Does buying a rental property, choosing the optimal rental strategy, and renting out on Airbnb make you an Airbnb super host? There are more things an Airbnb host should do in order to start making money with short term rentals. If you are not adjusting your nightly rate based on the levels of high demand or low demand, seasonal picks and special occasions, you are missing the opportunity of making money with your Airbnb rental property. So, how can an Airbnb host maximize the return on investment when renting out his/her property with the short term rental strategy? Keep on reading to find out what Airbnb pricing strategy to use for your investment property in order to maximize your rental income.
#1 How to Select the Best Airbnb Rental Property
In order to be an Airbnb super host, the real estate investor should know how to select and buy the best Airbnb investment properties. So before rushing into the explanation about the best Airbnb pricing strategy, let’s explore the aspects experienced as well as new real estate investors should take into account when selecting the potential short term rental property.
Step One When Buying an Airbnb Rental Property: Location
As you already know, the main goal of an Airbnb host is to provide a cozy home to his/ her Airbnb guests for a short period of time. One of the biggest determinants of a guest’s satisfaction is the location. Travelers who visit a certain city prefer that the location of their Airbnb rental property is close to the tourist destination points. Moreover, make sure that the potential location of the short term rental property has all needed facilities, such as restaurants, shops, public transportation, etc. This way, the Airbnb rental property will generate more rental income.
Step Two When Buying an Airbnb rental property: Real Estate Metrics
Another thing experienced and new real estate investors should carefully check is the real estate metrics. Such metrics are the cash on cash return, cap rate, return on investment, occupancy rate, etc. The reason this step is crucial is simple- you do not want to end up with a negative cash flow short term rental property.
Consequently, when selecting an Airbnb rental property, make sure you pay close attention to the cap rate as well as cash on cash return. What is a good cap rate or cash on cash return? According to real estate books, a good cap rate and cash on cash return should be between 8-12%. However, due to constant fluctuations and growth of the competitive market, a good cash on cash return and cap rate is considered to be around 4-5%. Interested in learning what are the most important real estate metrics? Make sure to read “What Are the Most Important Metrics in Real Estate Investment Property Analysis?”
We can imagine that analyzing hundreds of short term rentals will take you tons of time and efforts and the possibility of missing the great opportunity to invest is high. Therefore, Mashvisor’s Airbnb profit calculator is a solution you might take advantage of. The Airbnb profit calculator is a must-have real estate investing tool. It will provide real estate investors with the values of the potential rental income, occupancy rate, cap rate and much more in just seconds. That’s not it. The median property price and return on investment can be computed as well. Curious to learn more about the Airbnb profit calculator? Make sure to read “The Guide to Using an Airbnb Profit Calculator.”
#2 Airbnb Pricing Strategy: Don’t Ask Too High and Too Early
When you are a new real estate investor planning to enter an Airbnb rental market, you should carefully figure out how much to charge your potential Airbnb guests. One of the major mistakes many new real estate investors make with their Airbnb pricing strategy is charging too high at the early stage. Consequently, they don’t receive the desired occupancy rate. Why so? An Airbnb super host knows that one of the determinants of success is the positive Airbnb reviews given by Airbnb guests. As a result, it is tough to compete with established Airbnb hosts and short term rentals that have tens or hundreds of positive Airbnb reviews. That is why an Airbnb host should establish him/herself in a housing market first with charging lower nightly rate.
#3 Airbnb Pricing Strategy: Don’t Ask Too Low for Too Long
So, what is the next step after collecting Airbnb reviews? Well, the next step in the Airbnb pricing strategy is to increase the nightly rate. Of course, we understand that having high occupancy rate is nice. Yet, if you are fully occupied for a few months straight, this might mean only one thing. This thing is that the Airbnb host charges too little for a nightly rate. Consequently, you have all the chances to maximize your returns by increasing the rent! Ready to know how much rent to charge your Airbnb guests? Make sure to read “Question of the Day: How Much Rent Should I Charge?”
#4 Airbnb Pricing Strategy: Don’t Price the Same for High Season and Low Season
If your nightly rate during the high season and low season stays the same, you are in the wrong. This is the moment when you should consider another Airbnb pricing strategy. In order to maximize your Airbnb profit, you should study the supply and demand relationship. More specifically, you should know when there is high demand and low demand for short term rentals in your area. This is simply because asking too much during the low season will negatively affect your occupancy rate. However, if the real estate investor charges too little during high season the chance of missing the profit is guaranteed.
#5 Airbnb Pricing Strategy: Consider the Special Occasions
Another thing the real estate investor should consider when planning an Airbnb pricing strategy is the variable of special occasions. Why is it so important to know? Well, special occasions that are popular in your location often make travelers book a rental property in advance. Consequently, your task as an Airbnb super host is to constantly monitor the calendar for special occasions. You would also need to change your pricing strategy accordingly. Booking an Airbnb property for such events can bring sweet profit to the real estate investor’s pocket.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.