The Ultimate Guide to the Airbnb Investment Property

Having an Airbnb investment property means joining the union of tourism and real estate – two huge industries. An Airbnb investment property is a property that has been purchased to list on Airbnb and function as a short-term rental. The number of these properties has grown as Airbnb hosting has become more prominent. Investors are seeing the potential to make greater returns through Airbnb than through traditional rentals.

If you’re considering making such an investment, keep in mind that you’ll be an investor and a host. You’ll be providing a property and a service. Take a look at some of the things to consider before buying a property and how to be the ultimate Airbnb investment property owner.

Ask yourself, should I invest in an Airbnb investment property?

Like with anything, there are so many things to consider before pursuing an investment.

Time

If you plan on being an active investor, that means being a host and property manager. Do you have time to take care of check-in, check-out, turnover, and bookings?

Deciding on being an active or passive investor will make identifying your goals and planning financials a lot easier. For example, if you decide you won’t be able to manage the property yourself, you’ll know to calculate property management costs.

Financing

Whether investing in a traditional or Airbnb investment property, positive cash-flow is priority. To find properties with high returns, you can also search on Mashvisor and find the estimated cash on cash return, rental income, and cap rate.

Typical monthly investment costs: mortgage payment, property tax, insurance, HOA, maintenance, and vacancy provision (6-8% of rent, use occupancy rate to calculate this).

Less obvious costs: Airbnb 3% Host Service Fee, occupancy and sales tax (check City for rates), property management fees, cleaning fees, utilities, and guest amenities.

Location

Ahh, location! The backbone, soul, and core of any investment property. Real estate investors eat, breathe, and sleep location. Okay, you get it.

Location may be even more crucial on Airbnb than traditional investing because tourists are looking to stay in the most popular places to see the best of the best. They want to be near attractions and public transportation. Will your property have a favorable location?

Attractions and proximity to the metro are not the only things to look at – seasonality trends and occupancy rate are very important for your investment. What you might consider to be a good location could in fact have low occupancy rates. Does it have a high occupancy rate during the summer and almost nothing during the winter? Will cash flow be hurt with such long vacancies? You can search for Airbnb occupancy rates per neighborhood on Mashvisor.

Rules & Regulations & Safety

Inquire about your city’s laws regarding short-term rentals.These laws might require you to gain a license, register with the city, or pay additional taxes. The legal issues can get very overwhelming but check out Responsible Hosting to understand more and use Ernst & Young’s guide on taxation of rental income. If Airbnb does not collect occupancy tax on your behalf, then you are responsible for collecting it from guests on your own.

Research is one way to protect yourself from getting in trouble, but you should also be aware about the type of insurance Airbnb provides, Host Guarantee and Host Protection Coverage.

Read about how to stay safe as a host on Airbnb.

If these four things are feasible, then jump in!

1. Research

An intelligent investor and Airbnb host do additional research to ensure they are creating a lucrative investment property. Do some research about the following to optimize your rental strategy:

Target Audience

Know the type of people visiting the and their interests. The better understanding of their persona, the better you’ll be able to market your listing and appeal to them. Knowing the target audience will make preparations and your property search a lot easier.

Competition

The way to compete on Airbnb is through pricing and location. As a new host, make sure to set low prices to give users an incentive to pick your listing over another well-known listing. A killer location will also give you the ability to compete. If the location isn’t the best, then shower the property with special amenities and provide concierge-like services. Guests might prefer a helpful host in a strange city over a great location.

Analytics

Before buying a property, use predictive analytics on Mashvisor to understand the market more. Find out expected returns, seasonality trends, Airbnb occupancy rate, and more. Learn what key variables to assess to increase occupancy rate and maximize returns. The data also shows information on active listings, allowing you to understand how your competitors are performing.

2. Finding A Property

The Market

The most important quality in a property is its profitability. Invest in a property that will profit every month (positive cash flow). Consider appreciation as a bonus and not as a reason to invest. Look at market home prices, insurance rates, property tax, etc. and compare rental rates to estimate revenue. Is it possible to establish positive cash flow?

You can search for average neighborhood Airbnb rental income on Mashvisor. Make sure you’re investing in a market that is attracting tourists and that is growing. Is tourism seasonal? If people are only visiting during the winter for ski season, can you afford the vacancies during the rest of the year?

The Neighborhood

What neighborhood would appeal to Airbnb users? Every guest values proximity to amenities and public transportation. Are there a lot of attractions nearby? Are there restaurants nearby? Is it a key spot for tourists? Join travel forums and get a better understanding of what is valued and sought-out. With Airbnb, travelers might be looking for a quiet getaway or for nightlife. For this reason, it’s important to know what the target audience is after.

The Property

Consulting an appraiser about the property will help determine if the property is worth the asking price. You also want to get an inspection to make sure there are no deal-breakers. Finally, you want to pick a property that will be engaging for Airbnb users. This might be tricky but try to select a property that has special features like a big backyard, pool, balcony, fireplace, exposed brick – something that adds to the Airbnb experience.

Mashvisor’s optimal strategy insights calculates the property type and number of bedrooms that get the highest returns.

3. Listing The Property

Furnishings

If your profile says “sleeps 6,” then make there are enough beds or sofa beds to accommodate six persons. The property should have all the basic furnishings anyone would need. The decor is also very important, not only for guests to enjoy the property, but also for pictures. Include basic amenities and necessities like towels and toilet paper.

Then, go beyond the basics by adding unforgettable elements. Think like a concierge. City guides, pillow chocolates, board games, welcome baskets are just some of the endless ways to create an unforgettable experience. Going the extra mile with amenities like laundry detergent, an ironing board, and shoe-shine go a long way. Be as helpful as possible by leaving house functionality instructions and your contact information.

Pricing

While pricing is arbitrary, there is a steady approach to setting prices.When you’re freshly listed property appears on Airbnb with no reviews, users will be hesitant to book your property. Hence, an overpriced, “untested” property will induce guests even more to stay away. Take a look at what neighbors and nearby hotels are charging and set your prices lower than theirs to attract guests.

After guests have stayed at the property, make sure they leave reviews to draw attention to the listing. With more reviews, the rankings go up and the listing gets more exposure. More importantly, users will feel more comfortable trying out the property.

Your occupancy rate will increase but that does not mean it should get to a 100%. If you’re fully booked months out, your prices are too low. Once the occupancy rate goes up, start raising prices. During holidays and weekends, it’s customary to raise prices, so don’t lose out on such opportunities.

You might find lower prices during high season drive higher occupancy rates. Test different pricing strategies and balance out occupancy rate with price to maintain consistent income.

Profile & Photos & Reviews

Your profile is a chance to indirectly tell users why they should choose your property over someone else’s. Post professional and attention-seeking pictures because that is what users care about the most. Make sure to be very transparent in the description of the property and of your personal bio. Getting verified on Airbnb and accepting verified guests will help get more bookings. Lastly, lots of reviews get lots of bookings.

Safety

Make sure your property has emergency equipment. Read here about how to make your home safer.

4. Managing The Property

Communication

Be responsive and communicate with guests when they have questions. Communication is vital to travelers when they’re going to a strange place.

Turnover

Clean the property very well. The last thing you want to do is have a dirty property. Reviews about poor cleaning are hard to recover from. Turnover is probably the most active part about having an Airbnb investment property. Establish a routine that will be efficient but that also includes being meticulous in cleaning.

Resources

There are so many resources out there to help with Airbnb investment properties – ranging from helping with managing the property to increasing returns.

Property management and cleaning companies sometimes offer promotions. Some companies include Pillow, Handy, and MaidThis!
Exchanging keys is easier said than done. There are apps that automatically lock and unlock doors, such as Lockitron or Keycafe.
Mashvisor analytics can help you with your pricing strategies and your overall investment by providing the numbers to make intelligent-based decision. Occupancy rates, seasonality trends, revenue potential, cost assumptions, cash flow calculation and financial and purchase investment analysis can be brought to one place to decrease your searches and increase your investing.

Welcome to Airbnb investing! Make money, be hospitable, and have fun!

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