When owning a rental property, a real estate investor has to decide whether to rent it out traditionally (for the long-term) or list it on a short-term rental site such as Airbnb. This is an important decision to make in the real estate investing business because the rental strategy will determine how much profits your investment property will generate. One question that beginner property investor ask in this regard is: is Airbnb profitable?
To give you the short answer – yes, Airbnb is, in fact, very profitable! Many property investors in the US housing market are reaping a high return on investment with Airbnb rental properties, otherwise, Airbnb would not have experienced the huge success it had over the last years. As a matter of fact, being a real estate investor with short-term rentals can even be more profitable than with long-term rentals.
Why is Airbnb Profitable
After finding out the answer to the question is Airbnb profitable, you must be wondering how come. The simple answer is that anyone owning an Airbnb rental property will gain an extra source of steady income. While some real estate investors buy properties just to rent out on the short-term rental site, you don’t necessarily have to do that. You can rent out your own home when you’re not occupying it and, thus, make a passive rental income. One thing to remember is that you need to generate positive cash flow – meaning the rental income has to cover your rental expenses – otherwise, you won’t make any profits.
Related: Why Positive Cash Flow Is a Must With Investment Properties
Another reason explaining why is Airbnb profitable has to do with real estate appreciation. Investment properties are fixed assets, meaning they gain value the longer you hold them. Therefore, in addition to making money on the short-term in the form of rental income, Airbnb rentals also make money (potentially a lot of it) on the long-term. Finally, renting out on Airbnb exposes property investors to lower risk than other types of real estate investments – when investing in the right location, of course! This leads us to our second point.
Where is Airbnb Profitable
If you’ve heard the phrase “Location, Location, Location” then you’d know the importance of finding the right place to buy an investment property. The optimal rental strategy in one location might not be as profitable in another. Thus, if you aim to make money in real estate through short-term rentals, you must invest in a location where there’s a high Airbnb occupancy rate, as this indicates a high demand for Airbnb rental properties. Moreover, higher demand will result in higher rental rates in the said location, meaning there’s a possibility to generate a high rental income and guarantee a positive cash flow.
Related: These Are the Best Cities for Airbnb Investment 2018
Mashvisor’s investment property calculator helps real estate investors find whether is Airbnb profitable or not in any city across the US housing market. This tool gives you readily calculated data regarding investment properties in a certain location to help you analyze their profitability as traditional VS as Airbnb rentals. Data that Mashvisor provides are the median property price, rental income, cash on cash return, cap rate, and Airbnb occupancy rate. Using this data, property investors can easily determine the optimal rental strategy in their housing market.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
What Determines the Profitability of Airbnb Rentals
Besides the location of your Airbnb investment, there are other important factors that explain why is Airbnb profitable for some property investors more than others. These include:
#1 Type of Investment Property
The real estate investing business offers numerous choices for Airbnb property investors. There are condos, beach houses, boathouses and yachts, and even lighthouses and castles. To find out which type makes the most profits, you need to understand what Airbnb guests are looking for in an Airbnb rental that allows them to enjoy the best experience. Always remember to perform an investment property analysis before buying one to find its potential return on investment and profitability as an Airbnb rental.
#2 Rental Property Management
One thing that beginner property investors find to be a challenge of owning Airbnb rentals is property management. Seeing as these investment properties have a higher turnover rate, managing and making sure they’re in excellent conditions can turn into a full-time job. Sure, you can hire a professional management company to do all of the work for you, but management fees are pretty expensive and will affect your profit margin. So, when is Airbnb profitable? When you handle managing the rental property on your own.
How to Find Profitable Airbnb Rentals
So now that we’ve covered why is Airbnb profitable in addition to explaining what determines its profitability, you’re probably asking yourself “how do I find an Airbnb rental that is guaranteed to bring me the profits I want?” Well, you’ve come to the right place – Mashvisor works to help real estate investors find the best rental properties using these tools:
- The Investment Property Calculator: we already explained above how this tool helps investors determine the optimal rental strategy. To learn more about how to use it, read this blog.
- The Property Finder Tool: if you don’t want to waste time analyzing rental properties, this tool will lead you straight to the best one in the city/cities of your choice using different filters. If you have a free Mashvisor account, click here to use our Property Finder and find properties in a matter of minutes!
- The Heat Map: This tool makes finding investment properties even easier as it uses visual cues! you can even go more into details with your property search by setting the heat map to show where is Airbnb profitable in terms of rental income, rental income, cap rate, cash on cash return, or occupancy rate!
Related: How to Be a Successful Real Estate Investor with Mashvisor
Is Airbnb Profitable – Final Words
To sum up, real estate investing with Airbnb rental properties is a very profitable investment for many. Certain factors play a role in determining exactly how much profits you’ll make with Airbnb short-term rentals. Therefore, we always recommend using the best tools to ensure that Airbnb is the optimal rental strategy for you.
Mashvisor’s tools provide the most accurate and up-to-date data to help you, the real estate investor, make smart investment decisions whether you’re interested in traditional or Airbnb rentals. Make sure to sign up for our services and we’ll guarantee you a successful real estate investing career. To start out your 14-day free trial with Mashvisor, click here.
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