Should you start with renting out your house or buying a rental property? A dilemma every beginner Airbnb investor faces when starting a career in real estate.
To be clear from the beginning, there is no right answer to this dilemma. However, there is always a situation that makes either choice better as an investment. So really, it is all up to you to decide.
Related: When Is Renting Out a Room on Airbnb the Ultimate Real Estate Investment Strategy?
To help you decide which way to go, we are going to tell you the pros and cons of each choice. All you have to do is measure things out and decide for yourself.
The Pros and Cons of Renting Out Your House on Airbnb
Renting out your house on Airbnb comes with both rewards and struggles. Here is what we mean:
The pros:
Making money in real estate:
There is no doubt that everybody could use a few extra dollars each month. It would be nice to have an income stream that helps pay the bills and maybe afford a vacation every now and then. Some Airbnb investors even said that they made two to three times the revenue by renting out their house on Airbnb vs. renting out traditionally.
Related: How Much Can I Rent My House For?
No need for a mortgage:
Renting out a house you already live in saves you the pain of buying an investment property. When you have your own property and an extra space for tenants, you won’t have to worry about a mortgage payment. Even if you have mortgage payments on your house, you still won’t need to worry about a second mortgage. Instead, renting out your house could provide you with extra money to repay the one you already have.
Cultural experiences:
Perhaps one great advantage of renting out your house on Airbnb is that you get to interact with all kinds of people. You get to meet many people from all different backgrounds and make friends. If they like the stay, guess what? You’re their first choice every time they think of visiting the area.
Easier to manage:
Renting out your house on Airbnb means easier property management. Be it repairs, maintenance, cleaning or just everything else, it is always easier to manage a place you live in. Plus, you get to save up on Airbnb property management fees since you already live in the house. You will also receive constant feedback from Airbnb guests. If anything is out of place, leave it to the guest to tell you about it. Besides, you will always have a clean house when tenants are coming in and out of your property frequently.
The cons:
The downside of becoming a landlord in your own house is mainly the inconvenience. Sometimes, you might feel like a guest at your own house. The constant visits will cause you to lose a bit of your privacy as you are going to live with others under the same roof. In some cases, Airbnb hosts have had really bad tenants, from the noise and constant complaints to cleaning after them. At some point, it might get too overwhelming.
The Pros and Cons of Buying an Airbnb Investment Property
Buying a second home and renting out the first is sometimes a good idea. Other times, it is not due to certain circumstances:
Related: Why You Should Buy an Investment Property While Renting
The pros:
You own the property:
One of the advantages is that when you buy the property, you own it. This means that besides the rental income, it also appreciates over time. By the time you decide to sell it, the property may have doubled in value. Besides, it is never a bad investment as long as you take care of it. After all, you get to change your investment strategy at any point in time.
Privacy:
The lack of privacy is the main downside of renting out your house on Airbnb. In this case, it is a major advantage. Having a separate property for renting out on Airbnb will save you the struggle of having to share the same roof much less the same bathroom!
It’s a learning opportunity:
Buying a rental property instead of renting out your house is a great learning opportunity. This way, you can learn how to become a real estate investor in no time. Besides, you get to explore different aspects of owning a rental property. It starts with the procedure of buying an investment property all the way to rental property management and making money in real estate.
The cons:
The financial commitment:
Unfortunately, unless you have the money in cash, you will have to get investment property financing. Therefore, you will find yourself committing financially. Even though it is an income property and it might pay for itself, you can’t always guarantee a high Airbnb occupancy rate. You will have to put a little more effort into marketing to make sure that your property is booked most days of the year.
Moreover, if you are a beginner real estate investor, you might find it hard to find a good mortgage deal. It might take some time until you manage to find a mortgage with low interest rates.
Non-profitability:
As a short-term rental investor, the last thing you want is a property that is not profitable. In that case, you are better off renting out your house! But, when does that happen?
In most cases, it happens when the investor fails to perform an investment property analysis and a real estate market analysis. The property analysis deals with the rate of return while the market analysis is based on all location-profitability factors.
Click here to learn about the Airbnb profitability calculator and find out how it can help you with finding the best Airbnb investment properties!
Final words,
We hope that we were able to help with the decision a little. If you don’t mind the inconvenience and want the extra financial push, then renting out your house is a good idea. But, if you are looking to become a real estate investor and don’t mind the financial obligation that comes with it, then go ahead and buy a rental property to rent out on Airbnb.
Click here to sign up for Mashvisor’s products and services!
