Traverse City Remains A Bankable Short-Term Rental Market

Despite questions about regulation and oversaturation, Traverse City remains one of the most bankable markets in the United States for short-term rental (STR) investors, according to a new report from the global STR data firm AirDNA. While TC doesn’t appear on AirDNA’s overall top 10 list of the best American cities to invest in STRs, it does rank fifth on a list of the “best Airbnb markets for a $550-700K budget.”

The Ticker worked with AirDNA last fall to compile a by-the-numbers breakdown of STR availability and demand in northern Michigan. The firm’s data showed that there were more than 9,000 available STR listings across the north coast Lower Michigan market during the peak summer season. AirDNA representatives speculated at the time that growth in the local market was starting to plateau, due mostly to a growing number of STR regulations at the city, township, and village levels.

A plateauing market doesn’t mean no growth, though, and AirDNA’s recent lists seem to indicate there is still some juice left in the Traverse City STR market. AirDNA’s investor-centered lists look at how income potential compares to local home prices, and Traverse City still performs favorably with those metrics for higher-budget investors.

“Traverse City stands out as a market where higher acquisition costs are still supported by performance,” AirDNA Communications Manager Chloé Garlaschi tells The Ticker. While TC has above-average home prices ($629,000 according to AirDNA, compared to the U.S. average of $530,000), it also has above average “annual revenue potential” for STR owners ($67,000, compared to the national average over $43,000). These numbers equate to an “average gross yield” of 10.7 percent for STR owners in Traverse City; for reference, the U.S. average is 8.2 percent.

“What helped Traverse City perform well in our analysis is its mix of premium destination demand and relatively consistent pricing power,” Garlaschi says. “Summer lake travel remains a major driver, but the region’s food, wine, and outdoor scene also supports couples, groups, and repeat visitors beyond peak family vacation season. From an investment perspective, that balance allows income to keep pace with home prices better than in many other high-profile vacation markets.”

On the list, Traverse City trails Athens, Georgia; Lake Norman, North Carolina; Grand Rapids, Michigan; and Rocky Mountain National Park, Colorado. Two of those – Lake Norman and Grand Rapids – have the same $67,000 average revenue potential, but perform a little better in terms of average yield due to slightly lower home prices.

“All rankings in the report were based on yield, not just top-line revenue,” Garlaschi explains. “We compared projected STR income to purchase prices for for-sale homes in the $550–700K range to identify markets where the math is more realistic for investors today.”

The full list can be found here.

Traverse City isn’t the only northern Michigan destination popping up on AirDNA’s recent reports. The company’s list of “best places to invest in a ski vacation rental” has Lake Otsego, Michigan ranked at number 2, behind only the Pocono Mountains in Pennsylvania. According to AirDNA, Lake Otsego offers an average STR revenue potential of $36,000 and an average gross yield rate of 12 percent. The favorable ranking, AirDNA says, is owed in large part to the proximity of both Bittersweet Resort and Treetops Resort.