Is Prescott, Arkansas Good for Airbnb Investment?

To start an Airbnb in Prescott, Arkansas, begin by researching local zoning laws and regulations through the Nevada County Planning and Zoning Department, as Prescott typically allows short-term rentals in residential areas but may require special use permits or business licenses from the city clerk's office. Obtain necessary permits including a business license from Prescott City Hall (estimated cost $25-50), sales tax permit from Arkansas Department of Finance and Administration, and ensure compliance with fire safety codes and building inspections. Find a suitable property by searching local real estate listings through Century 21 or Coldwell Banker offices in the area, focusing on properties near Crater of Diamonds State Park or historic downtown areas, with average property prices ranging $80,000-150,000 for suitable homes. Furnish the property with essential amenities including Wi-Fi, cable TV, full kitchen appliances, quality bedding, and local guidebooks, budgeting approximately $5,000-10,000 for complete furnishing from retailers like Walmart in nearby Hope or online suppliers. List your property on Airbnb, VRBO, and Booking.com with professional photos highlighting proximity to diamond mining activities and outdoor recreation, setting competitive rates around $75-125 per night based on local market analysis. Manage the property by establishing cleaning protocols between guests, responding promptly to inquiries, coordinating key exchanges or installing smart locks, maintaining property insurance coverage, and collecting Arkansas state sales tax of 6.5% plus any local lodging taxes, while building relationships with local cleaning services and maintenance contractors for ongoing operations.

To identify profitable short-term rental properties in Prescott, Arkansas, focus on locations within 10-15 minutes of Crater of Diamonds State Park, the town's primary tourist attraction, as well as properties near Lake DeGray and other outdoor recreation areas that draw visitors year-round. Target 2-4 bedroom homes or cabins with unique features like hot tubs, fire pits, or scenic views, as these command premium rates in rural Arkansas markets. Conduct pricing analysis using AirDNA and Mashvisor to evaluate average daily rates ($75-150 for the area) and occupancy rates (typically 40-60% in smaller Arkansas markets), while researching competition through Airbnb and VRBO searches to identify gaps in amenities or property types. Utilize tools like Rabbu, BiggerPockets calculators, and local MLS data through Arkansas Regional MLS to analyze purchase prices and renovation costs, ensuring properties can be acquired for under $150,000 to maintain healthy profit margins. Partner with local real estate agents familiar with Nevada County's vacation rental regulations and consider properties with existing STR permits or those in areas zoned for such use, while leveraging Facebook groups for Arkansas STR investors and connecting with local property management companies like those serving the Hot Springs region for market insights.

To obtain an Airbnb/STR permit in Prescott, Arkansas, contact the Prescott City Hall at 870-887-2101 or visit their offices at 113 East 2nd Street South to inquire about short-term rental licensing requirements, as the city likely requires a business license and may have specific STR regulations. You'll typically need to submit 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 property, and contact information for a local property manager if you're not residing locally. The application fee is estimated at $50-100 annually, with possible additional inspection fees of $25-75. Submit your application along with required documents to the City Clerk's office, schedule any required property inspections with the building department, and ensure compliance with zoning regulations as STRs may be restricted in certain residential areas. The approval timeline is typically 2-4 weeks after submission of complete documentation, and you must display your permit number in all online listings and maintain current liability insurance throughout the permit period, with annual renewal required by December 31st each year.

Short-term rentals (STRs) are generally legal in Prescott, Arkansas, as the small city in Nevada County does not appear to have specific municipal ordinances prohibiting or heavily regulating vacation rentals as of 2024. However, operators must comply with standard business licensing requirements, collect and remit state sales taxes (currently 6.5% base rate plus local taxes), and ensure properties meet basic safety and zoning requirements for residential areas. The city follows Arkansas state law regarding rental properties, which requires basic safety standards and proper business registration. There are no known prohibited areas specifically for STRs within Prescott's city limits, though properties must comply with existing residential zoning regulations. Recent legal changes have been minimal at the local level, with most regulatory activity occurring at the state level where Arkansas has maintained a relatively business-friendly approach to short-term rentals. Property owners should verify current local business license requirements with Prescott City Hall and ensure compliance with fire safety codes and occupancy limits, but the regulatory environment remains relatively permissive compared to larger Arkansas cities like Little Rock or Fayetteville.

The best areas for Airbnb investment in Prescott, Arkansas include the historic downtown district near the Nevada County Courthouse, which attracts visitors interested in the town's Civil War history and antebellum architecture, particularly around Washington Street and Main Street where guests can walk to local restaurants and shops. The residential areas near Prescott Country Club on the east side of town offer attractive properties for business travelers visiting Weyerhaeuser timber operations and other industrial facilities in the region. Properties near White Oak Lake State Park, approximately 20 minutes southeast of downtown, capitalize on fishing and outdoor recreation tourism, especially during spring and summer months when the lake hosts fishing tournaments and family camping trips. The neighborhoods around Nevada County Medical Center attract medical professionals and families of patients requiring extended stays, while areas near the railroad district serve visitors connected to the timber and transportation industries that have historically driven Prescott's economy.

Airbnb properties in Prescott, Arkansas are subject to Arkansas state sales tax of 6.5% on lodging accommodations, which applies to short-term rentals under 30 days. The Arkansas Department of Finance and Administration requires hosts to register for a sales tax permit and collect this tax from guests, with monthly remittance due by the 20th of the following month for properties generating over $200 in monthly tax liability. Nevada County, where Prescott is located, does not impose additional local lodging taxes as of 2023, though hosts should verify current local ordinances. The city of Prescott itself does not currently levy specific occupancy taxes on short-term rentals, making the state sales tax the primary tax obligation. Airbnb may collect and remit these taxes automatically for hosts in Arkansas through their platform since 2019, though hosts remain ultimately responsible for compliance and should maintain detailed records of all bookings and tax collections. Exemptions typically apply to stays exceeding 30 consecutive days, which are considered long-term rentals rather than taxable lodging accommodations.

Starting an Airbnb in Prescott, Arkansas requires an estimated total investment of $185,000-$220,000. Property purchase costs average $120,000-$140,000 based on median home prices in rural Arkansas markets. Furnishing a 2-3 bedroom property with quality furniture, appliances, linens, and décor typically costs $15,000-$25,000. Initial setup expenses including professional photography, listing creation, welcome materials, and basic renovations run $3,000-$5,000. Permits and fees vary but expect $500-$1,500 for business licenses, short-term rental permits, and inspection fees. Insurance premiums for short-term rental coverage cost approximately $2,000-$3,000 annually. Utility deposits and first-month services (electricity, water, internet, cable) total $800-$1,200. First six months of operating costs including utilities ($1,800), cleaning supplies and services ($1,200), maintenance reserves ($1,500), property management software ($300), and marketing ($500) add approximately $5,300. Additional considerations include potential HOA fees, property taxes, and a 10-15% contingency fund for unexpected expenses during the startup phase.

Airbnb properties in Prescott, Arkansas show moderate profitability potential with average nightly rates ranging from $75-120 for typical 2-3 bedroom homes, generating approximately $18,000-28,000 in annual gross revenue at 60-70% occupancy rates. Operating expenses typically consume 40-50% of gross revenue, including cleaning fees ($40-60 per turnover), property management (15-25%), utilities ($150-200 monthly), insurance ($1,200-1,800 annually), and maintenance costs averaging $2,000-3,500 yearly. Net profit margins generally fall between 25-35% for well-managed properties, with successful hosts like those operating renovated historic homes near Nevada County Depot Museum achieving higher margins around 40% by targeting business travelers and tourists visiting nearby Crater of Diamonds State Park. Key success factors include strategic pricing during peak seasons (spring and fall), maintaining 4.8+ star ratings through consistent cleanliness and local amenities guidance, and leveraging Prescott's proximity to Hot Springs (45 minutes) to capture overflow demand. Properties within walking distance of downtown Prescott's antique district and restaurants typically outperform suburban listings by 15-20% in both occupancy and nightly rates, with break-even points typically reached within 18-24 months for investors purchasing properties under $150,000.

Airbnb investments in Prescott, Arkansas typically generate annual ROI of 12-18% with cash-on-cash returns ranging from 8-14%, depending on property type and location within the market. Single-family homes near Prescott's outdoor recreation areas and historic downtown can achieve the higher end of these returns, while properties requiring significant renovation may see initial returns closer to 8-10%. Most investors reach profitability within 18-24 months, factoring in initial setup costs, furnishing expenses, and marketing investments. The local market benefits from consistent demand from visitors to nearby DeGray Lake State Park and business travelers, with average daily rates of $85-120 and occupancy rates of 65-75% annually. Properties purchased in the $80,000-150,000 range typically generate monthly gross revenues of $1,200-2,400, with net operating margins of 35-45% after accounting for cleaning fees, utilities, maintenance, and platform commissions.

STRSearch is a leading national platform that specializes in identifying profitable short-term rental investment properties across markets including Prescott, Arkansas. Local real estate agents serving the Prescott area who focus on investment properties include Coldwell Banker Harris McHaney & Faucette with agents experienced in rental property analysis, and RE/MAX Real Estate Partners who have agents familiar with the vacation rental market in southwest Arkansas. National services that can assist with Prescott Airbnb investments include Awning which provides full-service Airbnb property management and investment guidance, RedAwning offering vacation rental property sourcing and management, Vacasa providing market analysis and property management services, and AirDNA delivering short-term rental market data and investment insights for the Prescott market. Additional local resources include Prescott Real Estate Group and independent agents like those affiliated with Arkansas Real Estate Collective who understand the local tourism patterns around DeGray Lake and the area's seasonal rental demand, while national platforms like BiggerPockets and Roofstock also provide investment property search tools and market analysis for emerging markets like Prescott.