Over the last decade, platforms like Airbnb and VRBO have transformed the way homeowners think about property ownership. What once were strictly primary residences are now potential income generators. But how do short-term rentals impact home appraisals? Can rental income boost your property value, and if so, how do appraisers calculate it?
Whether you’re a homeowner considering listing your home on Airbnb or a buyer eyeing a property for investment, it’s essential to understand how short-term rentals affect home valuations.
How Short-Term Rentals Influence Property Value
Appraisers look at many factors when determining the market value of a home. Traditionally, this includes location, square footage, condition, and comparable sales (also known as “comps”). But with the rise of short-term rental income, especially in high-tourism or urban markets, another layer is added: income potential.
Income Approach for Investment Properties
For properties clearly purchased or marketed as income-generating investments, appraisers may use the income approach to estimate value. This method involves calculating how much income the property is likely to generate and applying a capitalization rate (cap rate) to estimate its worth.
Example:
If a short-term rental generates $60,000 annually and the market cap rate is 8%, the appraisal might value the property at $750,000 using the income approach ($60,000 ÷ 0.08).
However, this approach is generally reserved for properties that are clearly being used primarily as rentals — not for single-family homes that are owner-occupied but occasionally rented.
When Rental Income Is Considered in an Appraisal
Not all short-term rental income will impact a home’s appraised value. Appraisers will typically only factor in Airbnb or VRBO income if:
- The property is located in a market where short-term rentals are common and supported.
- The homeowner can provide documented proof of rental income, typically over the past 12–24 months.
- The property is considered an investment property, not an owner-occupied home.
In some cases, appraisers may also consider projected income if the home is new to the rental market but in a strong short-term rental area. This often requires third-party data or market rent studies from local real estate professionals or property management companies.
Short-Term Rentals and Comparable Sales
Another challenge in appraising short-term rentals is finding appropriate comps. If a neighborhood has a mix of owner-occupied homes and Airbnb properties, appraisers must be careful in comparing apples to apples.
A home that regularly earns income through short-term bookings and is marketed as a rental may be worth more than a nearby owner-occupied home, but that value needs to be substantiated through either income analysis or a premium shown in the market.
If local comps don’t reflect the added value of rental potential, the appraiser may not be able to adjust the appraisal upward, even if the property has proven income.
Zoning and Regulatory Considerations
Not all homes can legally be used as short-term rentals. Zoning restrictions, city ordinances, and HOA rules can limit or prohibit Airbnb and VRBO use. Appraisers will factor in whether short-term rentals are legally permitted when considering income potential.
For example, if a city recently banned new short-term rentals, any future income projections may not be applicable, which could lower the perceived value from an appraisal standpoint — even if the home previously generated revenue.
How Homeowners Can Prepare
If you’re a homeowner or investor planning to use your property as a short-term rental, and you want that to reflect in your appraisal, here are steps to take:
- Document income: Keep detailed Airbnb/VRBO income statements from the past 12–24 months.
- Track occupancy rates: Higher occupancy can show stronger demand and value.
- Maintain records of expenses and upgrades: Show how you’ve improved the property for guests.
- Work with a real estate professional: Some appraisers may request market studies or rental projections to support their analysis.
Will Short-Term Rental Income Always Boost Your Appraisal?
Not necessarily. If the home is owner-occupied and short-term rentals are sporadic, an appraiser may disregard the income entirely and rely solely on the sales comparison approach. But for homes with consistent, documented rental performance — particularly in tourist or downtown areas — that income may help justify a higher valuation.
Still, it’s important to remember that appraisals must be based on market support. If the market isn’t showing that buyers are paying more for homes with Airbnb income, appraisers can’t assign a premium — no matter how much you’ve earned.
Appraising the Value of Short-Term Rentals
Short-term rentals have undeniably added complexity to home appraisals. In some cases, they can significantly increase a property’s value — but only when backed by documentation, legal usage, and market support.
Whether you’re selling, refinancing, or buying an investment property, it’s critical to work with an experienced appraiser who understands how Airbnb and VRBO income fits into today’s real estate market.
Contact us today to speak with a certified appraiser who can help you understand how your rental income may influence your home’s valuation!