Buying Investment Property Owning a Vacation Rental: The Worst Advice We’ve Ever Heard by Nadia Abulatif August 28, 2018January 27, 2019 by Nadia Abulatif August 28, 2018January 27, 2019 Owning a vacation rental is a very rewarding business. However, not all real estate investment advice you hear about it is actually good. In fact, this article is all about the worst advice you could ever get from other people! We all have a few know-it-all people in our lives who act like they’ve got everything under control. I know as you do that these people might even be the closest to us. Therefore, whenever you bring up an idea, they tend to discourage you or give you some advice that doesn’t make sense at all. Let’s face it, if they were right, they’d be the first people to have radical changes in their own lives. Related: Four Things to Consider Before Purchasing an Airbnb Investment Property For this purpose, we’ve put together a list of the worst advice you could get when owning a vacation rental. So, if you want to be making money with Airbnb, don’t listen to the following: #1. Follow your guts when owning a vacation rental! We all have that gut feeling about something or some situation in our lives. Many times, it is only wise to follow that gut feeling. However, when investing in vacation home rentals, is that all you should base your decisions on? Of course not! There is more to owning an Airbnb property than your gut feeling. In order to make money with short term rentals, you’ve got to follow the numbers. These numbers are 1) The return on investment 2) The cap rate 3) The cash on cash return and 4) The cash flow. Now, if you would ask us what metric is the most important, we would say the cash flow. The reason for that is that cash flow is actually the basis on which you calculate all the other metrics. Therefore, to calculate the cash flow, you deduct the rental expenses from the rental income. If you get a positive figure, then it is an indicator of higher rates of return. So, no matter what you do, make sure your Airbnb investment property is producing positive cash flow. Related: Airbnb Income From an Entire Property vs. a Single Room #2. Location is what matters when owning a vacation rental You’ve probably heard the saying “location, location, location” in real estate. But, is that really what matters the most? If people tell you that, indeed, it is the most important thing, then they’re lying to you! Here is why: Location, though important, is tied to other profit factors. These factors include the above-mentioned calculations, Airbnb occupancy rate, Airbnb property management and others. So, imagine owning a rental property that is luxurious and in the most beautiful place in the US. You list that property and, of course, write the best description of it without including any photos for Airbnb guests to view. Do you really think that, in this case, a guest would be interested even though you mention the fact that the property is located in one of the most beautiful places in the country? Let us tell you: Not really. See? In this case, location is not the success factor but rather the photos which make the property appealing to guests :). Related: This Is Why Location Is NOT Everything in Real Estate Investing #3. Airbnb property management is a myth! This is a lesson in real estate investing for beginners: If you can’t do it yourself, hire someone who can! Many times you’ll hear people saying that owning a vacation rental does not require management. They’ll go as far as saying that the only thing you need is a clean property. Well, guess what? They are wrong. You must understand that in order to become amongst the best Airbnb hosts, you must dedicate some time to managing your Airbnb investment. Successful real estate investors know that owning a vacation rental means marketing, cleaning, maintaining, repairing, and keeping track of the financial records associated with the property. So, let’s be realistic. If you can’t do it, hire Airbnb property management services performed by super hosts who are as successful as you want to be! #4. Reputation is not as important Let us tell you something here, your reputation is your key to success. You can’t possibly talk about making money with Airbnb while all the reviews you are getting are negative. If there is one thing for you to know about owning a vacation rental then it’s the importance of Airbnb reviews. Many Airbnb hosts don’t get bookings due to the low ratings they get from guests. Now, there might be a few guests who caused some trouble and intentionally wrote some bad reviews. But, come on, if you are getting that from every single guest you’ve ever had, then there is a problem you need to solve. Bottom line: Your whole Airbnb investment is dependant on your guests’ reviews. So, make sure you provide them with the best experience ever! #5. You decide how much to charge for rent This advice is partially true. It is your property and you decide what you want to do with it. However, if you intend on making money with Airbnb, there are other things to take into account. First of all, the whole rental business is based on what we call “the comparative market analysis.” To put it simply, it is when you analyze the location to find other similar properties close to yours. These are exactly what we call “real estate comps.” They are as similar as possible to your investment property in size, number of rooms, features, and lot. Therefore, you use these to estimate how much you should charge for rent when owning a vacation rental. The best real estate investment advice for owning a vacation rental! If there is one piece of advice we could give you for owning a vacation rental, it would be using the one investment tool every successful investor uses: The Airbnb profit calculator. As we have said before, the answers to questions such as “How much should I charge for rent?” and “What are the best locations for an Airbnb investment?” are dependent upon the numbers involved. Therefore, instead of performing such calculations manually, we strongly suggest that you invest in the Airbnb profit calculator. We promise you your analysis experience won’t be the same once you’ve tried it. Click here to learn all about it and here to sign up to Mashvisor and see how we can help you make the best investment decisions for your business. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL 0 FacebookTwitterGoogle +PinterestLinkedin Nadia Abulatif Nadia Abulatif is an experienced Content Writer at Mashvisor. She was a trainee lawyer before switching to writing about real estate. She is currently doing an LL.M. in Human Rights and International Law. Previous Post Buying an Investment Property to Rent vs Fix-and-Flip: Which Is the Smarter Decision? Next Post Long Beach Real Estate: A More Affordable Option in California Real Estate Related Posts How to Find the Best Cities to Invest in Real Estate in 2021 How to Make Money from Residential Properties in Real Estate Investing How to Find Real Estate Deals in 2021: 15 Ways The #1 Best Way to Invest Money: Income Producing Assets in Real Estate Should I Buy a Rental Property or Invest in Stocks? Clever Tips to Keep in Mind When Buying a House to Rent Out How to Make an Unsolicited Offer to Purchase Property What Real Estate Closing Costs Should I Expect Upon Closing a Deal? 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