Becoming a real estate investor requires time and effort if you want to be making money from your real estate investing business. Many beginner investors perform various analyses in order to find the best place to invest in real estate and the best real estate investment. However, the profitability of your investment does not simply depend on the predicted cash on cash return, cap rate and return on investment. If you want to receive high rental income, you should make sure to choose the optimal rental strategy for your property. This might look like a difficult task, but do not worry, we are here to help.
Today we will review the two most popular residential real estate investing strategies. These are, namely, Airbnb investments and traditional investments. We will compare them based on a few important things you should keep in mind. Last but not least, we will tell you how you can find the best place to invest in real estate as well as the best real estate investment. If you want to get more information on the topic, make sure to read “Real Estate Investing: Traditional vs. Airbnb Investments”.
#1 Becoming a Real Estate Investor
Becoming a real estate investor differs when owning and managing Airbnb investments or traditional investments. These main dissimilarities can be the key factor in your profitability. Here is what you need to know before deciding how to proceed with your real estate investing business.
The landlord of traditional investments plays a rather passive role. Sure enough, he/she is actively involved in finding occupants for the property and avoiding vacancy. Another thing to be considered is the amount the landlord will charge for rent. This is typically between 0.8% and 1.1% of the property’s market value. However, once the investor has found tenants and has signed a long-term contract with them, he/she starts receiving a steady rental income without doing anything. Of course, he/she is responsible for managing the property and repairing any problem that arises. Yet, that does not require as much time and effort as is required from the Airbnb host.
The Airbnb host plays a key role in the profitability of the short-term rentals. This is due to that fact that the maintenance of the property, as well as the hospitality towards the Airbnb guests, influence tremendously the Airbnb occupancy rate. Here, we speak about an active investor. If you want to be a Superhost and boost your Airbnb occupancy rate, there are a few things you need to do. As a Superhost, you need to keep the property in perfect condition- well maintained and clean. You also need to create a homey feeling and make your guests feel welcome. Additionally, ensure that the visitor has all the supplies he/she needs. Last but not least, to be a Superhost, you need to be friendly and provide your guests with the best experience.
As you can see, the management of Airbnb investments is much more involved. That might be an explanation as to why the price charged per night for these rentals is higher. Interested? Check “The Ultimate Guide to the Airbnb Investment Property”.
#2 The Tenants
Another major difference between Airbnb investments and traditional investments is the tenants. As you can imagine, they significantly influence your rental income and your general success. That is why we are presenting you with the similarities and dissimilarities between the occupants of each rental strategy.
A significant benefit of traditional investments is the fact that you can run a background check on your tenants before renting out the property. This might give you peace of mind, being sure that your property will be taken care of and that you would receive your rental income on time. That is not the case with Airbnb investments.
Airbnb guests are staying for a few days, a week, maybe a month, but definitely not long-term. In order to keep making money, you need to find new visitors. Exactly this type of guests’ flow might be an obstacle. There have been registered cases of Airbnb guests damaging the property, even stealing. Thus, you need to be very careful. Moreover, Airbnb tenants leave reviews on the website. These reviews can either boost your Airbnb occupancy rate or leave your place vacant. That is why you need to make sure you offer the ultimate Airbnb experience.
#3 The Optimal Rental Strategy
Choosing the best rental strategy for your investment is a hard task, but here are a couple of things to consider.
Airbnb investments are suitable in areas which attract tourists or business travelers. A tip here is not to strike for the hottest vacation destinations as properties there usually do not have a high return on investment. The ideal area for such an investment is a quiet and safe neighborhood with easily accessible public transportation.
When it comes to traditional investments, search for cities with many job opportunities or university bases. Ideal spots are towns with young families. Choose a nice neighborhood with available facilities such as supermarkets and, of course, easily accessible public transportation.
Mashvisor’s Rental Property Calculator
Mashvisor’s rental property calculator can help you in making this decision. Besides providing you with information about different real estate metrics such as cap rate, cash on cash return, and return on investment, the tool has other functions. Mashvisor’s rental property calculator can show you what the optimal rental strategy is for a property of your choice. It takes into consideration the location, the property, the demand for rentals in the area and shows you if Airbnb investments or traditional investments are the better choice in this specific case.
#4 Finding the Best Place to Invest in Real Estate Using Mashvisor’s Heatmap
Mashvisor’s heatmap can help you in finding both Airbnb investments and traditional investments. The tool represents a map which shows the performance of different areas in a city. The areas performing above the average are colored in green, the moderate areas in orange, and in red- the places with low-performance numbers. This way you can easily spot the best places to invest in real estate. Additionally, Mashvisor’s heatmap allows you to compare different properties based on their cash on cash return, for instance. This is extremely useful when aiming to find the best real estate investment. Want to learn more? Check “Finding Income Properties Using a Heatmap”.
If you are interested in other ways of making money in real estate or you simply want to learn more about Airbnb investments and traditional investments, sign up for Mashvisor. To start out your 14-day free trial with Mashvisor, click here.