Investing in Airbnb rentals is slowly becoming the preferred rental strategy of many real estate investors. The high income that an Airbnb investment property generates coupled with the availability of professional vacation rental property management has made these properties the go-to option for those who favor convenience and simplicity. While most investors are familiar with the basic aspects of short-term rentals, only a few have an idea of what constitutes an ideal Airbnb rental property. In this article, we will focus on investing in tiny houses and evaluate whether or not buying an Airbnb tiny house is a smart move.
What Is a Tiny House?
As the name suggests, tiny houses are small homes that have a minimalist design. Tiny homes are typically between 100 and 500 square feet. The tiny house movement gained traction after the 2008 financial crisis as more people started looking for cheaper alternatives to traditional homes. The cost-effective nature of these houses also attracts environmentally conscious individuals who want to reduce their carbon footprint. Tiny homes are quite cheap relative to traditional real estate properties. The most affordable options can cost as little as $15,000 whereas the best tiny houses can go for as high as $80,000.
After going over the features of tiny houses, the question that any real estate investor should be asking is: Should I buy a tiny house to rent out on Airbnb? Let’s answer this question by giving you a detailed look at what a tiny house investment entails.
Investing in an Airbnb Tiny House: The Pros and Cons
Real estate investors have to be aware of all the advantages and challenges that come with owning a tiny home. Here are some of the pros and cons of buying an Airbnb tiny house.
The Pros of Investing in an Airbnb Tiny House
The advantages of this type of investment property are fairly obvious. A tiny home is the cheapest rental property you could invest in. Moreover, the process of setting it up is rather simple and can be done entirely by the owner. But perhaps the biggest advantage of buying an Airbnb tiny house is the simple fact that they are in high demand. Recent Airbnb trends show an increased interest in these rental properties and the platform itself is home to over 14,000 tiny house listings. As long as you get your investment property analysis right, you will be able to generate positive cash flow.
Related: Airbnb Properties for Sale: A Guide to Finding the Best One
The Cons of Investing in an Airbnb Tiny House
Due to their affordability and overall convenience, investing in tiny homes comes with very few drawbacks. The only challenge that you will face as a real estate investor is finding the right financing for your investment property. This is due to the fact that home loans are not structured to accommodate small amounts of money. Consequently, investors have to turn to RV loans and personal loans.
What You Need to Know Before Buying an Airbnb Tiny House
Like any real estate investment, buying an Airbnb tiny house requires careful consideration of all the variables. There is a host of factors that come into play when making an Airbnb investment and a firm grasp of Airbnb analytics and regulations is a must. Let’s delve into what you need to be aware of when buying an Airbnb tiny house
1- Pick a good location
Location is everything when investing in an Airbnb tiny house. Having said that, figuring out the ideal location for potential guests can be quite challenging. People who rent tiny houses have different needs and preferences, so narrowing everything down to a specific set of features is not feasible. This is why it is highly advisable that you do a thorough real estate market analysis. Check the top tiny house listings on Airbnb to get a rough idea of what type of location attracts tenants. While you’ll find that some of the best Airbnb tiny houses can be found everywhere from California to Texas to Massachusetts, dig deeper into the locations of these listings and find common characteristics.
Related: Real Estate Investing for Beginners: How to Choose the Best Location for Your First Rental Property
2- Check local Airbnb regulations before investing
The first step of buying an Airbnb tiny home is making sure that short-term rentals are legal in the area. Furthermore, you have to be aware of any potential restrictions on this type of rental. Such restrictions include a limit on how long you can rent out your tiny home and laws that require your presence in the property for a set amount of time during the year. For example, in the Los Angeles real estate market, a host can only rent out an Airbnb property that he/she lives in for at least 6 months out of the year. It is important to keep in mind that these regulations can have a direct impact on the Airbnb occupancy rate.
3- Get your insurance in order
Buying an Airbnb comes with several responsibilities. As a matter of fact, landlords can be held liable if the tenant incurs an injury on the investment property. This is why having a solid insurance protection plan is essential when putting up a tiny house for rent. You can even go a step further and require tenants to sign a waiver of liability.
Related: Tips for Instructing Your Tenants About Renters Insurance Requirements
4- Make sure that your Airbnb tiny house has all the essential amenities
As demand for these rental properties increased, so did their sophistication and overall features. Most modern tiny homes are equipped with a wide range of amenities and luxuries. Attracting potential guests is therefore predicated on equipping your tiny home with such accommodations. Here are a few examples of what you should add to the home:
- A comprehensive set of kitchen appliances
- Washers and dryers
- High-end sound systems, televisions, and internet access
- Skylights and custom furniture
The Bottom Line
Buying an Airbnb tiny house is one of the best real estate investment decisions you can make given the current market dynamics. On top of being affordable, these investment properties generate high rental income. The investors who capitalize on the high demand for tiny homes are guaranteed to start 2020 with a massive return on investment.
Thanks to Mashvisor, buying an Airbnb tiny house has never been easier. The Property Finder can help you find the perfect home in a few minutes! In addition to this, you can analyze the potential of each investment property, thanks to the Airbnb profit calculator.
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