Is Fergus Falls, Minnesota Good for Airbnb Investment?

To start an Airbnb in Fergus Falls, Minnesota, begin by researching local zoning laws and contacting the Fergus Falls Planning Department to understand short-term rental regulations, as the city may require business licenses or special permits for properties rented less than 30 days. Obtain necessary permits including a Minnesota sales tax permit from the Department of Revenue since you'll need to collect state and local taxes (approximately 6.875% state sales tax plus local taxes), and register with the city for any required business licensing. Find a suitable property by researching neighborhoods near Otter Tail Lake, downtown areas, or properties with lake access, considering factors like proximity to attractions such as the Historic State Hospital or Broken Down Dam Park, and ensure the property meets fire safety codes and has adequate parking. Furnish the space with essential amenities including quality bedding, kitchen supplies, WiFi, and local touches that highlight Fergus Falls' lake culture and outdoor recreation opportunities. Create your listing on Airbnb with professional photos showcasing lake views or historic charm, competitive pricing research (likely $80-150 per night depending on size and location), and detailed descriptions emphasizing nearby fishing, boating, and small-town attractions. Manage the property by establishing cleaning protocols between guests, maintaining responsive communication, coordinating with local cleaning services, and ensuring compliance with ongoing tax collection and remittance to both state and local authorities, while building relationships with local businesses for guest recommendations and potential partnerships.

To identify profitable short-term rental properties in Fergus Falls, Minnesota, focus on locations within walking distance of Otter Tail Lake, downtown historic district, and near recreational areas like Pebble Lake Golf Club, as these attract tourists year-round for fishing, boating, and outdoor activities. Target 2-4 bedroom properties built after 1980 with lake views, updated kitchens, outdoor spaces, and parking, as families and fishing groups comprise the primary market. Analyze pricing by researching comparable Airbnb listings in the $80-150 nightly range during peak summer months (May-September) and adjust for winter rates around $60-100, while calculating potential annual revenue of $25,000-45,000 against acquisition and operating costs. Study competition using AirDNA and Mashvisor to identify supply gaps, particularly properties that accommodate 6-8 guests near water access points, and monitor occupancy rates of existing listings through tools like AllTheRooms and STR analytics platforms. Utilize local resources including the Fergus Falls Chamber of Commerce for tourism data, Otter Tail County property records for comparable sales, and connect with local property management companies like Vacasa or RedAwning who understand seasonal demand patterns and can provide market insights specific to this lake-focused tourism economy.

To obtain an Airbnb/STR permit in Fergus Falls, Minnesota, contact the Fergus Falls City Hall at 112 W Lincoln Ave or call (218) 736-5430 to apply for a short-term rental license, as the city requires registration for properties rented for less than 30 consecutive days. 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 showing maximum occupancy, contact information for a local responsible party within 30 minutes of the property, and proof of compliance with fire safety codes including smoke and carbon monoxide detectors. The application fee is estimated at $100-200 annually with possible inspection fees of $50-100. Submit your application to the Community Development Department and schedule a required safety inspection with the Fire Marshal's office. The approval timeline is typically 30-45 days from complete application submission. Fergus Falls specific requirements include maintaining a guest registry, posting maximum occupancy limits, providing emergency contact information to guests, ensuring adequate parking (typically 1 space per bedroom), and adhering to noise ordinances with quiet hours from 10 PM to 7 AM. Properties must also comply with residential zoning requirements and may have restrictions on the number of STR permits issued per neighborhood block.

Short-term rentals (STRs) are legal in Fergus Falls, Minnesota, but are subject to local regulations and zoning restrictions implemented by the city. As of recent years, Fergus Falls has established licensing requirements for STR operators, requiring permits and compliance with safety standards including smoke detectors, carbon monoxide detectors, and occupancy limits. The city typically restricts STRs in certain residential zones to preserve neighborhood character, with some areas requiring conditional use permits or special approvals. Property owners must register their rentals with the city, pay applicable fees, and adhere to noise ordinances and parking requirements. Recent changes around 2020-2022 have included more structured oversight and enforcement mechanisms, with the city working to balance tourism revenue with residential community concerns. STRs are generally prohibited in areas zoned exclusively for single-family residential use without proper permits, and violations can result in fines or license revocation.

The best areas for Airbnb investment in Fergus Falls, Minnesota include the Historic Downtown District near Lincoln Avenue, which attracts visitors to local shops, restaurants, and the annual Fergus Falls Summer Festival; the Otter Tail Lake area on the city's eastern edge, popular with fishing enthusiasts, water sports visitors, and summer vacationers seeking lakefront access; and the neighborhoods near the Broken Down Dam Park and Otter Tail River, which draw outdoor recreation tourists for hiking, kayaking, and scenic photography. The area around Lake Alice and the western residential districts also show promise due to proximity to the Prairie Wetlands Learning Center and appeal to nature tourism visitors. Downtown properties benefit from business travelers visiting the regional medical facilities and government offices, while lakefront and near-lake properties command premium rates during peak summer months from May through September when tourism peaks for fishing tournaments, family reunions, and outdoor recreation activities.

In Fergus Falls, Minnesota, Airbnb hosts are subject to both state and local lodging taxes. The Minnesota state lodging tax is 3% on gross receipts from lodging rentals, which applies to stays of less than 30 consecutive days. Otter Tail County imposes an additional lodging tax of 3%, bringing the total tax rate to approximately 6%. The City of Fergus Falls may also impose a local lodging tax of up to 3%, potentially making the combined rate around 9%. These taxes are typically collected by Airbnb directly from guests at the time of booking and remitted to the appropriate tax authorities on behalf of hosts, though hosts should verify their registration status with the Minnesota Department of Revenue and local jurisdictions. Hosts must obtain a lodging tax permit from the state and may need separate permits for county and city taxes. Exemptions generally apply to stays of 30 days or longer, certain government employees on official business, and some nonprofit organization stays. Hosts who collect taxes independently must remit payments monthly or quarterly depending on their volume, with returns due by the 20th of the following month for monthly filers.

The total cost to start an Airbnb in Fergus Falls, Minnesota is approximately $185,000-$225,000. Property purchase costs around $150,000-$180,000 based on median home prices in the area. Furnishing a 2-3 bedroom property requires $8,000-$12,000 for beds, linens, kitchen essentials, living room furniture, and decor. Initial setup costs including professional photography, listing creation, and basic renovations total $2,000-$4,000. Permits and fees including business license, short-term rental permit, and tax registration cost $300-$800. Insurance for short-term rental coverage adds $1,200-$2,000 annually. Utility deposits and connections for electricity, gas, water, internet, and cable cost $500-$800. First six months operating costs including utilities ($900), cleaning supplies ($300), maintenance ($600), marketing ($400), and property management software ($300) total approximately $2,500. Additional working capital of $3,000-$5,000 is recommended for unexpected expenses and initial vacancy periods.

Airbnb properties in Fergus Falls, Minnesota typically generate annual revenues between $15,000-$35,000 for well-positioned properties, with average daily rates ranging from $85-$140 depending on property size and amenities. Operating expenses generally consume 40-60% of gross revenue, including cleaning fees ($25-$40 per turnover), property management (10-20% of revenue), utilities ($150-$300 monthly), insurance ($800-$1,500 annually), and maintenance costs averaging $2,000-$4,000 yearly. Properties near Otter Tail Lake or downtown historic district command premium rates, with lakefront cabins achieving 65-75% occupancy rates during peak summer months (May-September) compared to 35-45% for standard residential properties. Successful operators in the area typically achieve net profit margins of 15-25% by focusing on unique amenities like hot tubs, fire pits, or boat access, with properties featuring these elements generating 20-30% higher revenues than basic accommodations. The market benefits from Fergus Falls' position as a regional tourism hub with attractions like the Historic Phelps Mill and proximity to outdoor recreation, though seasonality significantly impacts winter occupancy rates which drop to 20-30%, making year-round profitability challenging without strong winter marketing strategies or corporate traveler targeting.

Based on Fergus Falls, Minnesota market conditions, Airbnb investments typically generate annual ROI of 8-12% with cash-on-cash returns ranging from 6-10% depending on property type and location within the city. Properties near Otter Tail Lake and downtown areas command higher nightly rates of $80-120, while standard residential properties average $60-90 per night during peak summer months (May-September) when tourism peaks due to lake activities and local events. Initial investment recovery typically occurs within 7-10 years, with monthly gross revenues averaging $1,200-2,400 for well-positioned properties, though occupancy rates fluctuate seasonally from 35-45% in winter months to 65-75% during summer peak season. Properties requiring minimal renovation in established neighborhoods like the Historic Downtown District or near Pebble Lake Golf Course tend to reach profitability within 18-24 months, while fixer-uppers may require 3-4 years to achieve positive cash flow after accounting for renovation costs, property management fees of 15-25%, and seasonal vacancy periods.

STRSearch is a national platform that specializes in identifying profitable short-term rental properties for investors, including in Fergus Falls, Minnesota. Local real estate agents who can assist with Airbnb investment properties in the Fergus Falls area include Coldwell Banker Realty agents, RE/MAX Lakes Region professionals, and Century 21 Atwood Lake Realty specialists who understand the local vacation rental market near Otter Tail Lake. National services that help investors find profitable Airbnb properties include Mashvisor, which provides rental property analytics and market data, AirDNA for short-term rental market insights and revenue projections, Roofstock for turnkey rental properties, and BiggerPockets marketplace connecting investors with properties. Additional local resources include Otter Tail County tourism-focused real estate specialists and lake property experts at Erickson Realty and Lakes Area Realty who understand the seasonal rental demand in the region. Property management companies like Vacasa and RedAwning also operate in Minnesota lake regions and can provide insights on profitable rental properties while offering management services for investors looking to purchase Airbnb properties in Fergus Falls and surrounding Otter Tail County areas.