Thinking About Buying an Investment Property for Airbnb? Here’s What You Should Know

If you have been thinking about purchasing an investment property to use as an Airbnb or short term rental, you are not alone. With today’s flexible travel patterns, increasing demand for unique stays, and more travelers choosing home environments over hotels, Airbnb style investing continues to grow. Before taking the next step, it is important to understand a few key considerations that will determine how successful your investment can be. This is especially true in and around Silicon Valley, where regulations, pricing, and guest expectations often differ from other markets.

As a Silicon Valley REALTOR who works closely with both homeowners and investors, and as an Airbnb owner as well, here is what I recommend buyers understand before moving forward.

1. Know the Local Laws. They Matter More Than Anything Else.

Short term rental regulations vary significantly from city to city, and many Silicon Valley communities have strict requirements. Before purchasing, make sure you understand:

• Whether short term rentals are allowed
• Local permit requirements
• HOA rules regarding rentals
• Occupancy, noise, and parking restrictions
• Transient Occupancy Tax and other local taxes

A property can look perfect on paper, but if regulations prohibit what you want to do, it will not be a viable investment.

2. Understand the True Costs. It Is More Than the Mortgage.

Short term rentals often generate strong income, but they also require higher ongoing expenses. Be prepared for costs related to:

• Furnishings and design
• Turnover cleaning
• Supplies and restocking
• Repairs and maintenance
• Utilities and Wi-Fi
• Short term rental insurance
• Property management fees if you do not self-manage

Accurate budgeting is essential for long term profitability.

3. Choose a Location Where Travelers Want to Stay

The best performing Airbnb properties align with the needs of specific types of travelers. Strong guest demand exists near:

• Major employers and tech campuses
• Downtown dining and entertainment districts
• Hospitals and universities
• Wine country areas
• Coastal destinations and outdoor recreation spots

Understanding who your guests will be helps you select the right neighborhood and property type.

4. Best Places to Buy an Airbnb Investment Property

While every investor’s goals are unique, several areas consistently perform well for short term rentals. These markets offer strong occupancy, steady tourism, and good long term demand.

Top Silicon Valley and South Bay Areas

These communities appeal to business travelers, visiting families, and professionals on temporary assignments.

Downtown San Jose
High demand created by conventions, SJSU, SAP Center events, Adobe, and other major employers.

Willow Glen
Walkable charm and a strong sense of community that attracts families and visitors.

Santa Clara
Consistent bookings from guests visiting Levi’s Stadium, Great America, the tech corridor, and major corporate headquarters.

Mountain View and Sunnyvale
Reliable occupancy driven by tech workers, business travelers, and visiting teams.

Los Gatos
Appeal for boutique style stays near downtown, wineries, wedding venues, and the Santa Cruz Mountains. City regulations must be reviewed carefully.

High Performing Areas Within Driving Distance

These destinations offer more flexibility for short term rentals and maintain strong year round tourism.

Santa Cruz
A proven market for coastal vacation rentals. Properties near the beach and downtown perform especially well.

Capitola and Aptos
Popular for families, weekend visitors, and seasonal travelers.

Monterey and Pacific Grove
High visitor demand and excellent walkability support strong occupancy.

Carmel Valley
A luxury driven wine country destination with premium nightly rates.

Lake Tahoe and Truckee
A top California vacation rental market with strong seasonal peaks and consistent annual demand. Regulations vary by neighborhood.

Paso Robles
Rising demand for vineyard area homes and boutique farmhouse experiences.

5. Run the Numbers Carefully

Before making an offer, calculate projected occupancy, average daily rate, operating expenses, net cash flow, and cap rate. Tools such as AirDNA, Mashvisor, and local rental data are helpful, but pairing this with guidance from a local real estate expert provides the most accurate picture.

6. The Guest Experience Determines Your Success

Travelers today look for a comfortable, well designed environment. Top performing Airbnb properties typically offer:

• Thoughtful interior design
• High speed Wi-Fi
• Quality beds and linens
• A well stocked kitchen
• Easy self check-in
• Smart home features
• Outdoor space or views
• Consistent cleanliness

The better the experience, the stronger your reviews and revenue.

7. Decide Whether to Self-Manage or Hire a Property Manager

Self-management increases profit but requires time, organization, and availability.  Many investors choose professional management, which may cost a percentage of gross revenue but can improve occupancy, communication, and overall guest experience.  

8. Regulations Can Change Over Time

Cities frequently update short term rental rules. Make sure the property still makes financial sense if you shift to long term tenants, use it part time, or transition to mid-term furnished stays. Flexibility protects your investment.

Final Thoughts

Buying a short term rental investment property can be a smart way to diversify your portfolio and generate meaningful income.  Short term rentals are like running a hotel.  The income is not as reliable as a long term rental, and reviews become critically important for repeat guests and good occupancy rates.  The key is choosing the right market, understanding the regulations, and evaluating the numbers with clarity and confidence.

If you are exploring this path and want expert guidance rooted in experience, concierge style service and a commitment to excellence, I would love to help you analyze properties, forecast returns, and understand which markets align best with your goals.