Airbnb long term rentals. It sounds like an oxymoron, right? We all know Airbnb is popular for short term rentals and vacation home rentals. Still, this type of rental property is a thing and real estate investors should know about it.
Airbnb Is Everywhere
Being in the real estate industry, you can’t escape Airbnb. Not only have Airbnb rental properties made their way into the investment portfolios of many, but homeowners are depending on Airbnb for the extra annual income it can bring.
Airbnb is the hot topic at the moment it seems. And not just in real estate investing. Concerned with how Airbnb is affecting the hotel industry, long term rentals, and homeowners, lawmakers are dealing with short term rental regulations all over the US housing market. Still, travelers welcome Airbnb’s entrance into the market as it is a cheaper alternative to hotel chains and easier to find/book than your typical bed and breakfast.
So, it seems only natural that Airbnb, having sprung up as the giant billion dollar company it is today, would expand into long term rentals in one way or another. And while the expansion into traditional real estate has not been apparent in anything other than these Airbnb long term rental listings, there has been talk of the company entering the sector. But for now, we won’t speculate.
What Are Airbnb Long Term Rentals?
Typically, an Airbnb host allows tenants to book a property for less than 28 days. Usually, a few nights to a week is the norm. However, there is another option that allows Airbnb guests to book rentals for more than 28 days. In this case, the site would show curious guests a monthly fee rather than a nightly fee for listings with this option.
Tenants have this option across the US, as Airbnb long term rentals have become popular (albeit not as popular as their short term rental counterparts). A tenant pays for the first month up front and is charged a fixed fee for every month booked upon the end of that first month.
Airbnb long term rentals are advertised as fully furnished and having Wi-Fi. Landlords of these rental properties are typically responsible for handling the payment of utilities, adding to the appeal for tenants as well as the higher costing rental rate. But it’s convenient for tenants so they are usually willing to pay.
Airbnb Long Term Rentals vs. Traditional Investment Properties
The first thought that comes to an investor exploring this option is how does it differ from investing in traditional long term rentals. Other than the involvement (and the 9-12% fee paid to) Airbnb, it’s not much different than if you were to have a month to month lease agreement in place for your rental. Of course, even with a month to month lease, you might still have a higher occupancy rate with your traditional rental than with Airbnb long term rentals. This could be a matter of circumstance above all else depending on the type of tenants you receive in the location. For example, college towns can be a great place for a month to month lease agreement. With Airbnb being pretty popular in college towns for short term rentals, Airbnb long term rentals are likely to get attention there as well.
One difference that you could feel significantly as a landlord is the real estate marketing. Airbnb is a convenient and popular way for people to find accommodation. So, if you were interested in implementing a month to month lease, Airbnb could be the platform to market your listing on. But again, the fees.
On top of that, the tenant pool for Airbnb long term rentals and month to month leases isn’t as large as it is for traditional investment properties. Even with Airbnb helping your marketing, filling the property could still be an issue depending on the location.
Airbnb Long Term Rentals vs. Short Term Rentals
Obviously, this is where the major differences lie. Even though Airbnb is involved in both, everything from buying an investment property to legal implications to finding tenants to Airbnb property management changes here- not simply the duration of the tenants’ stay.
When buying an investment property to use for Airbnb long term rentals, the investment property analysis will now rely on a different rental income rate, occupancy rate data, etc. Determining the return on investment will be that much more difficult as Airbnb short term rentals data is much more readily available.
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Once you start renting out your property for more than 30 days, the laws that apply will change. The Airbnb regulations won’t apply to you anymore. This sounds like a great thing considering how city legislators are cracking down on Airbnb. However, long term tenants bring with them a whole set of complications. The confusion may come from the fact that you’re dealing with Airbnb, but now the traditional landlord-tenant laws will likely apply to you, depending on your location. That means you’ll have to be fluent in everything from rent control to eviction laws.
The tenants of Airbnb long term rentals might seem like an untapped market that landlords and real estate investors haven’t found their way into yet. That could mean less competition over tenants and higher occupancy rates. Still, the tenant pool is limited compared to short term rental tenants. Marketing your rental property, while convenient on Airbnb, may not be easy.
Airbnb property management changes completely when comparing Airbnb long term rentals and short term rentals. For some, it may be a welcome difference. That’s because property management of long term rentals is considered easier than for the typical Airbnb rental property. However, with the month to month lease, tenant turnover costs and tasks will still be more than for a traditional long term rental.
Airbnb Long Term Rentals as a Real Estate Investment?
Essentially, Airbnb long term rentals, while an interesting addition to the platform, seems to be more for homeowners and tenants wanting to sublet than it is for real estate investors. Does that mean Airbnb long term rentals should never be an option for an investor? Not necessarily.
For example, many cities have off seasons where an Airbnb rental stays vacant. Occupancy rates drop and so does rental income. Positive cash flow from previous months now has to be stretched out to cover vacancy costs. While a harsh reality, it is simply the reality of vacation home rentals. In many cases, real estate investors are told to look on the bright side- it’s during this time that you can use your property as a second home! But, it’s not vacation season, so you probably can’t get away.
If changing up your Airbnb pricing strategy didn’t work and tenants are still nowhere to be found, you can simply change the options on the site and turn your Airbnb into an Airbnb long term rental. Depending on the location, this could help fill your property for a few months until peak season hits again and you’re ready to accept short term rental guests. It can be a part of your real estate investment strategy, just not the whole business plan.
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