Is Ely, Minnesota Good for Airbnb Investment?

To start an Airbnb in Ely, Minnesota, begin by researching local zoning laws and regulations through the City of Ely planning department, as the city requires short-term rental permits and compliance with residential zoning restrictions that typically limit rentals to no more than 30 days. Obtain necessary permits including a business license from the city clerk's office (approximately $50-100), a short-term rental permit (estimated $200-300 annually), and ensure compliance with Minnesota Department of Health lodging regulations if renting more than one unit. Find a suitable property in residential zones that allow short-term rentals, focusing on areas near Boundary Waters Canoe Area Wilderness access points or downtown Ely for maximum appeal to tourists visiting for outdoor recreation. Furnish the property with durable, comfortable furniture emphasizing the northwoods aesthetic, including essential amenities like Wi-Fi, full kitchen, outdoor gear storage, and winter heating systems capable of handling sub-zero temperatures. Create your Airbnb listing with professional photos highlighting proximity to wilderness activities, local attractions like the International Wolf Center, and seasonal activities such as fishing, canoeing, and snowmobiling. Manage the property by establishing relationships with local cleaning services, maintenance contractors familiar with northern Minnesota's harsh winters, and consider partnering with local outfitters or guide services to enhance guest experiences while maintaining compliance with Ely's noise ordinances and parking requirements that typically limit guest vehicles to designated spaces.

To identify profitable short-term rental properties in Ely, Minnesota, focus on locations within 1-2 miles of Boundary Waters Canoe Area Wilderness entry points, near Shagawa Lake or Burntside Lake waterfront, and close to downtown's outfitters and restaurants. Target properties with 2-4 bedrooms, waterfront access or lake views, outdoor amenities like fire pits and docks, rustic cabin aesthetics, and adequate parking for boats/trailers. Analyze pricing using AirDNA and Mashvisor to benchmark against similar properties, with peak season rates (May-September) typically ranging $150-400/night depending on size and amenities. Research competition through Airbnb, VRBO, and local vacation rental companies like Ely Area Tourism, noting occupancy rates average 60-75% during peak season. Utilize tools like STR Helper for market analysis, PriceLabs for dynamic pricing, and connect with local property managers such as Northwoods Property Management or Ely Vacation Rentals who understand seasonal demand patterns driven by BWCA permits, fishing seasons, and fall color tourism.

To obtain an Airbnb/STR permit in Ely, Minnesota, you must first contact the Ely City Clerk's office at City Hall located at 209 E Chapman Street to inquire about their short-term rental licensing requirements, as the city implemented STR regulations around 2019-2020. You'll need to submit a completed short-term rental license application along with required documents including proof of property ownership or lease agreement, a site plan showing parking areas and emergency exits, proof of liability insurance (typically $1 million minimum), a waste management plan, and contact information for a local property manager if you're not residing within 50 miles of Ely. The application fee is approximately $200-300 annually, with additional inspection fees of around $100. Ely requires STR properties to maintain adequate parking (typically 2 spaces per unit), comply with occupancy limits based on bedrooms and septic capacity, provide emergency contact information to neighbors, and follow quiet hours from 10 PM to 8 AM. The approval process typically takes 4-6 weeks after submitting a complete application, during which time the city will conduct a safety inspection and review compliance with zoning requirements. Properties must also comply with state fire safety codes and may require smoke detectors, carbon monoxide detectors, and fire extinguishers, and you must collect and remit Minnesota state sales tax and local lodging taxes on all bookings.

Short-term rentals (STRs) are legal in Ely, Minnesota, but operate under specific municipal regulations that the city has implemented to balance tourism revenue with residential neighborhood character. The city requires STR operators to obtain a business license and comply with zoning restrictions that typically limit rentals in certain residential areas while allowing them in commercial and mixed-use zones. Properties must meet safety standards including smoke detectors, carbon monoxide detectors, and occupancy limits, with most regulations focusing on noise control, parking requirements, and maintaining neighborhood compatibility. Recent changes around 2020-2022 have included stricter enforcement of existing rules and enhanced registration requirements, though Ely generally maintains a more permissive approach compared to larger Minnesota cities due to its reliance on tourism from the Boundary Waters Canoe Area Wilderness. The city prohibits STRs in some purely residential neighborhoods and requires operators to have local contact persons available 24/7 for any issues, while also implementing quiet hours and guest behavior standards to minimize impacts on permanent residents.

The best areas for Airbnb investment in Ely, Minnesota are the Boundary Waters Canoe Area Wilderness (BWCAW) gateway district near the town center, the Shagawa Lake waterfront neighborhoods, and the historic downtown area along Sheridan Street. The BWCAW gateway area is highly attractive due to Ely's position as the primary entry point for over 150,000 annual visitors to the Boundary Waters, with peak demand from May through September when canoeists, kayakers, and wilderness enthusiasts need accommodation before and after their trips. Shagawa Lake waterfront properties capitalize on year-round recreation including fishing, boating in summer, and ice fishing in winter, attracting families and outdoor enthusiasts who pay premium rates for lakefront access. The downtown historic district benefits from proximity to the International Wolf Center, North American Bear Center, and Dorothy Molter Museum, drawing educational tourists and families throughout the year, while also serving business travelers visiting local outfitters like Ely Outfitting Company and Canadian Border Outfitters. Properties near the Ely-Winton History Museum and within walking distance of local restaurants and shops perform well due to convenience factors, and the area sees consistent demand from snowmobilers and cross-country skiers during winter months, making it a strong year-round investment opportunity with occupancy rates typically ranging from 60-80% depending on seasonality.

In Ely, Minnesota, Airbnb hosts are subject to Minnesota state sales tax of 6.875% on lodging rentals, which applies to stays of less than 30 consecutive days. The city of Ely imposes a local lodging tax of approximately 3% on short-term rental accommodations. These taxes are typically collected from guests at the time of booking through Airbnb's automated tax collection system, which remits the state sales tax directly to the Minnesota Department of Revenue on behalf of hosts. For the local Ely lodging tax, hosts may need to register with the city and remit taxes quarterly or monthly depending on volume, though Airbnb may also collect this automatically in some cases. Exemptions generally apply to stays of 30 days or longer, which are considered long-term rentals rather than taxable lodging, and certain tax-exempt organizations may qualify for exemptions with proper documentation. Hosts should verify their registration requirements with both the Minnesota Department of Revenue and the City of Ely to ensure compliance with all applicable tax obligations.

The total cost to start an Airbnb in Ely, Minnesota is approximately $285,000-$335,000. Property purchase costs around $200,000-$250,000 based on median home prices in the area. Furnishing a 2-3 bedroom property requires $15,000-$25,000 for quality furniture, bedding, kitchen essentials, and decor suitable for vacation rentals. Initial setup costs including professional photography, listing creation, welcome materials, and basic renovations total $3,000-$5,000. Permits and fees including business license, short-term rental permit, and potential zoning compliance cost $500-$1,500 depending on local regulations. Insurance for short-term rentals runs $2,000-$3,000 annually, significantly higher than standard homeowner's insurance. Utilities including electricity, water, sewer, internet, and cable average $300-$400 monthly or $1,800-$2,400 for six months. First six months operating costs including cleaning services, maintenance, supplies, platform fees, marketing, and property management total $8,000-$12,000. Additional considerations include potential property taxes of $3,000-$5,000 annually and a recommended cash reserve of $10,000-$15,000 for unexpected repairs and vacancy periods.

Airbnb properties in Ely, Minnesota, demonstrate moderate profitability with average annual revenues ranging from $15,000-$35,000 for typical 2-3 bedroom cabins, driven primarily by summer tourism and fishing seasons from May through September. Operating expenses typically consume 40-60% of gross revenue, including cleaning fees ($75-$125 per turnover), property management (15-25%), utilities ($200-$400 monthly), insurance ($1,200-$2,000 annually), and maintenance costs averaging $3,000-$5,000 yearly for seasonal properties. Properties within 5 miles of the Boundary Waters Canoe Area Wilderness command premium rates of $150-$300 per night during peak season compared to $80-$150 for standard lake properties, with successful hosts achieving 60-75% occupancy rates and net profit margins of 25-40%. Key success factors include waterfront access, canoe/kayak rentals, fish cleaning stations, and partnerships with local outfitters like Piragis Northwoods Company, while properties offering unique amenities such as saunas, fire pits, and guided fishing services can achieve 15-20% higher revenues than basic cabin rentals, though the short 4-5 month peak season requires careful cash flow management for year-round profitability.

Airbnb investments in Ely, Minnesota typically generate annual ROI of 12-18% due to the city's proximity to the Boundary Waters Canoe Area Wilderness and strong seasonal tourism demand. Cash-on-cash returns generally range from 8-14% annually, with properties near Shagawa Lake and downtown areas performing at the higher end of this range. Most investors achieve profitability within 18-24 months, with peak earning months from May through September when outdoor recreation activity is highest. Properties averaging $200,000-$350,000 purchase price can expect gross rental income of $35,000-$55,000 annually, with occupancy rates typically reaching 65-75% during prime season. The market benefits from limited hotel inventory and consistent demand from fishing, camping, and canoeing enthusiasts, though investors should account for seasonal fluctuations and higher maintenance costs due to Minnesota's harsh winters.

STRSearch is a national platform that specializes in identifying profitable short-term rental investment properties across markets including Ely, Minnesota. In the Ely area, local real estate agents like those at Edina Realty and RE/MAX Results have experience with vacation rental properties given the region's tourism appeal near the Boundary Waters Canoe Area Wilderness. National services include Mashvisor, which provides Airbnb analytics and investment property search tools, and BiggerPockets, which offers investment property analysis resources. AirDNA provides short-term rental market data and performance analytics for the Ely market. Local property management companies like Vacasa and RedAwning can assist with both property acquisition advice and subsequent management. Real estate investment firms such as Roofstock and Fundrise, while primarily focused on traditional rentals, occasionally feature short-term rental opportunities in Minnesota markets. Regional vacation rental specialists and property managers in the Duluth and northern Minnesota area often extend services to Ely given its proximity to popular outdoor recreation destinations, making them valuable resources for investors seeking profitable Airbnb properties in this wilderness gateway community.