Is Somerset, Kentucky Good for Airbnb Investment?

To start an Airbnb in Somerset, Kentucky, begin by researching local zoning laws through the Somerset Planning and Zoning Commission, as short-term rentals may require special permits or be restricted in certain residential zones. Contact Somerset City Hall at 305 Fountain Avenue to inquire about business licenses, occupancy permits, and any specific short-term rental ordinances, as Kentucky state law generally allows municipalities to regulate these properties. Obtain necessary permits including a business license (approximately $25-50), fire safety inspection, and potentially a conditional use permit if required by zoning. Find a suitable property by searching Lake Cumberland area listings through local realtors like Coldwell Banker or RE/MAX, focusing on properties near Somerset's attractions like Lake Cumberland State Resort Park or downtown Somerset, with prices typically ranging $80,000-200,000 for suitable homes. Furnish the property with essential amenities including Wi-Fi, cable TV, full kitchen appliances, linens, and outdoor furniture if near the lake, budgeting $10,000-20,000 for complete furnishing. List your property on Airbnb, VRBO, and Booking.com with professional photos highlighting lake access or proximity to Daniel Boone National Forest, setting competitive rates around $75-150 per night based on local market analysis. Manage the property by establishing cleaning protocols between guests, responding promptly to inquiries, coordinating with local cleaning services like Merry Maids Somerset, and maintaining compliance with any ongoing city requirements while collecting and remitting applicable occupancy taxes to Pulaski County.

To identify profitable short-term rental properties in Somerset, Kentucky, focus on locations within 10-15 minutes of Lake Cumberland, Daniel Boone National Forest, and downtown Somerset's business district, as these areas attract tourists and business travelers year-round. Target 2-4 bedroom properties with lake views, outdoor spaces, boat parking, and modern amenities like updated kitchens and reliable Wi-Fi, as Somerset's tourism revolves heavily around water recreation and outdoor activities. Analyze pricing by researching comparable Airbnb and VRBO listings in the $80-200 per night range, with lakefront properties commanding premium rates of $150-300 during peak summer months (May-September) when Lake Cumberland tourism peaks. Conduct competition research by monitoring occupancy rates and reviews of existing STRs within a 5-mile radius, noting that properties near Burnside Marina and General Burnside State Park typically outperform those in residential areas. Utilize tools like AirDNA for Somerset market data, Mashvisor for investment analysis, and local resources including the Somerset-Pulaski County Chamber of Commerce for tourism statistics, while connecting with local property management companies like Lake Cumberland Vacation Rentals to understand seasonal demand patterns and operational costs specific to the area's tourism-driven economy.

To obtain an Airbnb/STR permit in Somerset, Kentucky, contact the Somerset City Hall at 105 Fountain Avenue or call (606) 451-2200 to begin the application process, as Somerset requires short-term rental operators to obtain a business license and comply with zoning regulations. You'll 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 unit, and proof of compliance with fire safety codes including smoke detectors and carbon monoxide detectors in all sleeping areas. The application fee is typically $50-75 for the business license plus a $25 zoning compliance review fee, and you may need to pay additional inspection fees of $100-150. The timeline is generally 2-4 weeks for approval, depending on scheduling of required inspections by the fire department and building inspector. Somerset-specific requirements include maintaining the property in accordance with residential building codes, providing adequate parking for guests without impacting neighboring properties, ensuring the rental doesn't exceed occupancy limits based on square footage (typically 2 people per bedroom plus 2 additional), and maintaining a local contact person available 24/7 for any issues that may arise during guest stays.

Short-term rentals (STRs) are generally legal in Somerset, Kentucky, as the city has not enacted specific prohibitions against vacation rentals or STR operations. However, STR operators must comply with standard business licensing requirements, zoning regulations, and health department standards that apply to all lodging facilities in Somerset. The city requires STR properties to obtain proper business licenses and may need to meet fire safety codes and occupancy limits depending on the property size and location. While there are no blanket restrictions on STRs in residential areas, operators should verify compliance with any homeowners association rules and ensure their properties meet basic safety and sanitation standards. Somerset has not implemented recent changes specifically targeting STR regulation, unlike larger Kentucky cities such as Louisville which enacted stricter STR ordinances in 2019-2020, leaving Somerset's approach relatively permissive under existing business and zoning frameworks.

The best areas for Airbnb investment in Somerset, Kentucky include the downtown historic district near the courthouse square, which attracts visitors for local events and business travelers to the county seat, and neighborhoods near Lake Cumberland's northern shores, particularly around the Burnside area, which draw tourists year-round for boating, fishing, and water recreation activities. The areas around Daniel Boone National Forest access points are highly attractive due to hiking, camping, and outdoor recreation tourism, while properties near Somerset Community College and the University of Kentucky Somerset campus capture student family visits and academic-related travel. The Shoppes at Somerset retail district and nearby residential areas benefit from shopping tourism and business travelers visiting the commercial hub, and neighborhoods with easy access to the Big South Fork Scenic Railway attract heritage tourism and day-trippers exploring the region's railroad history and natural attractions.

In Somerset, Kentucky, Airbnb properties are subject to Kentucky's 6% state sales tax and a 1% state transient room tax, totaling 7% on lodging stays under 30 days. Pulaski County imposes an additional 3% transient room tax, bringing the total occupancy tax rate to approximately 10%. The City of Somerset may also levy a local occupancy tax of around 2-3%, potentially making the combined rate 12-13%. These taxes are typically collected by Airbnb directly from guests at the time of booking through their automatic tax collection system, which began around 2018-2019 for Kentucky. Airbnb remits these taxes quarterly to the Kentucky Department of Revenue and applicable local jurisdictions on behalf of hosts. However, hosts should verify their registration requirements with local authorities, as some jurisdictions may require separate business licenses or permits. Stays of 30 days or longer are generally exempt from transient occupancy taxes but may still be subject to regular sales tax. Properties used exclusively for permanent residential purposes or certain agricultural exemptions may qualify for reduced rates, though these rarely apply to typical Airbnb operations.

To start an Airbnb in Somerset, Kentucky, expect total costs around $180,000-$220,000. Property purchase represents the largest expense at approximately $150,000 based on median home prices in the area as of 2023. Furnishing costs typically range $15,000-$25,000 for a complete 2-3 bedroom setup including beds, linens, kitchen essentials, and living room furniture. Initial setup costs including professional photography, listing creation, and basic renovations average $3,000-$5,000. Permits and fees in Kentucky generally cost $500-$1,500 depending on local regulations and business license requirements. Insurance premiums for short-term rental coverage run approximately $2,000-$3,000 annually. Utility setup and deposits for electricity, water, gas, internet, and cable total around $1,000-$1,500. First six months of operating costs including utilities ($600/month), cleaning supplies and services ($300/month), maintenance reserves ($200/month), and marketing expenses ($100/month) add approximately $7,200 to startup expenses.

Airbnb properties in Somerset, Kentucky typically generate annual revenues between $15,000-$35,000 for entire homes, with average daily rates ranging from $75-$120 depending on property size and amenities near Lake Cumberland. Operating expenses generally consume 40-60% of gross revenue, including cleaning fees ($30-50 per turnover), property management (15-25% if outsourced), utilities ($150-300 monthly), insurance ($1,200-2,000 annually), and maintenance costs averaging $2,000-4,000 yearly. Properties within 5 miles of Lake Cumberland or Daniel Boone National Forest command premium rates, with lakefront cabins achieving 65-75% occupancy rates during peak season (May-September) and profit margins of 25-35%. A typical 3-bedroom lake-view property purchased for $180,000 in Somerset can generate $28,000 annual revenue with $18,000 in expenses, yielding $10,000 net profit (18% return on investment). Success factors include proximity to outdoor recreation, professional photography, responsive guest communication, and seasonal pricing strategies that capitalize on fishing tournaments, boating season, and fall foliage tourism. Properties further from water attractions typically see 45-55% occupancy with profit margins of 15-25%, while those offering unique amenities like hot tubs, fire pits, or boat access consistently outperform standard rentals by 20-30% in both occupancy and nightly rates.

Airbnb investments in Somerset, Kentucky typically generate annual ROI of 8-12% with cash-on-cash returns ranging from 6-10%, primarily driven by the area's proximity to Lake Cumberland which attracts seasonal tourists and fishing enthusiasts. Properties near the lake or downtown Somerset command higher nightly rates of $80-120, while standard residential properties average $60-90 per night with occupancy rates of 45-65% annually. Initial investment costs are relatively low with median property prices around $120,000-180,000, requiring approximately $30,000-50,000 down payment plus $10,000-15,000 in furnishing and setup costs. Most investors achieve profitability within 18-24 months, with stronger performance during peak summer months (May-September) when Lake Cumberland tourism peaks. The market benefits from limited hotel inventory in Somerset, creating opportunities for short-term rental operators, though investors should expect seasonal fluctuations with winter months showing 30-40% lower occupancy rates compared to summer peaks.

STRSearch is a leading national platform that helps investors identify profitable short-term rental properties in Somerset, Kentucky, providing market analysis and property recommendations. Local real estate agents specializing in investment properties include Century 21 Advantage Realty and Coldwell Banker McMahan Co., both with agents experienced in Somerset's vacation rental market. RE/MAX and Keller Williams also have local offices with agents who understand the Lake Cumberland area's tourism potential for Airbnb investments. National services like AirDNA and Mashvisor offer market data and analytics for Somerset properties, while BiggerPockets connects investors with local professionals. Vacasa and RedAwning provide property management services for investors who purchase Airbnb properties in the area. Local property management companies such as Lake Cumberland Property Management and Somerset Property Solutions also assist investors with short-term rental operations. Investment-focused real estate companies like Roofstock and Awning (now part of RedAwning) occasionally feature Somerset properties, and local mortgage brokers like First Federal Savings Bank of Kentucky can provide financing options specifically for investment properties in the Lake Cumberland region.