Additionally, the city's regulatory environment is conducive to short-term rentals, although investors should be mindful of specific zoning districts and permit requirements for rentals exceeding 30 days.

  • Average Investment Costs: Properties average around $373,138, with a spectrum of options suitable for different investment capacities.

  • Expected ROI: The high occupancy rate (59%) and average nightly rate ($330.4) suggest strong potential for profitable returns. Investors can expect a competitive ROI, especially given the strategic location near major attractions.

  • Operational Costs: Include property management, maintenance, cleaning, and utilities. Investors should budget for these recurring expenses, which can vary based on property size and amenities offered.

  • Tax Considerations: Florida imposes a tourist development tax on short-term rentals, which varies by county. In Osceola County, where Kissimmee is located, this tax is in addition to state sales tax, impacting overall revenue.

Key West

Key West stands out for its unique blend of cultural, historical, and recreational attractions, from the Ernest Hemingway Museum to the Truman Little White House, making it a magnet for tourists. The city boasts an impressive booking/occupancy rate of 63% with an average nightly rate of $626.3, reflecting the high demand for accommodations. Key West's market is geared towards the higher end, with a median property price exceeding $1 million, suggesting that investments here may require a significant upfront capital but promise substantial returns. The peak rental season extends from March to May, offering a window of heightened profitability. Investors should note that Key West requires a transient license for short-term rentals, underscoring the importance of understanding local regulations to ensure compliance and maximize investment returns.

  • Average Investment Costs: Higher entry point with median property prices over $1 million, targeting a luxury market segment.

  • Expected ROI: With an occupancy rate of 63% and an average nightly rate of $626.3, investments in Key West are positioned for high returns, particularly for properties that can attract the premium market segment.

  • Operational Costs: Higher due to the upscale nature of rentals and the premium services expected by guests. Additionally, insurance costs are significant given the coastal location.

  • Tax Considerations: Investors must navigate local regulations, including obtaining a transient license. The high cost of entry is offset by potentially substantial rental incomes and the unique appeal of Key West as a tourist destination.

Orlando

Orlando is globally renowned for its expansive theme parks and family-oriented attractions, driving a high volume of domestic and international tourism. With an occupancy rate of 61% and an average nightly rate of $216.6, Orlando presents a lucrative opportunity for Airbnb investors. The city's diverse property market allows for a variety of investment options, from townhouses near theme parks to apartments in the downtown area catering to business travelers. Orlando's peak rental season runs from June to July, coinciding with school vacations and the highest demand for accommodations near the theme parks. The average home value of $373,927, coupled with the potential for a 13% return on cash invested in the first year, makes Orlando an appealing option for both new and seasoned investors. City-specific regulations in Orlando, which cap occupancy and require short-term rentals to be the owner's permanent residence, highlight the necessity of strategic planning in property selection and management.

  • Average Investment Costs: Average home value sits at $373,927, offering a more accessible entry point compared to Key West. The variety of properties caters to a broad investor base.
  • Expected ROI: The booking/occupancy rate of 61% and an average nightly rate of $216.6 present a favorable ROI scenario, especially with Orlando's perennial tourist draw.
  • Operational Costs: Similar to Kissimmee but may vary based on proximity to attractions and the type of property. Management fees, maintenance, and marketing are key operational costs.
  • Tax Considerations: Orlando investors need to comply with state and local tax requirements, including sales tax and any applicable Orange County tourist development taxes.

For investors, these cities offer a blend of high demand, regulatory clarity, and diverse property options, making them standout choices for Airbnb investments in Florida in 2024. Success in these markets depends on selecting the right property, understanding and adhering to local regulations, and employing strategic pricing and marketing to optimize occupancy rates and profitability.

The cities of Kissimmee, Key West, and Orlando each offer unique advantages for short-term rental investments, with varying degrees of entry costs, operational considerations, and potential returns. Understanding the financial landscape, including average investment costs, ROI, operational expenses, and tax implications, is essential for making informed decisions.

For investors ready to explore these opportunities further, Milo can provide access to tailored financing options designed to meet the needs of short-term rental investors. Whether you're looking to purchase your first investment property or expand your portfolio in Florida's thriving tourist markets, Milo offers innovative solutions to help you achieve your investment goals.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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