It is no secret renting out on Airbnb is a big deal nowadays and if real estate investors play their cards right, they can be laughing all the way to the bank by adopting this business model onto their home/ rental property.
As a real estate investor, you must look for the best real estate opportunities for the highest financial returns whether in the traditional sense or with the short term rental strategy. Both real estate strategies are profitable investments and it all depends on your long term business plan, financial resources, personal preferences and most importantly location.
Location can dictate which real estate strategy will deem you higher profits and more rental income. Studying your market and conducting real estate market analysis is the key to honing in on the right real estate strategy, respective to the location and key economic indicators.
Renting out on Airbnb vs. Traditional Real Estate Investing
Short term rental strategy vs. long term rental strategy
If you want fast cash flow returns, take the short term route. However, beware that it is much harder to compete and make money in the Airbnb business considering the cutthroat competition. You must create your own competitive advantage to stand out and get a high Airbnb occupancy rate consistently. Traditional real estate investing is the safer investment route for investors because you only have to worry about finding a good quality tenant once. The competition is not as fierce in the traditional sense because there will always be someone in need to live in a house long term.
Liquidity vs Illiquidity
In tandem with the previous point, renting out on Airbnb affords investors liquidity and faster returns in terms of cash. Traditional real estate investing will have you bootstrapped until you sell. Your cash will be tied to the real estate property for a long time, taking appreciation into account.
High guest turnover vs long term tenants
If you enjoy meeting new people and dealing with people in general, then renting out on Airbnb sounds like a feasible business plan for you. If the opposite is true, then choose to invest in a long term rental strategy. In both cases, you can opt to hire a property manager to do this on your behalf so you won’t have to worry about providing premium customer support.
Flexibility vs. Inflexibility
Renting out on Airbnb is a much more flexible business model because it gives Airbnb hosts the autonomy to amend and change their pricing strategy as deemed necessary. This way, you are not constrained by one listing price. On the contrary, you adapt your pricing strategy respective to certain days/periods throughout the year to maximize your rental income altogether.
Dynamic vs Static
An Airbnb business is a more dynamic rental strategy because it allows you to maximize your rental income via different pricing strategies as well as have the freedom to pick and choose your dates for renting out on Airbnb as well as your Airbnb guests. There is also more room to grow your rental income in a shorter time frame via the Airbnb business model.
The Perks of Renting out on Airbnb
- You make quick cash. The more Airbnb bookings you accumulate, the faster cash flow returns and higher Airbnb guest conversion.
- You set your own terms. You get to pick and choose who will stay in your Airbnb rental property and set your own terms and policies.
- You are responsible for your business outcome. You have the full autonomy to increase your Airbnb bookings and grow the business altogether. You are your own boss!
- You can stop anytime. You can host Airbnb guests in your own time, at specific dates and times you choose. You can keep bookings open for a whole month or just a week. All on you.
- You meet new people. If you enjoy meeting new people, then Airbnb is the right business for you. It is a great platform for hosting people from all walks of life.
- You use your own home. If traditional real estate investing is too costly for you, then you can use your own home by renting out on Airbnb to make extra money.
How to Make a Successful Airbnb Listing
Choose the right location for renting out on Airbnb. If you currently live in a tourist city, then Airbnb sounds like a feasible business plan. Cities which attract a big influx of tourists on a regular or peak periods are the best locations for starting your Airbnb rental property business.
Do not mislead your guests
Your Airbnb page is an important communication medium and one which will decide whether or not someone will choose your Airbnb investment property over the other listings. Make sure you convey the right information and have an accurate depiction of the state of the rental property as well as your terms and policies.
Accommodate as many people as possible
If you can accommodate more people in your Airbnb rental property, the better. Not only do you maximize your rental income, but you open more opportunity for guests to book your Airbnb, irrespective of the number.
Offer the right amenities
Depending on the type of traveler you are hosting, business or leisure, it is always recommended to customize their guest experience as much as you can. Throw in unique elements and little touches to make their Airbnb guest experience more memorable. For example, consider quality toiletries and high-quality towels and bed linen, free parking, Netflix, complimentary goodies, fresh flowers etc.
Be prompt in getting back to Airbnb guest requests and reviews
Always respond to Airbnb guest reviews, especially the bad feedback. Airbnb guests expect premium customer service and when they see Airbnb hosts respond promptly to guest reviews and show that they actually care about their guests, it looks good on their part and helps them reap more Airbnb guests for growing their real estate investing business.
Real estate investing has no specific roadmap to acquire financial success and maintain a sustainable business. Renting out on Airbnb is a sound investment strategy and one with high rewards and short term cash flow returns. If you enjoy meeting new people from all walks of life and make money in the process, then Airbnb is the right real estate strategy for you. It is a much more fast-paced business and you must stay on top of things if you want your listing to stand out and gain more traction.
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