Investing in rental property is both exciting and intimidating. It’s exciting thanks to the many ways to make money and the financial rewards that a real estate investor could earn. However, the many options and investment strategies offered to property investors could intimidate and overwhelm property investors – especially beginners. When a real estate investor starts an investing career, the first thing he/she has to think of is investing in rental property as a traditional investment or as an Airbnb investment property.
The traditional approach of investing in rental property is probably the most common investment strategy. This means real estate investors buy investment properties for the purpose of renting them out for the long term. This investment strategy definitely has its perks which make it a popular choice for many property investors. However, investing in rental property as an Airbnb investment property is becoming more and more popular these days. You’ve guessed it; this investment strategy allows property investors to rent out their investment properties for the short term. But does that mean? How does Airbnb work? And is it a smart investment decision when investing in rental property? Keep reading to find out!
What Is Investing in Rental Property as Airbnb?
Airbnb is an online service that offers a platform for property investors to rent out investment properties of all types (including apartments, vacation rentals, your residential home, or even just a room) for a short time period – usually less than 6 months. The main reason investing in rental property as an Airbnb investment is now more widely spread is due to the increasing number of people (mainly travelers) looking for places to stay in for a short period of time which are more affordable and more flexible than hotels.
Another reason why Airbnb is gaining popularity is due to the fact it’s a great way for anyone to become a real estate investor and make money from the comfort of his/her own house! You don’t need to own an investment property to rent a short-term Airbnb; you can rent out your basement or even an extra room you have in your own residential home. Property investors have more flexibility too; they choose when to rent, who to rent for, and how much to charge.
Looking for a real estate property to invest in as an Airbnb rental? Click here to analyze different investment properties across the US and find which one works best for you!
Overall, investing in rental property as Airbnb rental offers many perks to both the real estate investor (Airbnb host) and the tenants (Airbnb guests). However, before taking such a decision, you should know that it’s not always the smartest decision. So, if you’re thinking of investing in rental property as an Airbnb rental, keep reading to determine whether this is a smart decision for you.
Investing in Rental Property as Airbnb – Consider the Location
As a real estate investor, you probably already know the importance of choosing the right location for your rental properties, whether you’re investing in rental property as a traditional or an Airbnb rental.
Airbnb investment properties don’t necessarily have to be a vacation home to be successful and get a high occupancy rate. What we mean by the right location is the demand for Airbnb investment properties in the area. For example, a city that is considered a tourist destination would have a high demand for Airbnb investment properties. Thus, investing in rental property as a short-term Airbnb would be much more favorable in these locations, as demand would be higher for Airbnb than for traditional rentals.
Moreover, property investors have to look at the area in which they’re investing in rental property in terms of utilities, taxes, and other expenses. For example, the tourism industry is thriving in California, making it a great housing market for short-term Airbnb rentals. However, the utilities, taxes, and property expenses cost California property investors a lot. Therefore, if you can’t financially cover these costs, investing in Airbnb rental properties won’t make financial sense.
The easiest way to check the most profitable locations for Airbnb rental properties is to check the Airbnb profitability calculator on Mashvisor. This tool is the best to:
- Analyze the location in terms of profitability and property prices.
- Conduct a real estate market analysis to compare similar rental properties within the same location.
- Perform an investment property analysis which indicates the potential of short-term Airbnb rental properties.
Click here to see if your real estate market is a profitable location for investing in rental property as Airbnb rental!
Investing in Rental Property as Airbnb – Check Local Laws and Regulations
When a real estate investor is looking for the right location for investing in rental property as Airbnb, another important thing to check is the laws concerning Airbnb investment in that city. Although Airbnb is now widely spread and proves to be a successful investment strategy, short-term Airbnb is still not legal in some cities across the United States.
In addition, Airbnb laws and regulation differ from one city to another. Some cities have policies on registering the investment property and even on how long guests can rent an Airbnb. It’s smart to check and ensure you’re not violating any local law before investing in rental property as Airbnb rental.
Investing in Rental Property as Airbnb – Property Management
Property management is key to success when investing in rental property as an Airbnb rental. Managing a short-term investment property requires time, effort, organization, and attention to details. As an Airbnb host, you’ll have many responsibilities to take care of. These include maintaining the investment property, selecting guests and welcoming them when they arrive, and collecting rent. Not to mention cleaning the property after your Airbnb guests leave and getting it ready for the next guest.
As a real estate investor, if you don’t have property management skills and what it takes to perform these tasks, then investing in rental property as short-term Airbnb is probably not a smart decision. You can hire a professional property management to take care of your Airbnb rental and perform the aforementioned tasks. This works great if you’re investing in an Airbnb rental located in an area you don’t live in. However, keep in mind that they come at a fee and are not cheap. Thus, it’s important for property investors to accurately plan their finances before deciding to hire professional property management.
When Is Investing in Rental Property as Airbnb Smart?
Short answer – when investing in the right location, when it’s legal in that location, and when you can manage it. Other than that, investing in rental property as a short-term Airbnb rental would be a waste of time and money as it’ll be too hard and not as rewarding.
Mashvisor’s investment property calculator allows a real estate investor to search for and find the best and most profitable rental properties (both traditional and Airbnb) in any state, city, and neighborhood in the US within minutes! Sign up for Mashvisor to start using this great investing tool and guarantee a successful real estate investing journey.
Click here to start your search, and for more information head over to Mashvisor’s Knowledge Center, where you’ll find thousands of guides and tips published regularly to keep property investors up to date with anything real estate.