There is no doubt that many Airbnb investors have made a fortune with short-term rentals. However, there is more to it than meets the eye. There are so many aspects that many beginner real estate investors overlook which cause them to lose their money and fail. Of course, nobody wants to go through that type of loss. The best way to avoid it is to prepare yourself and know what to expect from Airbnb real estate investing. So, here is what Airbnb investors need to consider before getting into the business:
Take It Slow
We understand how appealing the thought is of buying an Airbnb investment property. For many beginner Airbnb investors, that is the perfect scenario, so they jump in without proper knowledge. But, do you know if you want to be part of the business at all?
The answer to this question is up to you, of course. And, the only way for you to find out is actually to start step by step. Put together a business plan. A plan will help you see the pros, cons, and the requirements of this type of rental property business. This way, you can ensure knowing what you are getting into especially since it will force you to do some research on Airbnb investing.
Learn About Airbnb Regulations
Although Airbnb real estate investing is lucrative, there are places where it’s either illegal or restricted by law. So, check Airbnb regulations by city and make sure you don’t encounter any situations where you might be subject to legal consequences without knowing it. There have been many cases where Airbnb investors got into legal trouble, and as a result, they had to pay large amounts of money in fines. A situation like this leads to serious negative cash flow if not bankruptcy.
Related: 10 Major Risks of Real Estate Investing and How to Reduce Them
It’s All About Looks and Convenience
Understand that making money with Airbnb is all about the look and appeal of your rental property, so make sure it looks pleasant. Think of ways to add a unique feel or touch to your vacation rental so that Airbnb guests will want to stay at your place. It is essential for every Airbnb investor to have their rental properties booked as often as possible. So, think about the photography, the description, the experience as well as availability and response time. Such techniques are part of marketing a vacation rental property and will have a significant impact on your Airbnb reviews and thus, your Airbnb rental income.
Learn Location and Investment Property Analysis
One of the significant aspects of owning an Airbnb is the use of Airbnb analytics. If you learn to analyze an investment property and its location, know that you are more than halfway to success.
The first type of analysis, which deals with the profitability of the location, is the real estate market analysis. This procedure looks into the area of the rental property and helps you understand the dynamics of the real estate market there. Through Airbnb rental data and predictive analytics, you will be able to see where the market is heading in the future. This way, you can avoid investing in locations that show signs of decline in the market as well as the rental demand. Moreover, a neighborhood analysis might also help you decide if becoming an Airbnb investor is the way to go in that particular location.
To check the profitability of the rental property, you want to conduct an investment property analysis. This procedure computes the rate of Airbnb return through various metrics such as the cash flow and cap rate. This way, you can make sure that the investment property has a high potential for producing rental income.
The last type of analysis would be the comparative market analysis. It is a process of property comparison. Airbnb investors find rental properties that are similar to theirs and compare features and prices. This way they can ensure paying the right price for the investment property. They can also get a sense of how much they can charge for rent.
Be Aware of the Rental Expenses
One more aspect to take into account before buying an Airbnb rental property: the rental costs. Though there are a few expenses that you will expect such as utilities and insurance, there are other expenses that are unexpected. For example, if the ceiling starts leaking, that is a problem. There are also unforeseen damages that a guest might cause to your short-term rental property. Some Airbnb investors have encountered situations where the guests stole items or caused severe losses to the property. Therefore, you, as the Airbnb host, must consider having a specific amount of money set aside for unexpected expenses.
5 Tips for Beginner Airbnb Investors
Now that you know a few key things about investing in Airbnb property, here are 5 tips to help you get started.
#1. Try renting out a room first to get a feel for the Airbnb rental business. After all, you might end up not liking it at all or decide to stick to renting out room by room based on your needs.
#2. If you choose to buy an investment property to rent out on Airbnb, consider working with a real estate agent.
#3. One aspect Airbnb investors might neglect is insurance. It is not enough to get an insurance policy- you have to get the right one. Some locations are prone to natural disasters more than others. So, make sure to secure yourself as a real estate investor and your rental property to avoid any detrimental situations.
#4. Use real estate tools to help you find the best real estate investments out there. One digital device we can recommend is the Airbnb profit calculator. This tool is what you need to conduct the investment property analysis, the neighborhood analysis, and the comparative market analysis. Sign up here to try out Mashvisor’s Airbnb profit calculator now.
Related: Successful Airbnb Investors Use This ONE Tool and You Should Too!
#5. Learn about Airbnb property management. Explore the tasks that come with this type of rental strategy and see if you can do it on your own. If not, don’t ever hesitate to hire an Airbnb property manager to help you out. Managing Airbnb rentals could be the line between succeeding and failing in the business since it will help you maintain a high Airbnb occupancy rate.