Many investors are wondering how to make money in real estate. Well, one of the best real estate investments is short term rentals. However, there are things that you should consider before buying an Airbnb property.
For example, such questions are: “What is the influence of season/s on the occupancy rate?”, “How can you maintain a friendly relationship with Airbnb guests even if they need to sign a short term lease?” If you are interested, keep on reading to be prepared for buying an Airbnb property.
#1 What is an Airbnb Property?
When you are buying a property to rent out on a short-term basis, it means that you are buying an Airbnb property. Actually, what is Airbnb? Typically, those are furnished rental properties that the Airbnb host rents out to his/her potential tenants.
Depending on the landlord he/she may charge you for a night stay or on a weekly basis. Typically, when you rent out short term, you lease your investment property for a period shorter than six months. If the period is longer than six months, then you rent out long term.
The advantage of the Airbnb business is that the demand from tourists is constantly growing. This is mainly due to the fact that more and more potential tenants prefer to deal with short-term lease agreements over hotels’ procedures. Moreover, such properties tend to be cheaper per night and offer a higher level of comfort.
If you have decided to buy an Airbnb property make sure to read “Here Are the Most Profitable Airbnb Cities at the Beginning of 2018” to choose your investment property in the most profitable city!
#2 Airbnb as a Passive Investment or Active Investment?
When you are in the business of real estate investing, you should know that there is not only one way of getting positive returns. Usually, there are two major forms when investing in real estate: the passive investment and the active investment. So, to what type of investment does Airbnb belong?
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Active Investment
Being an active real estate investor means that you are fully involved in the operational activities. Additionally, you should know how to manage the property because you are the one who actually does it. Such investors are closely involved in every part of the process. This includes finding the top places to invest in Airbnb property, then buying a property to rent out on a short-term basis.
Finally comes managing the property in order to attract as many future tenants as possible. The main advantage of active investing is that the investor is in full control of his/her property. The main disadvantage is that it requires a lot of time and effort. You are the one who is responsible for the positive or negative Airbnb reviews.
You should know how to efficiently manage the property and how to increase bookings and so on and so forth.
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Passive Investment
Being a passive real estate investor means that you have less control as well as less work to do as you pass many responsibilities to the property management company, for instance.
The biggest advantage of a property management company is that someone else is operating your investment properties like dealing with Airbnb reviews, providing professional photo service, locating high return areas for future investments and so on. This places few requirements on a real estate investor’s time. However, while working with a property management company get ready as it might be costly.
Depending on the level of experience, a property management company may charge between 8-12% of your monthly rental income. So, if you hire a property management company get ready that your main responsibility will be only buying an Airbnb property and/or selling it later on.
If you are interested to know more about passive investment and Airbnb rentals, make sure to read “Can Airbnb Investment Properties Be Passive Income Investments?”
It is advisable, however, to take matters into your own hands. Being an active investor is the key to owning a prosperous Airbnb rental.
#3 Why is the Location Crucial When Buying an Airbnb Property?
The golden rule in real estate states: “Location, location, location”. But why is it important when considering buying a property to rent out on a short-term basis?
Every Airbnb host should know that short term rentals are successful only in the areas that attract travelers. Moreover, be sure that the location is suitable for your investment strategy before buying an Airbnb property there.
When buying an Airbnb property, make sure to choose the best neighborhood that is safe and calm. You should not skip this part because it is crucial for your Airbnb guests to have a nice and peaceful stay.
Additionally, if you want to have a high demand from tourists, make sure that your selected top places to invest in Airbnb property have an easy access to public transportation, supermarkets, various attractions, etc. Just imagine having to walk a few miles to the supermarket in a cold or a very hot season; many people would probably pass on your property.
So, areas with a good accessibility of various facilities fall into a category of high return areas.
#4 The Relationship Between the Airbnb Host and the Tenants
Another important aspect which you should consider before buying an Airbnb property is that you should maintain a good relationship with your Airbnb guests. So, what is the secret to having a good landlord-tenant relationship?
Well, you should know how to manage the property so it looks attractive, nice and cozy. No one enjoys staying in a dirty, poorly maintained property. The demand from tenants in the future also depends on your willingness and effort to provide them with the best experience possible.
If your tenants are happy, then wait for positive Airbnb reviews. However, how can you get good reviews? If you want to get more in-depth information, make sure to read “What’s the Secret to Maintaining a Good Landlord and Tenant Relationship?”
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Respond Quickly
One of the most important skills that a landlord should have is the communication and the ability to answer the calls and messages from Airbnb guests quickly and comprehensively. Do not make your tenants wait because the purpose of their stay is leisure and not waiting for your reply.
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Do Not Mislead
Many landlords use a professional photo service in order to attract as many travelers as possible. This is the correct way to promote your business. However, what is in a picture should be the same in real life. Travelers do not like to be misled, especially when it comes to their vacation.
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Manage the Property
There are many options for how to show hospitality when you rent out short term, however, it all starts with a clean and well-maintained property. Providing such a property should be your top priority when meeting your new guests.
This is easier said than done as it might be a challenge to keep the place shiny every time. On this matter, it is easier to rent out long term. However, when you rent out short term, I would advise to find local cleaning services when buying an Airbnb property and to make an agreement on the cleaning service.
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Give Space and Privacy
Another way to get bookings is to give privacy to your tenants. Even if travelers chose Airbnb to meet new people and/or get to know the locals, you should respect their private time. In order to have a good relationship do not enter the property unless a tenant approved beforehand.
Are you interested in buying an Airbnb property? To learn more about all aspects of real estate investing in Airbnb rentals, continue reading our blog.