How to Earn Positive Cash Flow with the Airbnb Strategy

If the Airbnb strategy is your preferred approach to real estate investing, you’ve probably wondered what you can do to earnpositive cash flow. After all, this is the key to making money with Airbnb. According to a popular expression used in analyzing investment properties, “Cash is king“. The more cash flow you earn from your Airbnb property, the better the return and the bigger the safety net you’ll have for unexpected expenses.

Having ample cash flow is key in keeping your Airbnb business afloat, particularly in economically challenging times like the ones that we are currently living in due to the Coronavirus pandemic.  Therefore, owning positive cash flow properties should be the goal of every investor who wants to set him/herself up for success. In the opposite situation, if your expenses and financing costs exceed your rental income, you will be losing money each month, and that’s something that no investor ever wants, regardless of whether he/she invests with the traditional or Airbnb strategy. 

Airbnb cash flow is influenced by several factors and, therefore, one needs to employ a set of different strategies to achieve positive cash flow. Here are top 5 ways to achieve positive cash flow with the Airbnb rental strategy. 

Related: 5 Ways To Create A Positive Cash Flow Income Property

1. Find a Profitable Location for Airbnb Investment 

Before you invest in Airbnb, your first step should be to search for the perfect location for Airbnb investment. The first thing you should do to ensure that you earn positive cash flow with the Airbnb strategy is to invest in the right location. The location of your Airbnb rental property will hugely impact the Airbnb occupancy rate, rental income, and rental property expenses, which will in turn affect your Airbnb cash flow.

To find a good location for Airbnb investment, you can begin by looking up the best cities for Airbnb on Mashvisor’s real estate blog. You can check out the best locations for Airbnb daily rate, occupancy rate, Airbnb income, or cash on cash return.

Next, you should conduct a neighborhood analysis to identify the most profitable area for this rental strategy in your city of choice. The easiest way to do your neighborhood analysis is to use Mashvisor’s Real Estate Heatmap. This is a tool that gives you access to Airbnb analytics on the neighborhood level.

The real estate heatmap tool will show you the best neighborhoods for making money with Airbnb based on the following Airbnb investment metrics:

• Listing Price
• Airbnb Rental Income
• Airbnb Cash on Cash Return
• Airbnb Occupancy Rate

2. Analyze Potential Cash Flow Before Buying 

Positive cash flow is one of the main indicators of a rental property’s profitability. Unless this value is above zero, you will not be making money from your investment property. The best way to ensure that you earn positive cash flow with the Airbnb strategy is to run the numbers even before you purchase the property. You should have an idea of the potential Airbnb cash flow you’ll be able to generate from the property before deciding whether or not to pursue the deal. Indeed, whether the property will be able to generate positive cash flow should be one of the main drivers in your investment decision.

The key to finding the best Airbnb properties for sale is knowing how to accurately calculate Airbnb cash flow. While this is – generally speaking – the difference between your rental income and rental expenses, calculations might be complicated when you consider multiple rental properties for sale. When you’re evaluating multiple Airbnb properties for sale, a cash flow analysis can help you eliminate any properties that do not meet your cash flow standards for investing. While there’s no magic number that represents an optimal amount of cash flow to earn (other than it should be above zero), you can establish a minimum cash flow based on your financial goals. 

The easiest and fastest way to calculate potential Airbnb cash flow – as well as other metrics for rate of return – for multiple properties is to use Mashvisor’s Airbnb income calculator. This tool allows you to analyze cash flow and other Airbnb investment metrics such as Airbnb occupancy rate, cap rate, cash on cash return, and more. The calculator uses Airbnb data from actual Airbnb rental comps as well as Mashvisor’s Airbnb predictive analytics to give you an idea about your potential Airbnb profit. You don’t need to use Airbnb spreadsheets, which can be time-consuming and overwhelming. 

To turn months of real estate research and analysis into 15 minutes, click here to sign up for Mashvisor today and enjoy 15% off.

Related: The Airbnb Profitability Calculator: The Best Friend of the Short-Term Rentals Investor

3. Create an Eye-catching Airbnb Listing

The work of a savvy real estate investor who wants to assure good profitability does not end with buying a property. While the neighborhood and the property analytics may promise you good returns for the Airbnb strategy, another important part of the equation is your ability to acquire bookings.

If you want to earn good cash flow with the Airbnb strategy, you need to draw in potential guests from the get-go to ensure a high occupancy rate. As you know, your Airbnb occupancy rate will influence your Airbnb rental income and, in turn, your Airbnb cash flow.

If you want to maximize your bookings when you are first starting out with Airbnb, you need to create an eye-catching listing that stands out from the crowd. The quality of your Airbnb listing will determine whether or not potential guests will book your Airbnb rental over the competition. 

Here are a few tips to help you perfect your Airbnb listing:

• Hire a photographer to take good professional photos.
• Have a captivating headline that will lure potential guests into clicking on your listing. 
• Write a detailed and enticing – yet truthful – description of the Airbnb property including the key amenities, desirable features, nightly rates, and any other important information. 
• Be straightforward and have good formatting. For instance, to make your listing description easier to read, use bullet points and brief statements. 
• Check out listings of other successful Airbnb hosts in the area and see what they are doing.
• Put efforts into getting good rankings and positive Airbnb reviews from the start. In addition to making everything possible to assure that Airbnb guests enjoy their stay, proactively ask them to write you a review afterwards.

4. Embrace Dynamic Pricing

A common mistake that novice investors make with the Airbnb strategy is charging the same rate all year round. Unlike with traditional rental properties, with short-term rentals you have to be flexible. To ensure that your Airbnb business is successful and yields positive cash flow, you should embrace dynamic pricing. You should price your Airbnb rental based on market demand and seasonality. This means that you’ll need to update your prices frequently. 

To remain competitive and maintain a high occupancy rate (which is one of the main factors for cash flow), be sure to look at what other Airbnb hosts in the area are charging. If you are just starting out, charging a slightly lower price than that of your competitors can increase your bookings. After building your reputation, you can gradually raise your nightly rates.

Related: How Do I Price My Airbnb property?

5. Cut Down on Expenses 

Airbnb fees and other rental property expenses will have a huge impact on the amount of cash flow you can earn with the Airbnb strategy. If you are owning an Airbnb, it’s important that you keep track of all expenses and eliminate any unnecessary spending that cuts into your cash flow.

Here are a few tips on how to lower your expenses:

• Schedule regular maintenance checks to help spot any property issues before they get too costly. 
• Consider refinancing to lower your monthly mortgage payments. 
• If possible, consider managing the Airbnb rental yourself instead of hiring professional Airbnb management.

6. Offer Additional Amenities and Services 

If you want to make more money with the Airbnb investment strategy and boost your cash flow, consider offering your guests some additional services at an extra fee. Apart from directly increasing your Airbnb cash flow, offering additional services will leave a good impression on your guests which will lead to better reviews. 

Here are some extra services you can offer to earn positive cash flow with the Airbnb strategy:

• Laundry services 
• Guided tours
• Bike renting
• Cooked meals
• Airport pickup and drop-off 
• Tickets to local events

The Bottom Line 

Although Airbnb investing could make you more money than investing in traditional rentals, it still requires a lot of work and effort for one to earn a positive cash flow. To set yourself up for success with the Airbnb strategy, be sure to implement the above tips.

To start searching for profitable Airbnb rental properties across the US market, sign up for Mashvisor now.