Getting into the short-term rentals business has been very popular ever since Airbnb was founded. Therefore, here is our guide on the top things to consider before buying an Airbnb investment property.
The number one goal of investing in rentals is keeping a high occupancy rate in order to make money in real estate investing. However, do not think that it is that easy. You can’t just buy an investment property and expect it to rent out immediately. Now, if you are a short-term rentals investor, this is especially true. So, here is our list of things to consider before buying an Airbnb investment property:
Related: Airbnb Rentals: Finding Income Properties Using a Heatmap
Airbnb investment: Where Airbnb is legal
The first thing you have to check when buying an Airbnb investment property is legality. You must check where Airbnb is legal in order to be safe in terms of legislation. There are many states and countries around the world in which Airbnb rentals are illegal. On the other hand, there are some major cities and states around the world where it is legal such as Paris, New York, and Israel. Therefore, when you get into the Airbnb rental strategy, make sure you are operating legally. Otherwise, you will suffer major consequences.
Airbnb investment: The location of your property
Another important aspect to consider when buying Airbnb rentals is the location. Check the most profitable locations for your rental property. The easiest way to do so is to check the Airbnb profitability calculator on Mashvisor. This great tool is the best when it comes to performing investment property analysis which indicates the rental potential of an Airbnb investment property. It is also the best when it comes to performing a real estate market analysis. This type of analysis enables you to compare your rental properties to other similar ones within the same location. Also, it enables you to analyze the location in terms of profitability and property prices.
Related: The 5 Most Profitable Airbnb Locations According to Mashvisor’s Investment Property Calculator
Airbnb investment: Airbnb property management
As with traditional rentals properties, property management is also important in the case of Airbnb rentals. Property management refers to the activities which you perform to take care of the investment property in terms of daily operations such as maintenance as well as collecting the rent. As for Airbnb rentals, you will have to perform these tasks more frequently, after each Airbnb guest.
However, recently, Airbnb has gone towards more professional property management services. This service is provided by Airbnb super hosts. Basically, they are people who have gotten great Airbnb reviews and do not have as many cancellations on their reservations. Therefore, all you have to do is to choose the services of property management on the Airbnb website. Afterward, they are going to present a list of Airbnb super hosts from which you get to choose after viewing their profile. Of course, you will have to do proper financial planning for this one as they are going to charge you property management fees.
Airbnb investment: Airbnb reviews
Airbnb reviews might be a nightmare or a boost to Airbnb real estate investors. After each visit, Airbnb guests are asked to rate their stay and leave a review. Therefore, your whole business depends on your Airbnb guests. The better services you provide, the better Airbnb reviews you get on your property. This will eventually lead to becoming an Airbnb super host, which is great for you.
The importance of Airbnb reviews appears especially in sustaining a high Airbnb occupancy rate. The last thing you want is to have your Airbnb investment property vacant for long periods of time.
Airbnb investment: High competition
Getting into the Airbnb rental strategy is highly competitive. This is because you are not competing with real estate investors only, but also with ordinary people who choose to rent out a room that is available in their house! Knowing this fact, you should think about it carefully. Moreover, the best thing you can do in this case is to come up with a unique service that will make your Airbnb property stand out.
Airbnb investment: Property expenses
One of the things that many Airbnb real estate investors came face to face with is property expenses. If you think that the only money you are going to spend is the cost of your investment property, then you are wrong. There are far more expenses than meet the eyes. For instance, there are cleaning expenses, landscape expenses, utility expenses, and so on. This is exactly where financial planning comes into play. Therefore, before buying an Airbnb investment property, make sure you learn all about the expenses that are associated with running it.
Related: The Best Real Estate Investing Tips for Cutting Down on Your Expenses
Airbnb investment: Start small
Starting small is a key in absolutely any business. Taking things slowly is the best way towards understanding the business well. Take your time learning the ins and outs of the Airbnb rental strategy. One way to do it is by renting out a room in your own house. The risks, in this case, are as low as 0% as you won’t have such financial commitments as in buying a whole property for the sole purpose of renting it out on Airbnb.
Airbnb investment: Finding the right Airbnb guests
With Airbnb rentals, you are dealing with short-term guests rather than long-term tenants. Therefore, your investment property is going to be occupied more frequently, and that is something to keep in mind. As you already know, there is a possibility that one of your Airbnb guests damages or steals an item. This means more expenses for repair and replacement. So, the best feature of Airbnb is the guest reviews. Airbnb hosts also have the right to write reviews about their Airbnb guests. This means that you get to approve or disapprove of reservation requests from Airbnb guests.
Airbnb investment: It is not a passive investment
Now, short-term rentals are not a form of passive real estate investments. Investing in Airbnb rentals means that you have to be present at all times. It takes more than just investing your money. You will also have to manage the rental property and welcome Airbnb guests. Therefore, if you are looking to get into the passive real estate investing business, Airbnb rentals are not the way to go.
If you want to learn more about short-term rentals vs. long-term rentals, make sure to check out Mashvisor’s blog. Or, you could schedule a time to consult with our professionals on real estate investing.