There are plenty of Airbnb horror stories online and I am not talking about the ones where guests trash rental properties. I am referring to the unfortunate stories of failure in the Airbnb business. Stories where real estate investors and hosts suffer super-low Airbnb occupancy rates, low rental income, and negative cash flow. At the same time, we have all heard the Airbnb success stories. These talk about hosts who enjoy high revenue from their Airbnb properties– enough to cover mortgage payments, operating costs, and even leave a profit.
So why is it that some Airbnb properties fail while others succeed? Why do some Airbnb hosts and short-term rental property owners struggle to attract guests while others seem to enjoy constant bookings and income? To be honest, it’s not a real mystery. There are 12 reasons why some Airbnb properties succeed while others fail.
#1. Successful Airbnb Properties Are Located in the Right Cities
Some hosts are renting out Airbnb properties in areas where there is no demand for them. You can’t just invest in Airbnb anywhere in the US housing market. Successful hosts, on the other hand, probably took the time to conduct Airbnb market research before buying property. They found out where tourists are going. They likely also made sure tourists are staying in Airbnb properties by looking at data like:
- Average Airbnb Rental Income
- Airbnb Cash on Cash Return
- Airbnb Occupancy Rate
With data like that, successful hosts are able to pinpoint the best cities for Airbnb investment. How can you, too, get a hold of such Airbnb data? Find it through online resources like Mashvisor. Start here: 50 Best Cities for Airbnb Rental Income in 2020.
#2. The Real Estate Investor Carried Out a Neighborhood Analysis
Again, you can’t just invest in Airbnb anywhere – not even in one of the best cities for Airbnb properties. Why? Because not every neighborhood is appealing to tourists and other visitors. Neighborhoods that have high Walk Scores, are near city centers and tourist attractions or business and educational centers are probably better suited for an Airbnb investment property.
While you can visit neighborhoods yourself to see if they would be appealing to travelers, that may not be possible if you’re getting into long-distance real estate investing. So, once again, it’s best to get your Airbnb data online. For neighborhood data, try Mashvisor’s Real Estate Heatmap. This tool will help you find a neighborhood that is not only in your price range but also one where Airbnb investment properties earn high rental income and enjoy high occupancy rates and cash on cash return. Quickly conduct a neighborhood analysis with this tool now.
#3. An Airbnb Spreadsheet Was Not Used for Investment Analysis
It’s clear by now that successful hosts conduct analysis before buying Airbnb property, right? They do real estate market analysis as well as neighborhood analysis. So it’s obvious that they would also carry out Airbnb investment analysis. This will help them estimate Airbnb income, cash flow, return on investment, and more on different properties for sale.
The key to their success, however, is not just that they carry out this kind of analysis. Rather, it’s how they carry it out. Successful real estate investors will tell you that they abandoned spreadsheets long ago. In 2020, you really can’t succeed if you’re still using an Airbnb spreadsheet for analysis. What you need are sophisticated real estate investment tools.
One such tool is the Airbnb rental calculator. This tool wins over the spreadsheet any day thanks to the fact that you can analyze multiple Airbnb properties for sale in minutes and find the best one. This allows you to quickly find the best real estate deals based on Airbnb analytics and jump on them before others in the housing market.
With Mashvisor’s calculator, you get data like rental income, Airbnb costs and expenses, cash flow, cash on cash return, cap rate, and even Airbnb occupancy rate data specific to the property. You will also get access to Airbnb comps.
If you want to succeed with an Airbnb investment strategy, then stop trying to manually collect data and perform calculations and start using the tools put at your disposal.
#4. The Owner Took on a Mortgage That He/She Can Pay Off
A lot of Airbnb hosts fail because they simply cannot make their monthly mortgage payments. Buying an Airbnb property with a mortgage can help you get your foot in the door, but if you’re not confident that the rental income will cover payments, you’re making a big mistake.
So how can you be sure that you’ll make your payments every month? Factor in your mortgage info when conducting Airbnb investment analysis. Mashvisor’s calculator allows you to enter in financing info for Airbnb properties. It then uses that information to calculate your monthly cash flow and cash on cash return. If a certain Airbnb for sale will leave you with negative cash flow every month, look for another. You want to find positive cash flow properties that cover your mortgage and leave a profit over for you.
#5. A Successful Airbnb Host Follows the Law
Airbnb properties are not legal anywhere and everywhere. In fact, in many major cities across the US housing market, you cannot rent out a non-owner occupied Airbnb. Two examples are the Las Vegas real estate market and the Denver real estate market. In both markets, you can only rent out your primary residence and if you’re caught doing otherwise, you will face serious consequences.
Other Airbnb regulations may revolve around permits and licenses, taxes, occupancy rate limits, etc.
Airbnb properties that have managed to succeed throughout the years are those whose owners know the laws and follow them. It sounds simple but it’s very important. You don’t want to risk getting shut down and having to pay hefty fines for running an illegal Airbnb.
#6. The Host Knows How Much to Charge for Rent
As an Airbnb host, you are allowed to set the rate that you wish to earn. There are no rent control laws, for example, dictating rates. However, you still have to find the right rate for your Airbnb rental property. Charge too much and Airbnb users will quickly overlook your listing. Charge too little and you risk running into negative cash flow.
A host needs to know how much to charge for rent. To find this out, you need to look at local Airbnb rental comps and how much they are charging. These are Airbnb properties that are similar to yours and in the same area. You also want to account for any differences. If you have an extra room, allow pets, or are closer to a popular destination, you can probably get away with charging a little more than the comps. To learn more, read: How Much Should I Charge for Rent? A 2020 Guide.
#7. The Airbnb Daily Rate Is Adjusted to Match Current Market Trends
You shouldn’t just set your Airbnb rental rate and leave it be. A successful Airbnb host keeps an eye on market trends. If the Super Bowl is coming to your city, Airbnb properties will be in high demand. So you can easily charge more and get bookings. Perhaps you own an Airbnb in a ski town. When winter rolls around, change your Airbnb daily rate to reflect the demand.
It’s also important to pay attention to lulls in the market. For example, when the school year starts, certain locations that were great family vacation destinations may see a drop in Airbnb occupancy rates. You can help keep up bookings by lowering rates during such a time.
#8. The Airbnb Rental Property Is Always Spic and Span
Good Airbnb properties, those that are booked often and get good reviews, are always clean. This is another factor of success that sounds simple. But remember, Airbnb guests also share horror stories online and many of them involve paying for unclean and unsanitary rentals. You can bet that these Airbnb properties have a lot of trouble finding guests after such stories are circulated.
If you don’t have the time or desire to do so, hire someone else to do it. It is an extra cost that you will have to take into account during your initial analysis. But paying for cleaning for Airbnb properties is a small price to pay to keep guests happy and the positive reviews rolling in.
#9. Effort Was Put Into Creating the Airbnb Listing
You may have found the perfect Airbnb investment, but that needs to be clear in your listing. Successful Airbnb hosts took the time to look at other listings on the site – those that show up on page 1 of search results. They investigate things like:
- What kind of photos do they include?
- Are there any keywords that are repeated among top Airbnb listings?
- Are the descriptions very long and detailed or short and sweet?
- What kind of aspects of the Airbnb rental property do they highlight?
- Are they offering anything more like city tours, for example?
Reviewing other listings is a great start to success. But be sure to keep up with your Airbnb listing once you write it. You may want to change it to reflect certain events or offerings throughout the year.
#10. Airbnb Guests Are Vetted
While you can’t do a thorough background check like with long-term tenants, successful Airbnb hosts do their best to learn what they can about guests before letting them in. It’s how they protect their Airbnb properties from damage and even squatters.
Check to see if the guest has completed their Airbnb profile. Putting effort into the profile is a positive sign. Check to see if the guest has any reviews from stays with other hosts. What do they have to say about the guest? Most likely, if the guest caused any damage or did anything else unpleasant, you’ll find a review about it. You may even consider meeting them (or having your property manager or co-host meet them) upon check-in. This will help you get a better idea of who will be staying in your Airbnb rental property.
#11. A Successful Host Keeps Up with Airbnb Reviews
Don’t ignore Airbnb reviews. After a guest has had a pleasant stay ask them to leave a review, letting them know that you will leave one for them in return. When it comes to negative reviews, do your best to respond in a positive way. Don’t get defensive but instead, apologize and explain the situation as best you can. When future guests see how you handle negative reviews and complaints, it will help them decide whether or not to book with you.
#12. The Host Has Hired Help
Successful hosts don’t always manage their Airbnb properties on their own. You’ll find that many of them actually hire professional Airbnb property management companies to take care of everything for them. If you’re completely new to running a short-term rental property, a professional can help to ensure you succeed. They will set the rental rate for you, vet Airbnb guests, take care of check-ins and check-outs, and make sure that the rental is cleaned between guests.
If you don’t want to hire a professional company, you can also look into working with a co-host. This can be a trusted neighbor or friend who takes on the managerial responsibilities for the Airbnb.
Either way, success sometimes requires a team. If you feel that you cannot do things on your own, don’t hesitate to hire help. Just be sure to factor in the Airbnb property management fees.
Why do you think some Airbnb properties succeed while others fail? Share with us in the comments below.