The hospitality sector experienced a huge change with the invention of Airbnb, and it’s certainly grown in popularity in the past decade or so.
That said, some people even decide to rent out their primary residence via Airbnb—and it’s obvious why. It’s an excellent way to generate more revenue—especially if there are lots of idle space in their primary residence.
Table of Contents
- Can You Airbnb Your Primary Residence?
- Pros of Renting Out Your Primary Residence on Airbnb
- Cons of Renting Out Your Primary Residence on Airbnb
- How to Find Out if Your Primary Residence Would Be Profitable as an Airbnb
Even if you decide to Airbnb your primary residence while on vacation, you can generate some extra income while enjoying a relaxing week away. However, the decision to Airbnb the primary residence is not without any downsides.
Because of them, let us walk you through the pros and cons of short term renting of your primary residence.
Can You Airbnb Your Primary Residence?
It’s no news that short term renting through Airbnb can generate more revenue than traditional renting. However, the real number-one question is: can you Airbnb your primary residence?
The thing is, not all places in the US allow Airbnb rentals, meaning that your goal of renting out a residential property via Airbnb may not even be an option for you.
More and more jurisdictions are installing restrictions on Airbnb rentals, making it illegal to a short term rental property that isn’t your primary residence. The City of San Francisco ruled that people cannot rent a part of the property unless it’s their primary residence. The law treats primary residence as where they stay at least 275 nights a year.
Moreover, it’s illegal to offer over three months’ worth of “unhosted” short term rentals, or in other words, rent out your primary residence while you aren’t there. San Francisco placed the restrictions to ensure that a housing crisis wouldn’t occur for residents.
However, it means less potential revenue for people investing in rental property, especially people looking into purchasing property for Airbnb rentals.
As for the other cities, the situation is a little different. Many of them allow Airbnb rentals, whether it’s a primary residence or not. Either way, we advise you to check the regulations in the city that crossed your mind first.
Pros of Renting Out Your Primary Residence on Airbnb
Airbnb is an ever-growing platform for short term rentals, and many property investors are now changing their traditional rentals for Airbnb rentals. It can prove very lucrative, and renting out your primary residence is also a good option.
That being said, there are many benefits of Airbnb-ing your primary residence. Let’s check them out below.
1. Airbnb-ing Your Primary Residence Can Be Very Lucrative
A decently-booked short term rental can generate more revenue than renting the same property long term to one tenant. The reason is that you can charge far more on a one-night basis than monthly.
For many larger cities in the US, you can generate double the amount of long term rent if you Airbnb it. It is affected by the occupancy rate, but even with a 70% occupancy rate, for example, you can still earn far more.
Keep in mind that you can earn even more if the rental property appreciates in the next ten years. Conversely, you can make significantly less if owning and managing the Airbnb property costs a lot in your area.
2. Passive Income Stream
Passive income is something all investors are after, and offering an Airbnb within your home can be that source of income. If your primary residence is in an Airbnb-popular area, you can use that to your advantage and list your home on the platform.
You can even exclusively rent your home while you’re on vacation. Some investors can even fund their holidays abroad by renting their place while away.
That being said, if you are okay with guests constantly coming and going from your place, Aribnb-ing your primary residence can be the ideal way to generate passive income. If you have the extra space to list your home on Airbnb, you should use it and rent it out.
3. Less Stress Regarding the Occupancy Rate
Buying an Airbnb investment property for the sole purpose of using it for Airbnb listings can come with a lot of pressure. You will need to make it attractive and exciting to get booked, and if the occupancy rate is too low, you will likely be losing money.
All that comes with plenty of stress, whether your real estate investment will pan out or not, and with renting out your primary residence on Airbnb—that is no longer the case. For the most part, you won’t be losing money if the occupancy rate in your home is low.
Letting your spare rooms sit unoccupied for a month or more certainly won’t make a huge financial impact the way an empty Airbnb condo will. Also, if you want to make some extra money while on vacation by renting your apartment, it won’t significantly impact your income.
Generally, renting out extra rooms in your apartment or house is less stressful because it won’t result in losing money, no matter what you do.
4. Exciting Venture
Renting out your personal property can add a dash of excitement to your life. Being an investor can often make your days look all the same, but getting new guests every week can bring a unique perspective into your life.
Travelers from all around the world use the Airbnb platform to find accommodation wherever they are going. The same thing is with the US. It can be the simplest way to connect with world travelers and experience other cultures in the comfort of your own home.
This way, you can also help tourists experience the best things about your neighborhood and show them good spots they cannot find on tourist-popular blogs and websites. You can also build new friendships by renting out space for people on vacation; the possibilities are endless.
5. Diversified Tenant Portfolio
If you decide to use your investment property for long term rentals, you rely solely on one tenant to generate rental income from that property. Of course, it can work out, provided that your new tenant receives a stable income and decide to stay for years and years.
However, if your tenant misses payments or just decides one night to move out without a word, your income can take a huge hit, especially if your property is in a low-demand area. On the other hand, if you go with Airbnb rentals, you’ll collect your income from different tenants.
All tenants make up a small percentage of your total monthly income, so if one of them decides to cancel last minute, you won’t be at a total loss. The income is fully diversified, allowing you to stay protected and generate enough income to make the loss meager and unimportant.
Cons of Renting Out Your Primary Residence on Airbnb
While the pros are certainly convincing and lean many investors towards renting out their primary residence, it’s not all sunshine and rainbows. It’s important to look at things from the other side, and that involves checking out all the downsides to renting out your home.
Give a good thought about all the downsides listed below before you say yes to this exciting venture.
1. Decor Issues
You likely prefer your primary residence the way it looks now, but you must do at least some things to attract Airbnb guests. Airbnb investors want their property to look better than the rest, and it’s not just about the spare room in your house or condo.
Even the colors of the walls might be the issue, and you might need to repaint them. The sofa and recliner may be your favorite place to relax after work. However, they may be prone to staining and difficult to maintain when hundreds of guests go through your home.
If you want to take the task of Airbnb-ing your primary residence seriously, you will need to reconsider your decor preferences.
2. High Expenses
Many investors that never dabbled in Airbnb properties need to learn what kind of expenses this type of rental is associated with first. Long term rentals can be associated with minimal management and relatively low expenses.
If you find good long term tenants, they will take care of all the bills and keep it clean and tidy. You will still be expected to cover regular and emergency maintenance, but that’s about it. It usually doesn’t cost you too much to look at it long term.
Using Airbnb as your primary residence can generate more revenue but also requires you to step up your game. Keeping it clean and paying the bills will fall on you solely. You will also need to invest in other things.
You may like your space as-is, but you must make it look classy and high-end. People looking to book an Airbnb want a high-end feel rather than feeling at home. If you don’t provide WiFi or cable, you must invest in it, as most Airbnb guests will expect such amenities.
You must also clean in-between tenants and change the sheets, add towels, etc. You can hire a cleaning and maintenance service for this task, but it will affect your earnings.
Another expense to keep an eye on is the food: you’re not expected to cook, but your rental kitchen will need to be supplied with some food items, such as coffee, tea, and snacks.
3. Irregular Income
Deciding to go with long term rentals—like renting your property out for a full year—will allow you to collect rent and take care of maintenance – without paying bills or cleaning. Long term rentals provide a regular income stream. However, they can generate less revenue than the decision to Airbnb your primary residence.
In theory, you can find tenants to rent out the spare rooms in your home 365 days a year, but it usually isn’t the case. Many investors who rent out rooms in their homes short term prefer to make a pause between bookings. They need enough time to clean and prepare everything for the next guests.
It will also depend on the tourists’ peak season in your area. If your residence is popular during the summer, your revenue will take a hit during winter. That being said, your area may be subject to restrictions about how many days a year you can rent out your primary residence.
4. Success May Come Slow
If you’ve never dabbled in short term rental property, likely, you won’t be able to maintain a 100% occupancy rate from the very start. Initially, it will be difficult to find bookings because users mainly want to make bookings with owners with stellar reputations, but some tips and tricks can help.
If you maintain a good grade from renters, you will easily attract new gusts. But in the beginning, it may be tough. Starting, you will likely have to offer below-market prices to attract tenants or offer special amenities.
Even if your primary residence is an Airbnb goldmine, it all comes down to good ratings on the platform. The Airbnb location and the space may be perfect, but the success is gradual. So don’t assume it will be an instant hit; you will need to grow your Airbnb business.
If you’re looking for short term rentals to purchase, you can always turn to Mashvisor help you find what you’re looking for.
5. Being Available 24/7 to Guests
Using your primary residence for Airbnb can be an exciting, lucrative venture. However, it can come with a huge downside. Your home, the palace where you come back to relax, can become your office.
New guests coming once or twice a week require a clean space, fresh sheets, towels, a friendly welcome, and much more. Also, you must answer your phone and respond to emails quickly, or your tenants will find a different place to say.
They can all affect how you feel at home, so be prepared for that.
How to Find Out if Your Primary Residence Would Be Profitable as an Airbnb
Doing your research and weighing the pros and cons of renting your primary residence as Airbnb can help you see clearer if it works out for you.
However, another principal thing to consider is getting the numbers right. You will need to see if renting out your primary residence is profitable, as it will help you figure out the right strategy from here on out.
Luckily, one of Mashvisor’s key tools, the Airbnb profit calculator, is specifically designed for Airbnb investors and people looking to rent out their primary residence. It holds all the pertinent information on potential investments and what is worth your money and what isn’t.
Our calculator can give you insight within seconds that will help you make the ultimate decision regarding your new investments.
You can search the calculator by:
- Property type
- Occupancy rate
Some of the best features include:
- Potential cash flow
- Cap rate
- Potential occupancy rate
We’ve mentioned that regulations regarding Airbnb can affect your income from short term rentals. The regulations are different from town to town and city to city, so make sure to check the Mashvisor’s short term regulations page before you dabble in this type of business venture.
Renting out your primary residence via Airbnb can be a lucrative experience, but it’s good to check the number before you dive into it.
Deciding to Airbnb your primary residence can come with many benefits, which is why many investors are making that capital decision today. Unlike purchasing a property to rent via Airbnb, investors aren’t stressed about occupancy rate when renting a portion of space in their home.
Although deciding to Airbnb your primary residence may require you to remodel parts of your home, it can generate much-needed extra income for you. That being said, such a decision can even fund your vacations while you’re away.
Mashvisor real estate tools were created with investors in mind, and they can help you find the ideal Airbnb property in a couple of minutes. That’s not all – you can even check if a certain property will generate enough Airbnb return before you buy it.
To learn how Mashvisor’s real estate tools can help you in your Airbnb investment journey, sign up for a 7-day free trial now, followed by 15% off for life.