Buying a property for Airbnb is one of the most profitable real estate investment strategies that you could implement. Short-term rentals yield higher rental income than traditional ones, and the Airbnb profit margin you stand to make is substantial. But like everything in real estate, making money with Airbnb is predicated on having a good understanding of how the housing market works.
With this in mind, how to make money with Airbnb in 2020? And what are the most effective strategies to generate high Airbnb rental income in this year’s housing market?
In this blog, we will break down some of these strategies and introduce you to the real estate investment tools that will help you generate a high Airbnb return on investment.
Airbnb 2020 Outlook
Airbnb rentals have been steadily growing for several years now. The convenience that these accommodations provide has made them the go-to option for travelers from all walks of life. But what does 2020 hold for Airbnb? You will be glad to know that there are several encouraging trends that suggest Airbnb will continue its expansion. Here are some of them:
- Airbnb is planning to go public in 2020. This development bodes well for Airbnb hosts since it will lead to further growth for the platform.
- The company expects significant growth in its revenue as well as the overall number of Airbnb guests.
- An increasing number of jurisdictions are taking steps toward legalizing short-term rentals and clearing up the legal ambiguity that surrounds Airbnb rental properties.
The next section will delve into the tips and steps that you need to take in order to make money with Airbnb in 2020.
How Airbnb Pricing Works
It is important to understand how you can earn at Airbnb if you want to be successful at it. When you list your rental property, there are pricing options to choose from. One of them is the nightly price, which refers to the nightly rate of your rental property. There’s also the cleaning fee, a one-time fee that is, as the name implies, for the cleaning costs. Also, a service fee of $3 will be charged by Airbnb to keep the platform running smoothly.
Another pricing option for Airbnb hosts is smart pricing, wherein the pricing of your rental property can go up or down automatically depending on the type of your property, location, and demand.
If you choose the smart pricing option, make sure to check your listing regularly because the platform may underestimate the demand at times, making the pricing of your rental property lower than the actual market value.
How to Make Money with Airbnb: 5 Tips
As we mentioned earlier, becoming an Airbnb host is a smart move in 2020. However, this does not mean profit is guaranteed. In fact, operating a profitable Airbnb investment property requires a certain level of know-how and adaptability to new challenges.
Moreover, real estate investors who fail to implement a coherent Airbnb business plan are likely to incur crippling losses early on. The tips below should help illuminate the path toward making money with Airbnb.
1. Pick a location with a favorable regulatory framework for Airbnb
The first step in making money with Airbnb is picking a suitable location for short-term rental properties. As with any other real property investment, it’s location, location, location.
Make sure to invest in a property with easy access to various points of interest in the area. Travelers who use Airbnb tend to look for properties that are in close proximity to tourist attractions, city centers, modes of transportation, and/or different establishments. One way to help you choose the location is to know your target audience and understand what they look for in a property.
One of the biggest challenges that hosts face is restrictive or ambiguous Airbnb regulations. Some jurisdictions impose complex zoning laws, whereas others prohibit non-owner-occupied rentals.
Furthermore, certain counties have made no effort to clarify the legal status of the activity, leaving Airbnb hosts in a constant state of uncertainty. It is why it is essential to invest in Airbnb in areas where short-term rentals are explicitly legal. Here are some examples that are worth considering:
- Park City real estate market in Utah
- Palms Springs real estate market in California
- Scottsdale real estate market in Arizona
Once you pick your location, make sure to check the requirements for operating an Airbnb rental. There might be some specific licenses that you need to apply for, and failing to get them might result in hefty fines.
2. Use online real estate investing tools
Thanks to the emergence of online real estate investing tools, finding profitable rental properties has never been easier. For example, Mashvisor puts at your disposal a wide range of tools that help streamline the Airbnb real estate investing process. Below is a brief overview of these solutions:
- The Airbnb Heatmap: The heatmap tool is one of the most convenient tools that you can use for your Airbnb investment property search. As the name suggests, this feature allows you to identify the top-performing neighborhoods with Airbnb properties for sale on a map.
- The Property Finder: The Property Finder tool employs advanced AI and considers a host of social and behavioral patterns to show you an Airbnb property with the highest return on investment that accurately matches your criteria.
- The Airbnb Profit Calculator: Using an Airbnb calculator is crucial to making money with Airbnb. Mashvisor’s calculator helps you determine important Airbnb data, such as the average Airbnb income that you can expect and the Airbnb occupancy rate.
3. Optimize your Airbnb rental listing
A critical step in learning how to become an Airbnb host is figuring out how to put your rental property in front of the ideal guests. As competition on the Airbnb platform becomes more fierce, optimizing your listings is essential if you want to stand out. There are several steps you can take in order to achieve better visibility for your Airbnb property. The following tips should help you optimize your listings in a simple and effective manner:
- Use captivating photos: This is the most effective way to boost engagement and improve your position in the search results.
- Write detailed descriptions: A well-structured description makes your listing appear more professional to potential guests. Moreover, Airbnb’s algorithms prioritize listings with good descriptions.
- Work on your listings as quickly as possible: It is important to note that Airbnb favors new listings in their search results. To capitalize on this fact, start optimizing your listings the moment you post them.
4. Explore Airbnb arbitrage opportunities
Rental arbitrage is a strategy that is worth exploring for your Airbnb business. The approach involves renting a property and subletting it to other guests. Your profit, in this case, is the difference between what you are paying your landlord and what you are charging the short-stay tenants. The
obvious benefit of implementing such a rental strategy is that you won’t have to invest in a property. However, executing a successful arbitrage strategy does require quite a bit of leg work. The steps below illustrate how rental arbitrage works.
- Check the legal status of subletting in the area before you start.
- Find profitable rental properties to rent out. The Airbnb profit calculator can help you narrow the search down to high-rental income homes.
- Inform your landlord.
- Estimate your start-up costs.
- List your property on the Airbnb platform.
- Scale the operation the moment you start making money with Airbnb.
5. Improve your Airbnb occupancy rate
As an Airbnb investor, you surely want to have the highest occupancy rate possible, right? Here are some tips to consider to help boost your occupancy rate:
- Utilize the Instant Booking feature. With Instant Booking, guests who would want to stay in your rental property will be able to book it without approval. Of course, you can always reject the booking request, but using the said feature can improve your ratings and even help make you a Superhost, which is always an advantage.
- Ask for reviews. Many travelers read reviews of former guests to help them decide which rental property to book. Getting a lot of positive reviews also increases your rating. So make sure to ask for reviews from your guests. In turn, write good reviews about them. Keep in mind, however, that if you want to receive good feedback, you need to deliver the best service possible. Make your guests feel welcome in your rental property. Keep it clean and make sure to put some basic necessities.
Get Started With Making Money With Airbnb
Figuring out how to make money with Airbnb might appear challenging on its surface. But in reality, the process becomes simple once you grasp the concepts of market research, proper strategy implementation, and Airbnb analytics. It might be a slow build, but once you get a firm understanding of what works and what doesn’t and the positive Airbnb reviews start rolling in, your business will start thriving.
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