Is Rochester, Minnesota Good for Airbnb Investment?

To start an Airbnb in Rochester, Minnesota, begin by researching local zoning laws and regulations through the Rochester Planning and Zoning Department, as the city requires short-term rental operators to obtain a conditional use permit for properties in residential zones and comply with specific safety requirements including smoke detectors, carbon monoxide detectors, and fire extinguishers. Contact Rochester's Building Safety Division to ensure your property meets building codes and obtain necessary permits, which typically cost around $200-400 and require annual renewal. Find a suitable property in areas zoned for short-term rentals or where conditional use permits are obtainable, focusing on locations near Mayo Clinic, downtown Rochester, or popular attractions since medical tourism drives significant demand. Furnish the space with quality, durable furniture, essential amenities like high-speed internet, and medical-traveler-friendly features such as comfortable workspaces and kitchenettes, budgeting approximately $5,000-15,000 depending on property size. Create your Airbnb listing with professional photos highlighting proximity to Mayo Clinic and other Rochester attractions, set competitive pricing based on local market rates of $80-200 per night depending on size and location, and emphasize cleanliness and medical-traveler accommodations in your description. Manage your property by establishing efficient check-in/check-out procedures, maintaining strict cleaning protocols between guests, responding promptly to inquiries, and consider hiring local cleaning services or property management companies like RedAwning or Vacasa if you live outside Rochester, while ensuring compliance with Minnesota state tax requirements including collecting and remitting sales tax and lodging taxes to both state and local authorities.

To identify profitable short-term rental properties in Rochester, Minnesota, focus on locations within 2-3 miles of Mayo Clinic and downtown, as medical tourism drives 60% of the market demand, with properties near Saint Marys Hospital and Methodist Hospital commanding premium rates of $150-250/night. Target 2-4 bedroom single-family homes or condos built after 1990 with dedicated parking, full kitchens, and medical professional amenities like workspaces and reliable WiFi, as the average stay is 4-7 nights for medical visitors. Analyze pricing using AirDNA and Mashvisor, where successful properties average 65-75% occupancy with $3,000-5,000 monthly revenue, while monitoring seasonal fluctuations during Mayo Clinic's peak periods in spring and fall. Research competition through Airbnb and VRBO searches, noting that Rochester has approximately 200 active STRs with medical-focused properties outperforming leisure-only listings by 25-30%. Utilize local resources including the Rochester Area Chamber of Commerce market reports, Destination Medical Center development plans for future growth areas, and partner with Rochester-based property management companies like Blueground or local Mayo Clinic housing coordinators who understand the medical visitor market dynamics and can provide insights on optimal property locations and amenities that consistently generate bookings.

To obtain an Airbnb/STR permit in Rochester, Minnesota, you must first contact the Rochester Planning and Zoning Department at City Hall located at 201 4th Street SE to determine if short-term rentals are permitted in your specific zoning district, as Rochester has strict regulations limiting STRs primarily to certain commercial and mixed-use zones. You'll need to submit a Conditional Use Permit application along with required documents including a site plan, floor plan showing the rental unit layout, proof of property ownership or lease agreement, certificate of insurance with minimum $1 million liability coverage, emergency contact information for a local representative available 24/7, and a detailed operational plan addressing parking, noise control, and guest management. The application fee is approximately $500-800 depending on the scope of review required, and you must also obtain a business license from the City Clerk's office for an additional $50-100 annually. The review process typically takes 6-10 weeks and includes neighbor notification requirements, potential Planning Commission review, and possible City Council approval depending on the location and any objections received. Rochester requires STR operators to maintain detailed guest registries, limit occupancy to no more than 2 guests per bedroom plus 2 additional guests, provide adequate off-street parking (typically 1 space per bedroom), and comply with all building, fire, and health codes including smoke detector and carbon monoxide detector requirements in each sleeping area.

Short-term rentals (STRs) are legal in Rochester, Minnesota, but operate under specific regulations established by the city. Rochester requires STR operators to obtain a business license and comply with zoning restrictions that generally limit short-term rentals to certain residential districts while prohibiting them in some neighborhoods. The city has implemented occupancy limits, parking requirements, and noise ordinances that STR operators must follow. Properties must meet safety standards including smoke detectors and emergency egress requirements. Rochester has been actively updating its STR regulations in recent years, with the city council making adjustments around 2020-2022 to balance tourism accommodation needs with neighborhood preservation concerns. Operators must also collect and remit local taxes, and there are restrictions on the total number of guests and vehicles allowed at STR properties. The city conducts periodic reviews of its STR policies and has enforcement mechanisms in place for violations, including potential license revocation for repeat offenders.

The best Airbnb investment areas in Rochester, Minnesota center around the Mayo Clinic district and downtown core, particularly the neighborhoods within walking distance of Saint Marys Campus and Methodist Campus, as these areas attract the highest concentration of medical tourists and business travelers year-round. The Historic Third Ward and Peace Plaza vicinity offer excellent potential due to proximity to Mayo facilities, restaurants, and the planned Destination Medical Center development expected to bring significant growth through 2030. The Kutzky Park and Pill Hill neighborhoods are attractive for their upscale residential character while remaining close to medical facilities, appealing to longer-stay patients and families. Downtown Rochester near the Government Center and Civic Center provides access to business travelers, conference attendees, and visitors to events at Mayo Civic Center. The Southwest Rochester area near Highway 52 and 20th Street offers good value with easy access to both Mayo campuses and Rochester International Airport, making it ideal for medical visitors arriving by air. Areas near Silver Lake and the recreational corridor attract leisure travelers during summer months, while neighborhoods close to the University of Minnesota Rochester campus can capture visiting academics and families of students.

In Rochester, 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, while Rochester imposes an additional local lodging tax of 3%, bringing the total lodging tax to 6%. These taxes apply to short-term rentals of less than 30 consecutive days. Airbnb typically collects and remits these taxes automatically for hosts through their platform since approximately 2017, though hosts should verify this arrangement and may need to register directly with the Minnesota Department of Revenue and the City of Rochester if taxes aren't being collected automatically. The taxes are generally remitted monthly or quarterly depending on the volume of rentals. Exemptions typically include rentals to permanent residents (30+ days), certain government employees on official business, and rentals that fall below minimum thresholds, though hosts should confirm current exemption criteria with local tax authorities as regulations can change.

To start an Airbnb in Rochester, Minnesota, the total initial investment would be approximately $385,000-$420,000. Property purchase costs around $280,000-$300,000 based on median home prices in Rochester as of 2023. Furnishing a 2-3 bedroom property typically requires $15,000-$25,000 for quality furniture, appliances, linens, and decor that meets guest expectations. Initial setup costs including professional photography, listing creation, welcome materials, and basic supplies total approximately $2,000-$3,000. Permits and fees vary but generally include business license ($100-$200), short-term rental permit ($200-$500), and potential HOA approval fees totaling $500-$1,000. Insurance for short-term rentals runs $2,000-$3,500 annually, with the first year paid upfront. Utility setup and deposits for electricity, gas, water, internet, and cable average $500-$800 initially. First six months of operating costs including utilities ($1,200-$1,800), cleaning services ($2,400-$3,600), maintenance reserves ($1,500-$2,500), property management software ($300-$600), and marketing expenses ($500-$1,000) total approximately $6,000-$10,000. Additional considerations include potential property improvements or renovations which could add $10,000-$30,000 depending on the property condition and desired positioning in the market.

Airbnb properties in Rochester, Minnesota show strong profitability potential, particularly due to the city's proximity to Mayo Clinic which drives consistent year-round demand from medical tourists and visiting families. Properties typically generate $2,800-4,200 monthly revenue for 2-3 bedroom units, with occupancy rates averaging 65-75% annually. Operating expenses including cleaning fees ($75-100 per turnover), utilities ($150-200 monthly), property management (20-25% of revenue), insurance ($1,200-1,800 annually), and maintenance typically consume 40-50% of gross revenue. Net profit margins generally range from 15-25% for well-managed properties, with some premium locations near Saint Marys Campus achieving 30%+ margins. Success factors include proximity to Mayo Clinic (properties within 2 miles command 20-30% premium rates), professional photography, responsive communication, and amenities like parking and kitchen facilities. A case study of a 3-bedroom home on 4th Street SW purchased for $280,000 in 2019 generated average monthly revenue of $3,600 with $1,800 in expenses, yielding 23% annual ROI including appreciation. Properties in downtown Rochester and Kutzky Park neighborhood consistently outperform suburban locations, with medical district proximity being the primary driver of both occupancy rates and premium pricing power in this specialized market.

Airbnb investments in Rochester, Minnesota typically generate annual ROI of 8-12% due to consistent demand from Mayo Clinic visitors, medical professionals, and business travelers. Cash-on-cash returns range from 6-10% annually, with properties near downtown and the medical district performing at the higher end. Initial profitability usually occurs within 12-18 months, assuming 65-75% occupancy rates and average daily rates of $85-120. Properties within 2 miles of Mayo Clinic command premium rates and achieve faster break-even, often within 10-14 months. The market benefits from year-round demand stability, with peak seasons during medical conferences and summer months driving occupancy rates above 80%. Investment properties typically require $40,000-60,000 down payment for median-priced homes around $200,000-300,000, with gross rental yields of 10-14% before expenses.

STRSearch is a national platform that specializes in identifying profitable short-term rental properties for investors looking in Rochester, Minnesota. Local real estate agents like Keller Williams Realty and RE/MAX Results who understand the Rochester market can help identify properties near Mayo Clinic and downtown areas that perform well as Airbnbs. National services include Mashvisor, which provides Airbnb analytics and property recommendations, AirDNA for market data and revenue projections, and Awning which offers full-service Airbnb investment property management. Rochester-specific agents at Coldwell Banker Realty and Century 21 have experience with investment properties in neighborhoods like Kutzky Park and Apache Mall area that attract medical tourists and business travelers. Additional national platforms like Roofstock, which focuses on investment properties, and BiggerPockets marketplace can connect investors with Rochester opportunities, while local property management companies such as Rochester Property Management and Bluestem Property Management can provide insights into which areas generate the highest occupancy rates for short-term rentals.