Is Federal Hill, Rhode Island Good for Airbnb Investment?

To start an Airbnb in Federal Hill, Rhode Island, begin by researching Providence's short-term rental regulations, which typically require a business license and may have zoning restrictions in residential areas like Federal Hill. Contact Providence City Hall at 401-421-7740 to obtain necessary permits, including a Certificate of Occupancy and potentially a Special Use Permit depending on your property type. Find a suitable property in Federal Hill's historic Italian-American neighborhood, considering proximity to Atwells Avenue restaurants and downtown Providence accessibility. Ensure the property meets Rhode Island's safety requirements including smoke detectors, carbon monoxide detectors, and fire extinguishers. Furnish the space with quality basics including Wi-Fi, linens, kitchen essentials, and local guidebooks highlighting Federal Hill's renowned restaurants like Camille's and Angelo's. Register for Rhode Island sales tax (currently 7%) and Providence hotel tax (approximately 5-7%). Create your Airbnb listing with professional photos showcasing the neighborhood's charm and walkability to Federal Hill's attractions. Set competitive pricing based on Providence market rates, typically $80-150 per night depending on property size and amenities. Implement a management system including automated messaging, professional cleaning between guests, and 24/7 guest communication. Consider hiring local cleaning services familiar with short-term rental turnovers and establish relationships with nearby restaurants for guest recommendations to enhance the authentic Federal Hill experience.

To identify profitable short-term rental properties in Federal Hill, Rhode Island, focus on location criteria including proximity to downtown Providence (within 1-2 miles), walkability to Federal Hill's renowned Italian restaurants and cultural attractions, and easy highway access via I-95 and Route 6. Target property features such as 2-3 bedroom units with parking spaces, updated kitchens, and outdoor spaces that can command $150-250 per night. Conduct pricing analysis using AirDNA and Mashvisor to evaluate comparable properties within 0.5 miles, aiming for properties under $400,000 that can generate 15-20% annual returns. Research competition by analyzing existing STRs on Airbnb and VRBO within Federal Hill and nearby neighborhoods like The Hill and Armory District, noting occupancy rates typically range 60-75% annually. Utilize tools like Rabbu and Rentometer for local rental comps, Providence city planning documents for zoning compliance, and partner with local property management companies like RedAwning or Awning who understand Rhode Island's STR regulations and can optimize listings for the area's strong tourism market driven by Federal Hill's food scene and proximity to downtown Providence attractions.

To obtain an Airbnb/STR permit in Federal Hill, Rhode Island, you must first apply through the City of Providence's Department of Inspections and Standards since Federal Hill is a neighborhood within Providence. Begin by submitting an application online through the city's permitting portal or in person at City Hall located at 25 Dorrance Street. Required documents include a completed short-term rental application, proof of property ownership or lease agreement with landlord consent, certificate of occupancy, fire safety inspection certificate, general liability insurance policy (minimum $500,000), floor plan of the rental unit, and valid Rhode Island business license. You'll need to pay application fees totaling approximately $200-300, which includes the initial permit fee ($150), inspection fee ($75), and business license fee ($25). The property must undergo inspections for fire safety, building code compliance, and zoning verification. Specific Federal Hill requirements include adherence to Providence's density restrictions (no more than one STR per building in residential zones), parking provisions for guests, noise ordinance compliance, and maintaining the neighborhood's residential character. The entire process typically takes 4-6 weeks from application submission to permit approval, provided all inspections pass and documentation is complete. Annual renewal is required with updated insurance and inspection certificates, costing approximately $100 yearly.

Short-term rentals (STRs) are legal in Federal Hill, Rhode Island, but operate under Providence's comprehensive regulatory framework established in 2019. The city requires STR operators to obtain a business license, register with the city, and comply with zoning restrictions that limit rentals in certain residential areas. Properties must meet safety requirements including smoke and carbon monoxide detectors, and operators must collect and remit hotel taxes. Federal Hill, being primarily a mixed-use neighborhood with both residential and commercial properties, generally allows STRs in appropriate zoning districts, though some purely residential streets may have restrictions. Providence caps the number of non-owner-occupied STR licenses and requires a minimum 30-day rental period for non-hosted units in some residential zones. Recent enforcement has increased since 2021, with the city actively monitoring compliance and issuing violations for unregistered properties, while also implementing stricter noise and occupancy limits following neighborhood complaints about party houses disrupting the area's traditional Italian-American community character.

Federal Hill in Providence, Rhode Island offers excellent Airbnb investment opportunities primarily along Atwells Avenue, the heart of Little Italy, where properties benefit from year-round food tourism and cultural events like the annual Federal Hill Stroll and Columbus Day Festival. The Broadway-Armory District on the eastern edge provides strong potential due to its proximity to downtown Providence business district, attracting corporate travelers visiting companies like CVS Health and Citizens Bank headquarters. The residential streets between Knight Street and Sutton Street offer attractive investment prospects with their authentic Italian-American neighborhood charm, drawing visitors to renowned restaurants like Camille's and Federal Taphouse. Properties near DePasquale Square capitalize on the area's reputation as a culinary destination, with consistent demand from food enthusiasts visiting establishments that have operated since the early 1900s. The western section near Hartford Avenue provides more affordable entry points while still maintaining walkability to Federal Hill's main attractions, making it ideal for budget-conscious travelers exploring Providence's cultural offerings and attending events at nearby venues like the Dunkin' Donuts Center.

Airbnb properties in Federal Hill, Rhode Island are subject to multiple lodging taxes including the Rhode Island state hotel tax of 7% on gross receipts, Providence city hotel tax of 6%, and a Providence tourism assessment fee of 1%, totaling 14% in combined lodging taxes. The state tax applies to all transient accommodations under 30 days and is collected by hosts who must register with the Rhode Island Division of Taxation, file monthly returns by the 20th of the following month, and remit taxes electronically through the state's online portal. The Providence city hotel tax of 6% plus the 1% tourism fee are administered by the Providence Tax Department, requiring separate registration and monthly filing by the 15th of each month following the reporting period. Hosts typically collect these taxes from guests at the time of booking or check-in and are responsible for maintaining detailed records of all transactions. Exemptions generally include stays of 30 days or longer which are considered permanent residency rather than transient lodging, and accommodations provided to certain government employees on official business. Airbnb may collect and remit some of these taxes on behalf of hosts through voluntary collection agreements with the state and city, though hosts remain ultimately responsible for compliance and should verify their tax obligations with local authorities as rates and procedures can change.

Starting an Airbnb in Federal Hill, Rhode Island requires approximately $380,000-$420,000 in total initial investment. Property purchase costs average $320,000-$350,000 for a median 2-3 bedroom home in this Providence neighborhood as of 2023-2024. Furnishing costs typically range $15,000-$25,000 including beds, linens, kitchen essentials, living room furniture, and décor to create an attractive rental space. Initial setup expenses of $3,000-$5,000 cover professional photography, listing creation, welcome materials, and basic technology like smart locks and WiFi equipment. Permits and fees total approximately $500-$1,200 including business registration, short-term rental permits from Providence, and potential homeowner association approvals. Insurance costs $2,000-$3,500 annually for specialized short-term rental coverage beyond standard homeowner's insurance. Monthly utilities average $200-$300 covering electricity, gas, water, internet, and cable services. First six months operating costs of $8,000-$12,000 include cleaning services ($100-150 per turnover), maintenance supplies, guest amenities, platform fees to Airbnb (3% host fee), property management software subscriptions, and marketing expenses. Additional considerations include potential property management fees of 15-25% if outsourcing operations and maintaining 3-6 months of mortgage payments as reserve funds for vacancy periods.

Airbnb properties in Federal Hill, Rhode Island, demonstrate moderate to strong profitability potential, with average nightly rates ranging from $85-150 depending on property size and amenities. A typical 2-bedroom unit in this Providence neighborhood generates approximately $2,500-4,200 monthly revenue during peak seasons (May-October), while winter months see 30-40% lower occupancy rates averaging $1,800-2,800 monthly. Operating expenses typically consume 35-45% of gross revenue, including cleaning fees ($40-60 per turnover), utilities ($150-250 monthly), property management (10-20% of revenue), insurance ($100-200 monthly), and maintenance costs. Net profit margins generally range from 15-25% annually, with successful properties achieving $18,000-35,000 in annual profit. Key success factors include proximity to downtown Providence (Federal Hill's location provides easy access to restaurants, Federal Hill Park, and business districts), authentic Italian-American neighborhood character that attracts cultural tourists, competitive pricing strategies, professional photography, and responsive guest communication. Properties featuring parking, updated kitchens, and local neighborhood guides consistently outperform basic listings by 20-30% in both occupancy rates and nightly rates, with some hosts reporting 75-85% annual occupancy rates and gross yields of 8-12% on property investment.

Based on Federal Hill, Rhode Island market conditions, Airbnb investments typically generate annual ROI of 12-18% with cash-on-cash returns ranging from 8-14% depending on property acquisition costs and renovation investments. Properties in this Providence neighborhood, particularly near Atwells Avenue's restaurant district, can achieve profitability within 18-24 months given average daily rates of $85-120 and occupancy rates of 65-75% annually. Initial investments of $200,000-350,000 for suitable multi-family properties can generate gross rental income of $35,000-55,000 annually, with net returns after expenses, taxes, and management fees typically falling between $15,000-25,000 per year. The Italian Heritage district's proximity to downtown Providence, Brown University, and RISD creates consistent demand from both leisure and business travelers, supporting sustainable returns in the 2019-2024 period despite market fluctuations.

STRSearch is a national platform that specializes in identifying profitable short-term rental investment properties and provides market analysis for Airbnb investments in Federal Hill, Rhode Island. Local real estate agents like Keller Williams Realty of Newport County and RE/MAX Newport County have agents experienced in investment properties who can help identify suitable Airbnb properties in the Federal Hill area. Mashvisor and AirDNA offer national data analytics services for short-term rental market analysis in Providence and surrounding areas including Federal Hill. BiggerPockets connects investors with local real estate professionals and provides educational resources for Airbnb investing. Local property management companies like Ocean State Property Management and Providence Property Solutions can assist with identifying investment opportunities and managing Airbnb properties. Awning and RedAwning provide national short-term rental investment analysis and property management services that cover the Rhode Island market. Local real estate investment groups and meetups in Providence often have members specializing in short-term rental properties who can provide guidance and potential partnerships for Federal Hill investments.