There is no arguing that buying an investment property and renting it out through Airbnb is a popular trend in today’s real estate investing business. In many cases, real estate investors owning an Airbnb short-term rental property receive more profits and a higher return on investment than when owning a traditional long-term rental property.
While owning an Airbnb sounds like an easy and laid-back plan to make money from real estate investing, there are some downfalls and challenges that Airbnb property investors face all the time. In this article, we’ll go through 5 major challenges that you, as a real estate investor, should keep in mind before owning an Airbnb property for successful real estate investing and a good return on investment.
Owning an Airbnb Rental Challenge #1: Airbnb Regulations
The biggest challenge for a real estate investor owning an Airbnb income property is regulations. To date, some cities across the US real estate market still impose minimum rental periods or set limits on the number of days per month or per year that the Airbnb property can be rented. In addition, there are also city zoning laws that limit short-term rentals to specific neighborhoods, prohibit short-term rentals near other short-term rentals, and even go as far as to limit the number of occupants or tenants.
Related: Don’t Invest in Short-Term Rentals Here: The Places with the Worst Airbnb Legal Issues
Furthermore, if you’re investing in a townhome or condo and are planning on renting it out through Airbnb, Homeowners’ Association rules and regulations must also be taken into account. Some HOAs prohibit owning an Airbnb rental, some allow Airbnb rentals that hosts tenants for more than 30 days, and others require the real estate investor provide tenant information to the management company.
The main challenge here is that these rules and regulations are not universal; instead, they are determined city-by-city. As a result, property investors must check Airbnb rules and regulations in their local real estate market before even considering owning an Airbnb investment property. Make sure to regularly check these to ensure you’re not following outdated regulations.
Owning an Airbnb Rental Challenge #2: Finding the Best Location
Before renting out an investment property as an Airbnb property, real estate investors should be aware that not every real estate market is suitable for owning an Airbnb rental property! Every property investor should already know that location plays a major role when it comes to anything and everything in real estate investing. This is especially true for Airbnb investments! Depending on your location or real estate market, owning an Airbnb income property could yield great profits or financial disasters. It all comes down to demand for short-term rentals in the real estate market.
The best locations that are desirable for owning an Airbnb rental property are those with a strong tourism industry. For example, Orlando is a top tourists’ destination and thus one of the best real estate markets for owning an Airbnb. With over 60 million people from around the world visiting the city thanks to its many attractions, it’s safe to say real estate investors will not be short of potential guests.
Related: Orlando Real Estate: Top 10 Neighborhoods to Invest In
Others examples of some of the best locations for owning an Airbnb income property in the US real estate market include Las Vegas, Nashville, and Austin. In these locations, real estate investors are guaranteed to find tenants since tourists are always looking for places to stay and most of them prefer Airbnb rentals over expensive hotels. Demand for short-term rentals in these real estate markets is high which, in turn, means real estate investors can ask for a higher rent and ensure a good return on investment.
Owning an Airbnb Rental Challenge #3: Setting the Rent
The next challenge of owning an Airbnb income property is setting the appropriate price to charge for renting the investment property. Your rental income is how you make money as an Airbnb real estate investor. Of course, you don’t want to charge too little and not gain any profits, but you also don’t want to charge too much and not get any tenants!
The best way to solve this issue is by using an investment property calculator. Mashvisor’s investment property calculator, for example, is one of the best out there! This real estate investing tool not only allows real estate investors to find and analyze investment properties (both traditional and Airbnb), but also shows estimates of the rental income they can expect from owning an Airbnb rental property vs. a traditional rental property, in addition to how much Airbnb property investors charge for rent in their location. Thus, real estate investors owning an Airbnb rental will have an idea of the appropriate price to charge for rent.
To learn more about our product, click here.
Owning an Airbnb Rental Challenge #4: Property Management
Property management is a big part of successful real estate investing, whether traditional or Airbnb. When owning an Airbnb income property, however, property management can be a bit trickier than when owning a traditional rental property. It requires more time and effort because renters are always checking in and checking out. Thus, Airbnb rental hosts have to repeat the process of advertising the rental property, welcoming tenants, and cleaning the rental to prepare it for the next tenant over and over again.
However, don’t let this discourage you from owning an Airbnb. There are professional property management companies – such as Pillow for example – that specialize in managing real estate investment properties and taking care of the tasks and responsibilities that come with owning an Airbnb income property.
Related: Airbnb Rental Property Management: A Must or a Waste of Your Money?
Owning an Airbnb Rental Challenge #5: Dealing with Tenants
The last challenge of owning an Airbnb income property for real estate investing is dealing with tenants. Some think that Airbnb rentals are passive investments that allow a real estate investor to make money without much work. This is definitely not the case! We already mentioned the fact that tenants are frequently checking in and out of short-term rentals, which means property investors need to stay organized and keep track of things like the dates a tenant is expected to arrive and leave, collecting rent, and cleaning the property for the next tenant.
Moreover, the real estate investor also needs to choose tenants carefully and ensure they understand what is expected of them. One risk that Airbnb property investors might face is unhappy tenants which are bad for their Airbnb reviews. Many people skip past an Airbnb property as soon as they notice a couple of bad reviews. In addition, there are stories of troublesome guests who trash Airbnb rentals and property investors owning an Airbnb who found that items had been stolen from their investment properties.
Final Thoughts on Owning an Airbnb Rental
It goes without saying that a real estate investor owning any type of investment property that is up for rent will face some challenges throughout their real estate investing career. Owning an Airbnb can be a luxurious investment, but that does not make it an easy one. A real estate investor has to take these challenges into consideration and be aware of how to overcome them before buying investment properties to rent them out as Airbnb rentals.
Looking for investment properties to rent as an Airbnb rentals? Mashvisor’s investment property calculator allows property investors to search for and analyze different investment properties in any state, city, and neighborhood across the US real estate market! Click here to start looking for and analyzing the best investment properties in any city and neighborhood of your choice!
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
