Airbnb vs. renting out on the traditional market – the biggest dilemma landlords have nowadays. “What is the difference?” and “Which rental strategy is better for me?” are the main questions real estate investors ask themselves. Certainly, deciding on the rental strategy that suits you best is not an easy task. Moreover, every real estate investor in the field might have a different viewpoint on this real estate subject. Thus, there is not an ultimately “right” answer. However, there is a certain set of factors landlords should consider prior to deciding on a rental strategy. Here is some help in choosing between Airbnb vs. renting out the traditional way.
Related: Real Estate Investing: Traditional vs. Airbnb Investments
#1 The Demand for Rentals in the Chosen Location
While exploring Airbnb vs. renting out the traditional way, real estate investors need to explore the local housing market. What is meant by this is simply researching the demand for rentals in the area. For instance, a tourist area would be much more likely to favor short-term Airbnb rentals. Therefore, it is highly possible that the demand for Airbnb rentals would be higher than the one for traditional rentals. Nevertheless, if you want to invest in a college/university area or a town which offers various job opportunities, it is certain that tenants would look for long-term or, the so called, traditional rentals. It would not make sense to choose the rental strategy with lower demand rates, would it? Hence, it is important to explore the local real estate market and take that variable into consideration.
#2 Local Laws and Regulations
There is another factor to consider when exploring Airbnb vs. renting out on the traditional market. Typically, long-term rentals are ruled by a strict set or rules and regulations. This aims to protect both sides – the landlord and the tenants. Airbnb rentals are usually not keeping such strict regulations. Moreover, the laws and regulations for such rentals vary from place to place. Different cities will have different permit regulations. Some places even have a policy on how long can a property be rented as an Airbnb. It is important to dig deep and research what rules and regulations apply at the location of your choice for either rental strategy. If you want to manage a successful real estate investment, you should make sure you are not violating any of the local rental policies.
Related: Don’t Invest In Short-Term Rentals Here: The Places with the Worst Airbnb Legal Issues
#3 Maintenance – Airbnb vs. Renting Out the Traditional Way
It is true that Airbnb rentals bring higher rental income per night compared to traditional rentals. However, this cannot be the main factor to make you choose Airbnb over long-term rentals. Even though they might bring higher rental income, Airbnb properties require more maintenance. For instance, landlords would only need to fix a problem or repair something when the property is leased on the traditional market. When it comes to Airbnb rentals, however, real estate investors need to put much more time and money. Besides fixing problems, Airbnb hosts would need to clean the place and prepare it for the next tenants. This includes washing the towels and sheets, checking on the needed supplies, and refilling the stocks if needed. Such supplies are, for examples, toilet paper, toiletries, coffee, spices, etc. Despite the fact that some long-term rentals come with furniture, when investing in an Airbnb property, the real estate investor should not only furnish the place, but provide it with the needed utensils such as coffee machine, washer and dryer, hairdryer, etc. Also, the property needs to be decorated and feel like the perfect vacation spot. As you can imagine, this takes a lot of effort and also reflects on your budget. It is, therefore, advisable, to carefully consider this in making your real estate investment decision.
Related: Airbnb vs. Traditional Renting: Which Rental Strategy Yields Higher Rental Income?
#4 Occupancy Rates – Airbnb vs. Renting Out the Traditional Way
When choosing between Airbnb vs. renting out the traditional way, the investor should consider the occupancy rates in the two cases. As previously mentioned, Airbnb properties tend to bring higher rental income per night. However, that is not really worth it if the real estate investment is occupied only half of the time. The benefit that long-term rental properties have here is the fact that once the contract with tenants has been signed, the landlord would receive rent for the agreed period of time. Hence, when choosing Airbnb as a rental strategy, ensure yourself that you are not investing in a property that would be only part-time occupied. Properties which hide such a risk are, for instance, seasonal rentals in summer or winter resorts.
#5 Tenants – Airbnb vs. Renting Out on the Traditional Market
When researching Airbnb vs. renting out on the traditional market, an important variable are the tenants. Airbnb properties require much more interaction with the renters. It is important to note that some real estate investors consider it a plus, while others see this as a minus. Additionally, it is possible to select your short-term tenants, based on the guest ratings on the Airbnb website. Even though that option exists, when signing a long-term rental contract, the landlord is able to perform background checks on the potential tenants. The latter provides the investor with much more information about the future occupants of the property and, thus, is a safer option.
#6 Competition
Last but not least, when exploring Airbnb vs. renting out the traditional way, it is important to have in mind the potential competition for each rental strategy. It is safe to say that there is not such a strong competition on the traditional rental market. The main reason for that is that there are various types of rentals which suit different types of tenants. Airbnb properties, however, are competitors to other Airbnb properties as well as hotels. Even though tenants might seek different experiences, the main purpose of the short-term rentals is relatively the same. This is, namely, a comfortable place to stay for a short period of time for either a vacation or a business trip. In order to be successful in your real estate business, it is essential to explore this step of choosing your rental strategy in depth.
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