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 $100-200 and takes 2-4 weeks 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 essential amenities like Wi-Fi, kitchen supplies, linens, and outdoor furniture to capitalize on the area's natural attractions, budgeting approximately $15,000-25,000 for a complete setup. List your property on Airbnb and VRBO with professional photos highlighting proximity to local attractions, competitive pricing around $80-150 per night depending on season and property size, and detailed descriptions of nearby hiking trails, wildlife viewing, and historic sites. Manage your rental by establishing relationships with local cleaning services (typically $75-100 per turnover), maintenance contractors, and consider hiring a local property management company 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, properties with mountain or prairie views, and areas with easy access to Highway 16A connecting to Mount Rushmore and Crazy Horse Memorial. Target 2-4 bedroom cabins or homes built after 1990 with rustic charm, full kitchens, outdoor spaces like decks or fire pits, and parking for multiple vehicles to accommodate families visiting the Black Hills region. Analyze pricing using AirDNA and Mashvisor to benchmark against comparable properties, aiming for $150-300 nightly rates during peak summer months (June-August) when tourism peaks, with occupancy rates typically reaching 70-85% during this period. Research competition by monitoring existing STRs on Airbnb and VRBO within a 5-mile radius, noting amenities, pricing strategies, and guest reviews to identify market gaps. Utilize tools like Rabbu for market analysis, STR Helper for performance tracking, and connect with local property management companies such as Black Hills Vacation Rentals who understand seasonal demand patterns driven by Sturgis Motorcycle Rally in August, hunting seasons in fall, and winter activities at nearby Terry Peak, while ensuring compliance with Custer County's zoning regulations and any city ordinances regarding short-term rentals.

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 license application, as the city requires all properties rented for less than 30 days to be licensed. Required documents typically include a completed application form, 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 $100-150 annually, with additional inspection fees of around $50-75. Submit your complete application to the City Clerk's office along with payment, after which the city will schedule a safety inspection to verify smoke detectors, carbon monoxide detectors, fire extinguishers, and proper egress windows. Custer-specific requirements include maintaining a guest registry, posting maximum occupancy limits (typically 2 people per bedroom plus 2 additional), providing adequate parking (minimum 1 space per bedroom), ensuring quiet hours from 10 PM to 7 AM, and having a local contact person available 24/7 within 30 minutes of the property. The approval timeline is generally 2-4 weeks from submission of a complete application, and licenses must be renewed annually by December 31st with updated insurance documentation and any necessary re-inspections.

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 city-specific STR ordinances, operators must follow state tax collection requirements for lodging. Some residential neighborhoods may have deed restrictions or homeowners association rules that limit rental activities. Recent years have seen increased discussion among city officials about potential regulation as STR popularity has grown in the Black Hills region, but no major restrictive legislation has been enacted specifically targeting short-term rentals in Custer as of late 2023.

The best areas for Airbnb investment in Custer, South Dakota are the Historic Downtown District, which attracts tourists year-round visiting the 1881 Courthouse Museum and local shops while serving as a base for Black Hills exploration, and the Crazy Horse Memorial vicinity on the southwestern edge of town, where properties benefit from the 1.4 million annual visitors to the monument since its dedication in 1998. The area near Custer State Park's eastern entrance is highly attractive due to the park's 2 million yearly visitors who come for wildlife viewing, scenic drives, and the annual Buffalo Roundup in September. Properties along Highway 16A toward Mount Rushmore capture overflow tourism from the 2.3 million people visiting the presidential monument annually, while the residential areas near the Mickelson Trail appeal to cycling enthusiasts and outdoor recreation tourists. The Sylvan Lake Road corridor is particularly valuable as it provides access to multiple Black Hills attractions including Needles Highway and serves business travelers working with the South Dakota Department of Game, Fish and Parks, established in 1909, who frequently need temporary accommodations during peak tourism seasons from May through October.

Airbnb properties in Custer, South Dakota are subject to the state sales tax of 4.2% on lodging accommodations, plus an additional state tourism tax of 1.5%, for a combined state rate of 5.7% on short-term rental income. Custer County may impose a local lodging tax of approximately 2-3%, and the City of Custer typically levies a municipal lodging tax of around 2-4%, bringing the total tax burden to approximately 9.7-12.7% depending on specific local rates. These taxes are generally collected from guests at the time of booking through Airbnb's automated tax collection system for participating jurisdictions, though hosts may need to register directly with the South Dakota Department of Revenue and local tax authorities if automatic collection is not available. Remittance is typically required monthly or quarterly depending on volume, with returns due by the 23rd of the following month for monthly filers. Properties rented for 28 days or longer may qualify for exemptions from certain tourism taxes, and some agricultural or educational lodging may receive preferential treatment, though standard short-term vacation rentals under 30 days are generally subject to all applicable lodging taxes.

The total cost to start an Airbnb in Custer, South Dakota would be approximately $285,000-$320,000. Property purchase costs around $180,000-$200,000 based on median home prices in the Black Hills region. Furnishing a 2-3 bedroom property would cost $15,000-$25,000 including beds, linens, kitchen essentials, living room furniture, and décor. Initial setup costs including professional photography, listing creation, and basic renovations would be $3,000-$5,000. Permits and fees including business license, short-term rental permit, and tax registration would cost approximately $500-$1,000. Insurance including liability and property coverage specifically for short-term rentals would cost $2,000-$3,000 annually. Utilities including electricity, water, sewer, internet, and cable would average $200-$300 monthly or $1,200-$1,800 for six months. First six months operating costs including cleaning supplies, maintenance, marketing, platform fees (Airbnb charges 3% host fee), and miscellaneous expenses would total approximately $4,000-$6,000. Additional considerations include potential HOA fees, property taxes, and a recommended emergency fund of $5,000-$10,000 for unexpected repairs or low occupancy periods during Custer's seasonal tourism fluctuations.

Airbnb properties in Custer, South Dakota typically generate annual revenues between $15,000-$35,000 for well-positioned properties, with peak summer months (June-August) accounting for 60-70% of total bookings due to proximity to Mount Rushmore, Crazy Horse Memorial, and Custer State Park. Operating expenses generally range from $8,000-$18,000 annually, including property management fees (10-20%), cleaning costs ($50-75 per turnover), utilities ($150-250/month), insurance ($1,200-2,000/year), and maintenance reserves. Net profit margins typically fall between 25-45% for properties averaging $120-180 per night during peak season and $80-120 in shoulder months, with occupancy rates reaching 70-85% in summer but dropping to 15-30% in winter months. Success factors include proximity to major attractions (properties within 10 miles of Mount Rushmore command 20-30% premium rates), unique amenities like hot tubs or fire pits, professional photography, and responsive guest communication. Properties converted from traditional vacation rentals around 2018-2020 have shown the strongest performance, with some cabin-style accommodations near Custer State Park reporting gross revenues exceeding $40,000 annually, though seasonal volatility remains the primary challenge with most properties generating minimal income from November through March.

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 and strong demand from families visiting the Black Hills region, with occupancy rates typically reaching 65-75% annually. Properties purchased in the $200,000-400,000 range tend to perform best, generating gross rental income of $35,000-65,000 annually after accounting for seasonal fluctuations and the area's winter tourism lull from November through March.

STRSearch is a national platform that specializes in identifying profitable short-term rental investment opportunities including 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. RE/MAX Black Hills and Coldwell Banker Lewis-Kirkeby-Hall often work with investors seeking properties in tourist destinations like Custer. National services include Mashvisor, which provides Airbnb analytics and investment property data for markets including South Dakota, and AirDNA, offering short-term rental market insights since 2015. BiggerPockets connects investors with local agents familiar with STR regulations in Custer County. Awning and RedAwning provide property management services for Airbnb investments in tourist markets. Local property management companies like Black Hills Property Management and Custer Area Property Services can assist with vacation rental operations. Investment-focused platforms such as Roofstock and Fundrise occasionally feature properties in emerging markets like the Black Hills region, while local mortgage brokers at First National Bank of the Black Hills understand financing for investment properties in the area.