The real estate market has been ever changing in the last decade. The sudden rise of the revolutionary short-term rental industry has caused a ripple effect across the entire real estate market for a long period of time. Real estate investors are now more focused on Airbnb rentals than on the traditional rental strategy, which has in effect caused a hike in prices of real estate properties in major cities globally.
Buying an Airbnb apartment or an Airbnb house can be extremely profitable for investors. But the question real estate investors always seem to ask is: “Which type of property is better for an Airbnb investment: an Airbnb apartment or an Airbnb house?”
To completely understand and answer that real estate question, we must first take a look at how Airbnb as a platform works. Airbnb is without a doubt the most famous and trending form of short-term rentals around the world. Its success has been so rapid and immense that it has become an important option for both guests (tenants) and hosts (landlords) alike.
But for hosts or real estate investors to succeed in Airbnb investment properties, they must first identify which type of property is better suited for short-term rentals. Based on the latest Airbnb data, most indications point out to Airbnb apartments as being the most successful and most common form of property for Airbnb rentals. Let’s see why.
Airbnb Apartment vs. Airbnb House: Which Is the Better Option?
Apartments are Cheaper
This is without a doubt the primary reasons why real estate investors logically opt for investing in an Airbnb apartment property rather than a house. Purchasing an apartment is usually cheaper than buying a house if we consider the same location, because in the end what drives rental properties prices the most is the location.
To guarantee success for Airbnb rentals, it is usually advised to buy a property that is relatively centrally located to attract people and be more appealing to guests. Purchasing houses in central locations can be extremely expensive which can result in less positive cash flow over the years if we consider return on investment, mortgage payments, or even taxes.
Buying an Airbnb apartment is cheaper and usually generates the same rental income as an Airbnb house. The idea behind the investment is to break even to start making profit as soon as possible and this is why an apartment is the better choice.
Related: Single Family Homes vs. Multi Family Homes: Differences & Similarities
Airbnb Guests Have Limits
Understanding this limitation is a must for every real estate investor before making an investment in order to generate the profits he/she needs within a certain time period. An Airbnb investment is all about profit for the host, but it’s also about saving money for the guests, and it is the rent price that must appeal to them.
The purpose of Airbnb is to make travel and hospitality a bit cheaper on guests, while giving real estate investors a chance to make money. If an investor buys an Airbnb house and the finances require him/her to ask for an above average price, then this results in pushing away a majority of potential guests looking for Airbnb properties to stay at.
An Airbnb apartment does exactly that; its lower cost makes a real estate investor more flexible in adjusting to the needs of the rental market and potential guests. Finding the right financial balance that will suit your expectations and appeal to your guests can only be done through smart investing: in this case, an Airbnb apartment is the choice.
More Convenient for Guests
If you are buying an Airbnb property, then the question you should be asking is: “What would my guests need in order to book the property?” There is no definitive answer to this real estate question, but there is a standard that is involved.
Guests book Airbnb properties based on many different factors that include size, location, cleanliness and reviews. The most important aspect of them all based on hundreds of reviews is the location.
If you are a real estate investor considering an investment property in Washington DC, then the possibility of affording a centrally located apartment is much higher than that of finding a centrally located house.
The competition in the real estate market is fierce and as a real estate investor you would be forced to look into the suburbs to find an affordable house to buy. This doesn’t appeal to Airbnb guests, and most likely your Airbnb house will not even be noticeable considering its location away from the central spots of the city.
An Airbnb apartment also offers more ease in terms of a short-term stay for guests. An apartment is easy to access, safer, and central usually. This gives a short-term rental property more appeal on Airbnb, which leads to more profits for the investor.
Related: What are the challenges of owning an Airbnb investment property?
Airbnb House Is More Maintenance
This is not just a fact when it comes to an Airbnb house, because all houses usually require more maintenance and expenses than apartments, due to their bigger size. If a real estate investor wants to make some money off of Airbnb and the short-term rental industry, then putting an entire house on Airbnb can be time consuming for the owners.
Airbnb hosting requires a certain standard to be maintained in terms of cleanliness and services. Owning an Airbnb house would be more troublesome because a bigger house that can have a garden or big outdoor area will be harder and longer to clean. There is also the issue of repairs and maintenance for a house, which clearly exceed those of an apartment. A house will require more money to keep it maintained and functional at all times.
An Airbnb apartment can be easier to maintain because its easier to clean. If as a host you are unable to clean the apartment on a regular basis then, there are many other ways to manage it than can be far less costly than when owning a house. Professional property management companies can do that work for the host, and they would charge less for an apartment compared to a house. An Airbnb apartment is just the easier choice for investors.
Related: Airbnb Fees Investment Property Owners Should Know About
Conclusion
Facing the dilemma of whether to invest your money in an Airbnb apartment or an Airbnb house is common for first time real estate investors. The thing is there are no right or wrong answers when it comes to your preference of property type for your investment.
There are, however, trends that have shown success for many real estate investors, and that trend seems to be apartments when it comes to Airbnb investments. This all boils down to the reasons mentioned above.
However, since this is just a trend, it can change depending on the unique reasons or circumstances related to your real estate investing business. The best piece of investing advice will always be dependent on your own analysis of investment opportunities.