Airbnb has opened up a whole new world for real estate investors. At long last, the tourism hospitality industry has been democratized, and millions of investors can take advantage of this new income opportunity. In order to establish a successful Airbnb business, finding the right investment property is a crucial first step. This guide will look into how you can find that perfect rental property. So if you’re wondering how to have a successful Airbnb business, just keep reading.
The City
Many Airbnb investors search locally and try to find rental properties nearby. While this can sometimes be a successful strategy, your own city may not be the best place to start your property search. This is especially true if your city does not have a large tourism industry, has high housing prices, or too much competition.
Consider looking out-of-city or out-of-state for a better real estate investment. Some cities, such as Lansing, Michigan, would not pop into mind as great spots for an Airbnb investment. However, this small city draws in over 4.6 million visitors annually. With a median property price of $102,100 and an average Airbnb monthly rental income of $2,674 (according to Mashvisor’s data), investing in Lansing becomes a no-brainer for a successful Airbnb business.
Related: 8 Best Cities for Airbnb Investment in 2019
Another reason you should consider looking beyond your own city is if you’re facing strict short term rental regulations. Some cities impose harsh restrictions on hosts, which can severely cut into your Airbnb rental income. In places like Santa Monica, for example, you’ll even need a municipal license when renting out an Airbnb. This additional cost factors into your bottom line and stands in the way of a successful Airbnb business. By searching for a city that is Airbnb-friendly, you can guarantee lower costs and a higher overall profit from your investment property.
But then you’re faced with another issue: How can I manage my Airbnb business if it’s not within driving distance? That’s where a property management service can come into play. While hiring a proper rental manager will increase your overall costs, it will allow you to go after much more profitable investment properties, thereby putting you in a better position overall. Doing so will also greatly reduce your amount of work, making your investment a form of passive income. It may be worth looking into this option in order to ensure you find the best investment property.
The Exact Location
Whether you decide to invest in your own city or out of state, you need to pay very careful attention to your rental property’s location. Different neighborhoods — or even streets — within the same city can yield radically different income.
Consider using a heatmap analysis tool to find the best properties. This tool (provided by Mashvisor) allows real estate investors to visualize the best regions within a city for their Airbnb investment. It will allow you to look into listing prices, projected Airbnb occupancy rates, and return on investment for neighborhoods with a number of properties for sale within your selected region. This can be crucially helpful when comparing different neighborhoods, in order to ensure you’re making the best possible investment. An in-depth analysis of your location is crucial when choosing the right property for a successful Airbnb business.
Mashvisor’s Heatmap Analysis Tool
You’ll also want to take into account the location of your property when advertising it. If you’re investing in a short term rental property that is nearby a number of tourist attractions, you can be assured that tourists will flock to your place for its convenience. Meanwhile, if your rental property lies within a city’s business district, your demographic will likely be business travelers. This demographic consideration should be taken into account when marketing your Airbnb.
The Investment Property
The Airbnb industry is becoming increasingly competitive. Thousands of listings from across the globe are setting new standards in quality and providing stays that convince millions of people to switch from traditional hotels.
To ensure a successful Airbnb business, you need to make sure that you’ve selected a property of great quality, which stands up to the fierce competition that’s out there. Special features, such as unique interior design, a garden, or access to a pool, can greatly increase your property’s value to renters.
You should also consider making the necessary upgrades to your rental property’s interior in order to be a successful Airbnb host. An appealing listing, in a visually appealing property, can greatly improve your Airbnb occupancy rate. A successful Airbnb business will depend on an owner’s eye for detail and customer-orientation. If you’re committed to providing a high-quality experience, in a high-quality property, you’re in good standing to reap huge returns.
Related: 20 Airbnb Tips That Will Help Double Any Investor’s Rental Income
I’ve found the property. Now what?
The most crucial step to take once you’ve found a rental property is to figure out how profitable it will be. Consider using an Airbnb profitability calculator in order to quickly analyze a property’s income potential. This will let you know your cash on cash return, capitalization rate, and return on investment, all of which is crucial information when establishing a successful Airbnb business. Having this information can help inform your financial decisions when buying an Airbnb investment property.
You’ll also want to look at Airbnb comps. This essentially means properties in the same general region, of comparable specifications to yours. Looking at the performance of these properties will help to inform a lot of your important decisions. For example, it can provide valuable information about the kind of Airbnb occupancy rate you can expect. The performance of these rental properties can also let you know what kind of price you can expect to set for your listing while maintaining a low vacancy and high income. When running a successful Airbnb business, you’ll want to take a scientific approach to these details, which can be studied with a number of premium services. An Airbnb investment analysis doesn’t need to be time-consuming if you’re using the right tools.
Learn More: What’s the Best Airbnb Analytics Platform for 2019?
Bottom Line
Investing in Airbnb has provided a source of income for countless real estate investors. Making money with Airbnb depends heavily on selecting the right property, in the right location. Airbnb investment properties vary heavily in their income potential, and a successful Airbnb business requires a lot of due diligence from the investor.
In order to capitalize on the emerging short term rentals market, finding the right property should be your top priority.
