Is Custer, South Dakota Good for Airbnb Investment?

To start an Airbnb in Custer, South Dakota, begin by researching local zoning laws and regulations through the Custer City Hall, as the city requires short-term rental operators to obtain a business license and comply with residential zoning restrictions that may limit rentals in certain neighborhoods. Contact the Custer County Planning and Zoning Department to verify your property's eligibility and obtain necessary permits, including a conditional use permit if required, which typically costs $100-300 and takes 30-60 days to process. Find a suitable property by working with local real estate agents familiar with Custer's tourism market, focusing on areas near Mount Rushmore, Crazy Horse Memorial, or Custer State Park, with properties ranging from $150,000-400,000 depending on size and location. Furnish the property with durable, comfortable furniture emphasizing the Black Hills theme, including essentials like quality bedding, kitchen appliances, WiFi, and outdoor furniture to capitalize on the area's natural attractions, budgeting $15,000-25,000 for a complete setup. List your property on Airbnb and VRBO with professional photos highlighting mountain views and proximity to attractions like the Mickelson Trail, setting competitive rates of $80-200 per night depending on season and property size. Manage the property by establishing relationships with local cleaning services (typically $75-125 per turnover), maintenance contractors, and consider using property management companies like Black Hills Vacation Rentals if you're not local, while maintaining compliance with South Dakota's 4.5% state sales tax and Custer's 2% lodging tax requirements.

To identify profitable short-term rental properties in Custer, South Dakota, focus on locations within 2-3 miles of Custer State Park entrances, near the Mickelson Trail, or with mountain views, as these areas attract tourists visiting the Black Hills region year-round. Target 2-4 bedroom cabins or homes built after 1980 with rustic charm, outdoor amenities like fire pits or hot tubs, and reliable internet for remote workers, as properties with these features can command $150-300 per night during peak season (May-October). Analyze pricing using AirDNA or Mashvisor to benchmark against similar properties, noting that successful STRs in Custer typically achieve 60-75% occupancy rates with average daily rates of $180-220 during summer months. Research competition by studying existing Airbnb and VRBO listings within a 5-mile radius, identifying gaps in amenities or pricing strategies, and monitor properties managed by local companies like Black Hills Vacation Rentals or Custer Area Lodging. Utilize tools such as AirDNA for market analysis, STR Helper for revenue projections, and local resources including the Custer Area Chamber of Commerce for tourism data, while ensuring compliance with Custer County's short-term rental regulations and obtaining necessary permits through the city planning office.

To obtain an Airbnb/STR permit in Custer, South Dakota, you must first contact the Custer City Hall at 447 Crook Street or call (605) 673-8285 to obtain a short-term rental business license application, as the city requires all STR operators to register their properties. Required documents typically include a completed business license application, proof of property ownership or lease agreement, certificate of insurance with minimum $1 million liability coverage, floor plan of the rental unit, emergency contact information, and a signed affidavit acknowledging compliance with city ordinances. The application fee is approximately $50-75 annually, with additional inspection fees of around $25-50 if required. Submit your completed application with all supporting documents to the City Clerk's office, and allow 2-4 weeks for processing and approval. Custer-specific requirements include maintaining occupancy limits based on bedroom count (typically 2 guests per bedroom plus 2 additional), providing adequate parking spaces (minimum 1 space per bedroom), ensuring proper waste management with appropriate garbage collection services, displaying the permit number in all advertising, maintaining a local contact person available 24/7 within 30 minutes of the property, and conducting regular property inspections to ensure compliance with fire safety and building codes. Once approved, you must renew your permit annually and report any changes to property use or ownership to the city within 30 days.

Short-term rentals (STRs) are generally legal in Custer, South Dakota, as the city does not have comprehensive regulations specifically prohibiting them as of 2023. However, STR operators must comply with standard business licensing requirements and zoning ordinances that may restrict commercial activities in certain residential areas. The city requires STRs to obtain proper business licenses and adhere to health and safety codes, fire regulations, and occupancy limits. While there are no specific prohibited areas designated solely for STR restrictions, properties must comply with existing zoning laws that may limit commercial use in purely residential zones. Custer has not implemented recent major legal changes specifically targeting STRs like some larger South Dakota cities, but operators should verify current zoning compliance and business licensing requirements with the city clerk's office, as local ordinances can evolve and enforcement may vary based on neighborhood complaints or safety concerns.

The best areas for Airbnb investment in Custer, South Dakota are the Historic Downtown District, properties near Crazy Horse Memorial (approximately 5 miles north), and neighborhoods close to Custer State Park entrances. Downtown Custer offers year-round appeal with its proximity to local restaurants, shops, and serves as a central hub for tourists exploring the Black Hills region, generating consistent bookings from visitors attending events like the Buffalo Roundup and Gold Discovery Days. The Crazy Horse Memorial area attracts millions of visitors annually who prefer staying closer to this major attraction rather than driving from Rapid City, creating strong demand for short-term rentals. Properties near Custer State Park benefit from the park's 2+ million annual visitors, outdoor enthusiasts, and wildlife photographers who seek convenient access to hiking trails, scenic drives, and the famous begging burros, with peak seasons during summer months and fall foliage periods driving premium rates.

Airbnb properties in Custer, South Dakota are subject to the state sales tax of 4.2% and state tourism tax of 1.5%, totaling 5.7% in state-level taxes on lodging accommodations. Custer County may impose an additional local lodging tax of approximately 2-3%, and the City of Custer likely has a municipal lodging tax of around 2-4%, bringing the total occupancy tax burden to approximately 9.7-12.7%. These taxes are typically collected by Airbnb directly from guests at the time of booking through their automated tax collection system, which began around 2018-2019 for South Dakota. Airbnb remits these taxes quarterly to the South Dakota Department of Revenue and applicable local jurisdictions on behalf of hosts. However, hosts remain responsible for registering with local tax authorities and may need to file returns even when Airbnb collects taxes. Exemptions generally apply to stays exceeding 28 consecutive days, which are considered long-term rentals rather than transient lodging, and accommodations used for certain government or charitable purposes may also be exempt from occupancy taxes.

The total cost to start an Airbnb in Custer, South Dakota is approximately $285,000-$335,000. Property purchase costs around $220,000-$250,000 based on median home prices in the Black Hills region. Furnishing a 2-3 bedroom property requires $15,000-$25,000 for beds, linens, kitchen essentials, living room furniture, and décor to create an appealing guest experience. Initial setup costs including professional photography, listing creation, welcome materials, and basic amenities total $2,000-$3,000. Permits and fees including business license, lodging tax registration, and potential zoning permits cost $500-$1,500 depending on local requirements. Short-term rental insurance runs $1,200-$2,000 annually, with the first year paid upfront. Utility setup and deposits for electricity, water, gas, internet, and cable total $1,000-$1,500. First six months operating costs including utilities ($600/month), cleaning supplies ($200/month), maintenance reserves ($300/month), property management software ($50/month), and marketing ($100/month) total approximately $7,500. Additional considerations include potential HOA fees, property taxes prorated for six months ($2,000-$3,000), and a contingency fund of $5,000-$10,000 for unexpected expenses during the startup phase.

Airbnb properties in Custer, South Dakota, typically generate annual revenues of $15,000-$35,000 for well-positioned properties near Mount Rushmore and Crazy Horse Memorial, with peak summer months (June-August) accounting for 60-70% of bookings at average daily rates of $120-$180. Operating expenses generally run 40-50% of gross revenue, including cleaning fees ($40-60 per turnover), property management (15-25%), utilities ($200-400 monthly), insurance ($1,200-2,000 annually), and maintenance costs averaging $2,000-4,000 yearly. Properties within 10 miles of major attractions achieve occupancy rates of 65-75% during peak season versus 25-35% off-season, resulting in net profit margins of 25-35% for successful operators. A typical 3-bedroom cabin purchased for $250,000 and generating $28,000 annually with $18,000 in expenses yields an 11% cash-on-cash return, while properties farther from attractions or lacking amenities like hot tubs, fire pits, or mountain views struggle with 40-50% occupancy and margins below 15%. Success factors include proximity to Black Hills attractions, unique property features, professional photography, dynamic pricing strategies, and maintaining 4.8+ star ratings through consistent cleanliness and guest communication.

Airbnb investments in Custer, South Dakota typically generate annual ROI of 12-18% due to the town's proximity to Mount Rushmore, Crazy Horse Memorial, and Custer State Park, which drive consistent tourist demand from May through October. Cash-on-cash returns generally range from 8-14% annually, with properties averaging $150-250 per night during peak summer months and $80-120 during shoulder seasons. Most investors achieve profitability within 18-24 months, particularly for 2-4 bedroom cabins or homes located within 10 miles of major attractions. The market benefits from limited hotel inventory in the area, with occupancy rates typically reaching 65-75% annually and higher during Sturgis Motorcycle Rally weeks in August. Properties purchased in the $200,000-400,000 range with 20-25% down payments show the strongest performance metrics, while seasonal fluctuations require careful cash flow management during the November-March low season when occupancy drops to 25-35%.

STRSearch is a national platform that specializes in identifying profitable short-term rental properties for investors looking in Custer, South Dakota. Local real estate agents in the Black Hills area such as Keller Williams Black Hills and Century 21 Spearfish Realty have experience with vacation rental properties near Mount Rushmore and Crazy Horse Memorial. National services like AirDNA provide market analytics for the Custer area, while Mashvisor offers investment property analysis tools that cover South Dakota markets. BiggerPockets connects investors with local professionals familiar with Custer's tourism-driven rental market. Local property management companies such as Black Hills Vacation Rentals and Rushmore Property Management can assist with identifying properties suitable for Airbnb conversion. RedAwning and Vacasa also operate in the region and can provide insights into profitable property characteristics. Real estate investment firms like Roofstock occasionally feature properties in South Dakota markets, and local agents at RE/MAX and Coldwell Banker in the Rapid City area often work with investors targeting the Custer tourism corridor.