Airbnb Investment Strategy: 5 Things to Succeed

Many hosts have made plenty of money with the Airbnb investment strategy, but simply buying a property and renting is not enough for positive ROI.

As the Airbnb platform continues to grow year after year, exceeding 6.6 million active listings in 100,000 global cities and towns, more and more investors are entering the vacation rental market. However, you must understand that investing in Airbnb properties is not the same as renting out a part of your home. Owning an Airbnb investment means managing a short term rental business.

Table of Contents

The Right Airbnb Investment Analytics Tools
Optimal Airbnb Pricing Strategy
Excellent Knowledge of Short Term Rentals Laws
The Most Appropriate Airbnb Property Management Strategy
A Lot of 5-Star Reviews

Starting an Airbnb business comes with its own peculiarities and requirements, and there are certain things that you need to get right in order to reap its benefits. To succeed with an Airbnb investment property, you must ensure positive cash flow and good return, either with the cap rate or cash on cash return.

While there’s a lot that can be said about an Airbnb investment, in this article, we’ll focus on the five must-have things needed to make a profit with the short term rental strategy. In addition, we will show you how the Mashvisor tools and resources can help you in the process.

To have a successful real estate investment and truly reap the many benefits of the Airbnb strategy, here’s what you need:

1. The Right Airbnb Investment Analytics Tools

The Airbnb investment strategy is no different from any other investment strategy in the sense that you need to run the numbers. Yes, Airbnb real estate investing is known to be quite a profitable strategy, but it needs to be done right. You need to assess the potential revenue, ROI, and payback of any deal to determine whether it’s worth pursuing or not.

The way to do it is by asking simple, yet meaningful questions. Is Airbnb a good investment strategy in this market? Can you make money investing in Airbnb in this neighborhood? Is it the right property for starting an Airbnb business, or will it make me more money as a long term rental destination? Is the home going to generate positive cash flow and good returns?

Reliable, up-to-date, high-quality, detailed Airbnb analytics will help you answer the above questions (and many others) and ultimately make the right decision. You need to be able to quantify your Airbnb rental property analysis before deciding on any property for short term rentals.

Let’s see what Airbnb data analytics you need and where to find them:

Airbnb Rental Data Analysis

When we say Airbnb analytics, we’re talking not only about Airbnb daily rates, Airbnb occupancy rates, and Airbnb revenue. We’re talking about much more detailed information that any Airbnb investor needs for determining the return on investment for a short term rental property in a real estate market.

The most important Airbnb data points when analyzing the potential of a city, neighborhood, and property include:

The property price: This affects profitability and ROI.
The startup costs: These show if you can afford to buy the property and impacts ROI.
The occupancy rate: This is one of the two main determinants of revenue in the vacation rental industry.
The monthly income: This determines how much money you will make with the short term rental strategy.
The recurring operating expenses: These are calculated in cash flow, which should always be positive.
The cash flow: This shows if you’re making money or losing money in real estate.
The cap rate: This calculates ROI without taking into consideration financing.
The cash on cash return: This shows return depending on whether you pay in cash or borrow from the best investment property lenders.

Where to Get Airbnb Data Analytics

The traditional way to obtain all the relevant Airbnb data analytics is to conduct real estate market analysis, neighborhood analysis, and investment property analysis. All your analysis should focus on real estate comps (similar recently sold properties in the area) and rental comps (similar active Airbnb listings in the local market). Comps data will help you estimate the expected performance of your investment.

However, obtaining all the said data, entering them into Excel spreadsheets, cleaning them, and doing manual calculations used to take months from real estate investors aspiring to become Airbnb hosts. And you don’t have months to spend if you want to be competitive in the right short term rental market. Then, you need to act faster while also boosting the accuracy and reliability of your data and analysis.

The easiest and most efficient way to get the data is to use an Airbnb profit calculator, like the one available on the Mashvisor real estate investing app.

The Mashvisor Airbnb Analytics Platform

Mashvisor is home to a number of different Airbnb tools which will help you find the best market and the best property for Airbnb return on investment:

The real estate investing blog: This tool gives you access to nationwide rankings of the best short term rental markets based on various criteria such as most affordable prices, highest income, best occupancy rate, or best ROI.
The heatmap: The Airbnb heatmap will give you visual cues as to which neighborhoods have the highest and lowest ratings based on property price, rental income, occupancy, and cash on cash return. In this way, you’ll know exactly where to look and how successful an Airbnb investment strategy is in that location.
The neighborhood analysis pages: These pages are neighborhood-specific and show you all the Airbnb data points you need to decide if an area makes sense for investing in a vacation rental. You’ll know how much revenue and profit you can expect on average and whether Airbnb is the optimal strategy. You’ll also see what property type will bring you the best results.
The Airbnb investment calculator: This calculator conducts rental property analysis, showing you all the must-have numbers before making an investment decision. Make sure the income will cover the expenses and result in positive cash flow. Check if the cap rate and cash on cash return are above 8%. Ensure the property will be occupied for more than half the time.

If you want to succeed with an Airbnb rental strategy, doing due diligence with the right data and analysis tools is important.

Sign up for a 7-day free trial of Mashvisor to search for the best markets and properties for the Airbnb investment strategy.

Airbnb Investment Strategy: The Mashvisor Airbnb Analytics Platform

Mashvisor’s real estate heatmap can help you succeed in your Airbnb investment.

2. Optimal Airbnb Pricing Strategy

First-time Airbnb investors often get confused on how to price short term rental investment properties after buying them and listing them on the Airbnb platform. When it comes to the Airbnb investment strategy, you need to price against hotels, as well as other vacation rentals in the area. Moreover, unlike with the long term rental strategy, you must apply what is known as dynamic pricing.

To optimize your Airbnb pricing strategy, it’s crucial to understand that nightly rates are not constant and are not fixed. On the contrary, they change on a daily basis to reflect seasonality, weekdays and weekends, public holidays, regional events, and other changes in local Airbnb demand. It’s important to adjust your daily rate all the time to capture enough guests without losing income unnecessarily.

So, how do you decide how much to ask for your short term rental?

How to Set Up the Right Airbnb Daily Rates

A good starting point would be to research the cost of nearby hotels as one of your competitors so that you know how much they charge guests. Next, you need to research the short term rental market and find out how much Airbnb rental comps are charging and how their rates change based on seasonality.

You can find comps on the Airbnb platform, as well as on other listings websites like Vrbo, Booking.com, and others. In your research and analysis, try to focus on properties that are as similar as yours for the success of your Airbnb pricing strategy. Look at not only the property type and the number of bedrooms, but also at amenities, extras, and experiences provided by the guests.

Based on your search, you should put together a range of prices that make sense for your base price. You should be taking note of any seasonal adjustments you should consider into your Airbnb dynamic pricing. You can test the Smart Pricing option available on the Airbnb platform, which will provide you with the optimal daily rates according to what your competitors are charging each day.

Mashvisor Airbnb Rental Comps

Instead of going through hundreds of Airbnb listings in your city without knowing exactly how comparable they are to your investment property, you can use the Mashvisor rental property calculator. It is the most straightforward way to optimize your Airbnb pricing strategy.

For any property listed on the platform and for any off market property, you’ll get access to rental comps coming straight from the Airbnb website. It eliminates the need to search for them yourself and to evaluate how similar or not they are to your vacation rental property.

The Mashvisor tools offer the following metrics for Airbnb comps:

Similarity: This percentage shows you how similar the comps are to your investment property.
Distance: This tells you how far the comp is from your Airbnb.
Location: This reveals the address, city, and zip code.
Occupancy rate: This lets you know how often the property is booked.
Nightly rate: This shows you the average daily rate for the comp.
Rental income: This indicates the average monthly Airbnb revenue generated by the comparable.
Ratings & reviews: This shows you the average rating of the comp on Airbnb and the total number of guest reviews so that you know what you need to get to perform better.

It means that you get immediate access to the base – or average – daily rate that comps are asking for. As a beginner Airbnb host, it’s a smart move to ask for a bit less to get these first bookings going and start gathering positive reviews. It’s important to establish your reputation on the Airbnb platform to rank better in searches and get more reservations.

3. Excellent Knowledge of Short Term Rental Laws

Tips to succeed with Airbnb investment strategy

Before buying a house for the Airbnb strategy in any US housing market, you need to look up how short term rentals are regulated in the area. The success stories of Airbnb investors in some of the country’s strongest markets don’t come without any road bumps.

The boom in this industry has encouraged many investors to switch to the Airbnb investment strategy. As a result, non-owner-occupied Airbnbs have been popping up in a lot of residential areas. While it is great for guests searching for local accommodation, the locals themselves sometimes oppose them.

The main concerns of local residents include safety as they witness a constant influx of short term visitors into the neighborhood and wild parties at Airbnb rentals. Moreover, they see skyrocketing property prices due to demand from Airbnb hosts, leading to unaffordability for homeowners.

The said issues, along with backlash from the hotel industry, have motivated policymakers to start writing up some more strict regulations regarding short term rentals. So, to make sure you won’t be facing any legal issues, read up on local legislation. Stay ahead of any restrictions that might make it harder for you to turn a profit with the Airbnb strategy.

Mashvisor Short Term Rental Regulations Page

Doing detailed research on every single state, county, city, and neighborhood that you’re interested in will drive you crazy. Airbnb laws can vary at any of the said levels. So, you must check the local authority websites before you can make sure that the best short term rental markets for your needs allow this strategy.

Alternatively, you can get started on the Mashvisor short term rental regulations page. The page provides a summary of the latest laws governing owner-occupied Airbnb rentals in all major US markets. It also includes information on non-owner-occupied properties. Moreover, it offers links to the local authority website of each city where Airbnb hosts can read the detailed regulations.

Make sure to choose a location that is not only profitable but also fully legal for the short rental investment strategy for your Airbnb rental property to succeed.

4. The Most Appropriate Airbnb Property Management Strategy

Short term rental properties see Airbnb guests coming and going all the time; they require much more active management than the long term rental investment strategy. The upkeep associated with operating an Airbnb isn’t always a walk in the park, but some real estate investors enjoy being hosts. Some also like knowing they have full control over their Airbnb business and everything that goes into it.

It makes sense because no one knows your property better than you. And because no one will care more about maximizing your revenue and profit than you. And no one will put as much effort into your Airbnb success as you yourself.

However, in some situations, managing an Airbnb investment on your own is simply not feasible. If you’re running multiple Airbnbs in different locations, it can be difficult to manage them all properly. Not giving each property the diligence it requires can hurt your success rate.

To successfully manage your property with an Airbnb investment strategy, you need to pay attention to hospitality, maintenance, marketing, occupancy, and competition. At this point, it might be worth considering the extra fee of professional property management. Weigh your options and determine what’s more practical for your investment portfolio.

How to Choose the Best Airbnb Management Strategy

When deciding between being a DIY Airbnb host and hiring a professional property manager, consider whether:

You live in the market where you invest.
You have a full-time job and any availability.
You enjoy meeting new people.
You don’t mind getting calls, texts, and messages at all times.
You have any experience in hospitality and/or customer service.
You are available to handle check-ins and checkouts, cleaning, restocking, and everything else between guests.

You can also consider a hybrid management model where you work with local contractors to take care of things like cleaning, restocking, and maintenance while you supervise their work. In any case, if you’d like to be personally involved in the management of your Airbnb investment property in any capacity, it’s a must to get technology automation tools. They will help you boost pricing, communication, and others.

5. A Lot of 5-Star Reviews

At the end of the day, Airbnb is a business all about hospitality and customer service. You want your guests (customers) to enjoy their time and leave your rental satisfied with their experience. Airbnb guest reviews are an extremely important factor for the success of your investment property. Why?

Having many 5-star reviews helps your Airbnb strategy in two different ways. First, it improves your rankings in the Airbnb algorithm, which favors listings with the most positive reviews in the area. Second, potential guests are more likely to book a listing that others have found to be good and welcoming.

People want to know that they’re getting their money’s worth. Are they paying for what was marketed to them? Guest reviews will let them know. If your property has positive reviews from guests commending the hospitality of the host or their overall stay, occupancy rates will be healthy. The better the impression your short term rental property leaves on guests, the more reviews and the more stays.

As you start building your reputation on the Airbnb platform and working towards an Airbnb Superhost status, your property will be becoming more popular. Before you know it, demand for your short term rental will be up. It gives you more leeway to incrementally raise your nightly rates without sacrificing occupancy. It will allow you to maximize the profitability of your vacation rental home

How to Collect Positive Airbnb Guest Reviews

Five-star reviews by Airbnb guests rarely come on their own. As a host, you’ll need to be proactive to gather positive reviews to boost your listing’s overall rating.

Here are a few practical tips on how to do it:

Make sure your property matches the photos and the description of the listing. There isn’t a more certain way for guests to get frustrated than offering them a worse property than advertised.
Keep your property in a top-notch shape.
Be available, kind, and helpful before, during, and after guest stays.
Respond to every question from your guests in a timely manner. Try to be available in a few languages (through the help of online tools if you don’t speak other languages).
Try to offer an experience in addition to a space. There’s been an increased focus on Airbnb experiences on the platform as a result of the surge in demand.
Clean your investment property impeccably.
Provide comfortable linens and supplies, like coffee, tea, spices, office supplies (if advertised), and others.
Offer a manual on exactly how everything in your short term rental works so that guests don’t need to guess how to start the air-conditioner or turn on the oven.
Ask guests to write a review after following up with them a couple of days upon checkout and making sure everything has been up to their expectations.
Write reviews of guests that have stayed at your Airbnb property.
Avoid negative reviews like the plague. While you cannot satisfy everyone’s expectations, work hard on avoiding negative reviews. Customers focus more on them than on anything positive anyone has ever said about your service.
Get the best tools to automate as much of the process as possible, especially communication and reviews.

Succeeding With Your Airbnb Investment Strategy

Investing in an Airbnb rental property can be very profitable if you put in the necessary work. Everything from choosing the right market, through buying the best property, and to selecting the optimal management method should be carefully considered and calculated. The Airbnb strategy has become particularly competitive in recent years, so there’s no other way to beat the competition and succeed.

However, the success of millions of Airbnb hosts around the world shows that it is all doable as long as you are up to the challenge. If you focus your attention on the five success factors listed above and execute each one with the necessary care, you’ll join the community of prospering Airbnb investors.

As a first step, you need to start with a market with a high potential for Airbnb investments and then a top-performing short term rental property. Ready to get started?

Sign up for a free demo with our team of real estate consultants to learn how the Mashvisor tools can help you launch your Airbnb investment strategy on the right foot.

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5 Things You Need to Succeed with an Airbnb Investment Strategy