The Pros and Cons of Airbnb Real Estate Investing

Airbnb is an online platform where people who want to rent out their homes are connected with travelers and tourists looking for accommodation in the area.

But What Is Airbnb Real Estate Investing?

Airbnb real estate investing is a great way for investors to earn income from their investment property. Essentially, it is a strategy where a real estate investor buys a rental property and lists either the entire house on Airbnb or individual rooms. Typically, a real estate investor doesn’t live in an Airbnb investment property.

The platform has had immense growth since it was launched more than ten years ago. If you are considering becoming an Airbnb host, you may be wondering if it will be a profitable real estate investment for you. Well, Airbnb real estate investing is generally considered one of the best real estate investments you could make now thanks to the many opportunities it presents for investors.

However, the Airbnb rental strategy doesn’t come without its drawbacks. How successful you will be in this business will depend on many factors. Before you take the dive, you need to consider the pros and cons of Airbnb. This article will help you get a better idea of whether Airbnb real estate investing will be a good fit for you.

Here is a list of the pros and cons of Airbnb:

Pros of Airbnb Real Estate Investing

1. Free Listings

You are not required to pay costly sign-up fees to list your rental property on Airbnb. All you need to do is create your profile with a written description and good photographs. This helps potential guests to understand what you are offering.

2. High Potential Returns

If you have an Airbnb rental property in an ideal location, have listed it properly, furnished it well, and provide excellent customer service, it is possible to attract a steady stream of guests and net a high return on your investment. It can actually bring in more revenue than being a landlord of a long term rental.

3. You Can Set Up Your Own Price

Airbnb real estate investing allows hosts to decide how much they are going to charge their guests per night, week, or month. As an Airbnb real estate investor or host, you can also increase the rental rate since it’s fixed only for the lease term, so long as you make the change in your listing.

4. Host Protection

Airbnb hosting comes with a lot of risks. However, in some countries, Airbnb hosts are protected by the Airbnb host guarantee program. This program covers the host in the event the guest damages the rental property for up to $1,000,000.

5. Cultural Experiences

Apart from money, Airbnb real estate investing usually brings about cultural exchanges. This is because many travelers from around the world and from all walks of life now use the platform. If this is something you are interested in, you can find yourself learning a lot from the different travelers.

what are the pros and cons of Airbnb investing?

6. More Flexibility

Another benefit of owning an Airbnb investment is that you can choose to block off dates when your property is not available. This way, guests won’t be able to book for such dates. For instance, you may need to do a major repair or plan on being out of town. A typical landlord would have no such option.

7. Control of Your Rental Property’s Upkeep

Once a landlord signs a lease with long term tenants, it practically belongs to them even though the rental property is technically the landlord’s. The landlord usually loses a great deal of control over their property. This sometimes leads to significant damages to the home that can be quite costly. With short term rentals, you get to check them regularly. You will be cleaning it and doing maintenance more often.

Cons of Airbnb Real Estate Investing

1. Time Consuming

Running an Airbnb rental property is not a walk in the park. It is a hospitality business. You will be getting new guests frequently, which makes Airbnb property management quite hectic. There will be a lot of work to do, including cleaning, communicating with Airbnb guests, laundry, occasional repairs, calendar management, etc. However, Airbnb investors can choose to outsource some or even all of the duties.

2. Less Certainty

It is possible to make more money off Airbnb real estate investing than traditional real estate investing. However, your Airbnb rental income will be more irregular and less dependable. This is because Airbnb occupancy rate usually fluctuates with seasons. This makes it harder to do your cash flow planning, especially if you are on a tight budget.

3. More Risk

With numerous Airbnb guests in and out of your investment property on a regular basis, you are opening yourself up to some risk. Most Airbnb guests are usually responsible and kind. However, you may have heard stories of guests leaving the home in a total mess after partying all weekend. Some guests may be well-intentioned but simply get involved in accidents that may cause some damages. To prevent having bad guests, ensure you actively screen all prospective guests before you let them in. You can also protect yourself from Airbnb risks by buying insurance that is tailored for short term rentals.

Related: 5 Risks of Airbnb Real Estate Investing

4. Legal Restrictions

Airbnb real estate investing isn’t legal everywhere. Before you list your rental property on Airbnb, make sure you check the local Airbnb laws and Airbnb regulations. In some areas, Airbnb real estate investing may be banned entirely or with some restrictions. As a host, you may also be required to acquire special permits or licenses before you can operate your rental property business in the area. If you fail to follow the Airbnb laws and regulations, you risk getting hefty fines.

The Bottom Line

Airbnb real estate investing can be great and highly lucrative. However, it usually comes with more risks than a traditional rental. So, should you invest in Airbnb rental property? Well, that will depend on you and your situation. You need to consider these pros and cons of Airbnb before you decide to be an Airbnb host.

If you choose to invest in Airbnb, be sure to use Mashvisor’s tools and rental property calculator to find and analyze a profitable Airbnb investment property in the US. Mashvisor’s Airbnb profit calculator uses Airbnb analytics to calculate Airbnb return on investment in terms of cash flow, cap rate, Airbnb rental income, and Airbnb occupancy rate.

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