AirDNA lists Columbus, GA #1 City to Invest in the U.S.

AirDNA – a website that provides market data to short-term rental investors – recently gave a ranking of 99 (highest on the scale) to Columbus, Georgia for real estate investments.  In comparison to other popular tourist destinations, the housing market in Georgia’s third largest city remains relatively cheap.  Paired with high growth numbers YoY with both RevPAR (revenue per available unit) and rental growth make the city a prime location to invest, according to the website.

Therefore, our team wanted to investigate the recent craze around the River City short-term rental market.  In our opinion, Columbus has always been a great cash-flow market for investors interested in cash-on-cash returns but like in most cash-flow markets, has really lacked appreciation component of investing – until recently.  Generally, Columbus lags Atlanta (Georgia’s largest city) by ~$100 per square foot and is attractive to investors because of low entry costs in comparison to mainstream cities.  However, after researching data by the St. Louis Federal Reserve it really starts to paint of picture of investors who won and those who didn’t.

Federal Reserve of St Louis Analysis of Price Per Square Foot

The winners (like in most markets) were those who purchased properties prior to 2020.  The average price per square foot in Columbus in 2017 was $79 and now has reached $127 in 2024, which is >60% increase.  Those who purchased in 2017 also experienced a rent growth of about 34%.  However, with historically high prices for homes and the rapid increase of interest rates by the Fed, Columbus, like most cities throughout the U.S. have become increasing harder to find cash flowing assets.

This brings us to the short-term (STR) market.  Our team partners with several STR providers and the area has proven ripe for the tourism industry which attracts people to military graduations on Fort Moore, white water rafting, and Columbus State Events.  Columbus even hit the map nationally by hosting the Republican National Convention in 2023 drawing the likes of Donald Trump.

While the demand for short-term real estate has increased ticked upward over the years in the South Georgia town, the supply has also followed.  The hotel industry added two new additions in the downtown area of Columbus, which added a total of 227 rooms between the AC Marriott and the Hampton Inn.  This is on top of the 177 rooms that is already provided by the Marriott Hotel – Downtown.  During our investigation, our team did not

Downtown Historic District	35
Weracoba/St Elmo Historic District	20
High Uptown Historic District	15
Liberty Heritage Historic District	7
Waverly Terrace Historic District	16
Wildwood Circle Historic District	11
Wynnton Village Historic District	27
Peacock Woods/Dimon Circle District	12
Dinglewood Historic District	2
Wynn's Hill Overlook Historic District	26

Table 2: Columbus, GA Short-Term Limits

uncover any direct lobbying efforts by hotels, but it is rumored amongst real estate professionals in the area that the hotel industry did have a part in the local mayor imposing a ban on Airbnb’s that limits the amount of short-term rentals in specific areas of the city.  The city ordinance also imposed a 16% room tax, which hotels have historically paid.  Investors who own short-term rents can reach out to the local zoning office at inspections@columbusga.org.

Even with the ban on the amount of short-term rentals in the area, AirDNA reports that the area currently possesses 490 listings available as of May 2024.  In perspective, Zillow – a long term rental website – shows that the same area has 313 listings.  That’s a ratio of 1.6 short-term rentals for every long-term rental!

Average Revenue	$29,100
(-) Management (30%)	$8,730
(-) Expenses (30%)	$8,730
(-) Taxes	$1,500
(-) Insurance	$1,500
(-) Debt Service	$9,346
Cash Flow	-$706

Table 3: Project returns for a short-term rental

Lastly, our team wanted to conduct an analysis of what the returns would look like if an investor were to purchase a short-term rental given the current environment.  The median home sale at the time of this report is $161k and with interest rates at 7.5% the annual debt service payment would be $9,346.  Based off the same model, AirDNA projected that the annual average revenue for an AirBnB would be $29,100.  As depicted in Table 3, investors would negatively cash flow using the metrics that we assumed unless, the investor was able to self-manage.

In conclusion, the short-term rental market in Columbus, GA is heating up but it’s clear that the supply is more than ready to meet the demand.  The investors reaping the rewards at the moment are those that purchased prior to 2020 and locked in cheap debt.  Our recommendation would be to use caution when purchasing a short-term rental in the area to ensure that you are compliant with local laws and that you have the ability to convert your investment into a long-term rental if the ordinances change in the future.

If you’re interested in purchasing an investment property or are interested in more market insights in the Columbus, GA area then please reach out to me at kyle@fifthprincipleproperties.com.