The following article will help vacation property investors who are looking for lucrative Airbnb investment opportunities.
Here, you’ll find a list of features of the best properties to buy for short-term rentals. We’ll also discuss how to find them.
Let’s get started with the characteristics of a good short-term rental property.
What Kind of Property Should I Look For?
Vacation rental properties should be located in places where people go on vacation. No surprise there. Good locations can include being at or near:
- Beaches/Coastal areas
- Other large bodies of water such as lakes or rivers
- Areas with theme parks and other entertainment
- Sports destinations for hikers/campers, fisherman/hunters, and golfers
Your property needs to be easily accessible. If renters have trouble finding your property, their experience starts off on the wrong foot. Parking should be adequate and close to the unit.
Most vacationers go as a family. Make sure the property can house at least four people. More if possible.
The style of the rental should reflect the area. Hikers who stay in mountain properties are okay with a more traditional floor plan, but beach-goers want something open, light, and airy.
In some places, condos are more available and are preferred by vacationers.
Talk to vacation rental property managers in the area and focus your search on the types of properties that are most popular with short-term renters.
1. Use Online Platforms for Real Estate Investors
Online investment real estate websites are a good starting place. You can quickly look at opportunities in your chosen location and get a good overview of the market.
The best platforms, like Mashvisor, can do much more. For example, Mashvisor shortens your research time by providing you with detailed data about the property (estimated returns, Airbnb occupancy rate, etc.) and the area (information about sales comps, etc.).
As usual, you get what you pay for. The most useful sites charge for their service. Look for a package that fits your expected need.
If you are a one-time buyer, you don’t need bulk data analyses that may cost more. Platforms like Mashvisor offer tiered pricing that is based on your needs.
2. Work With Real Estate Wholesalers
Real estate wholesalers can be a big help to investors. A wholesaler locates properties that appeal to investors, puts them under contract with assignment rights, and then shops the property/contract to investors.
The wholesaler sells the rights to the contract, not the property. They get paid by charging a fee for assigning the contract.
Wholesalers have to be able to price the property correctly to a point where the investor can make a good return after paying their fee.
Wholesalers hunt for and secure properties that will attract the interest of their intended customers – the investors.
This means that they’re out looking for properties that fit your criteria. For you, that’s like outsourcing your research and property hunt to a workforce of wholesalers.
If you are building a portfolio of properties, a relationship with at least one of the good real estate wholesalers near you should be part of your ongoing networking with industry professionals.
When a wholesaler knows that you are a good source of business, they will concentrate on finding your preferred property type.
3. Work With Investor-Friendly Real Estate Agents
Active agents in your desired location are intimately familiar with the market and can be on the lookout for suitable Airbnb investment opportunities.
However, not all realtors are interested in working with real estate investors due to a simple reason that many investors tend to submit numerous offers, most of which are low ball offers.
That said, there are investor friendly real estate agents who specialize in working with investors. Those are harder to come across, but there are usually a handful of them in every decent-sized city in the US.
Their fee is built into the sales price, but otherwise, they can perform a function for you that is similar to a wholesaler. With their access to the local MLS (Multiple Listing Service), they can give you a list of homes that fit your requirements.
Investor friendly realtors are often aware of properties that are coming onto the market in the near future. This can help you get the jump on your competition.
Not many homeowners are prepared to rehab a distressed property. For that reason, most brokers aren’t interested in listing those properties.
If you have the ability to make improvements, you could become a new source of income for your broker contact. That moves you to the top of their list.
4. Look for Distressed Properties to Find Profitable Airbnb Investment Opportunities
As we mentioned before, investors who are able to rehab distressed properties can expand their supply of suitable investment choices.
If you don’t have a large pool of funds, the BRRRR investment strategy can help you build a profitable portfolio of assets.
BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. By buying and rehabbing distressed properties, you are creating equity that can be accessed with a cash-out refinance loan and used to buy the next property.
Let’s consider some ways that you can find distressed properties:
Lender Foreclosed (REO) Properties
When a borrower defaults on a mortgage loan, the lender forecloses and auctions the collateral (the house or condo) to recover the remaining loan balance.
If the auction doesn’t achieve the amount needed, the lender keeps the property.
These properties are designated as “Real Estate Owned,” or REO properties, on their books. REO properties are liabilities for the bank, and they want to sell them.
They only have to sell the properties for the amount that they are owed. This can result in good prices for investors.
You might find REO properties on a lender’s website, but not all banks post them there. The top US Banks and websites that show their REO properties are:
- Bank of America
- Wells Fargo
- Citi Bank
Another top bank, US Bank, prefers to use the services of specialized brokers called “real estate disposition vendors.”
You should research the local lenders and community banks in your market for their REO properties.
If you can network with local REO managers, you might hear about suitable properties ahead of the general public.
There are agencies of the US government that issue, buy, or guarantee residential mortgage loans.
When the borrowers of those loans default, the government can foreclose on those properties in the same way as private lenders.
These agencies include HUD, FHA, VA, and USDA.
There are also Government Sponsored Enterprises (GSE) involved in the mortgage markets in the US, including Freddie Mac and Fannie Mae, along with the Federal Home Loan Bank (FHLB).
The Federal Housing Finance Agency (FHFA) has the responsibility for overseeing the activities of these organizations. If loans that were bought by these agencies go into default, the FHFA can foreclose.
To find government foreclosures, go to the hud.gov website. In the search window, type “houses for sale.”
On the list of links that appear, click on “Houses For Sale.”
This will take you to lists of foreclosures being conducted by various agencies such as HUD/FHA, VA, FDIC, USDA, Fannie Mae, Freddie Mac, IRS, US Customs, the US Marshals Service, and the General Services Administration.
That said, government websites often lack various essential functionalities that make the search quite challenging for a user. Fortunately, some of the government entities, such as HUD and others, decided to engage private organizations to help them dispose of the available inventory by listing their off market properties for sale on 3rd party marketplaces.
Such marketplaces provide access to foreclosed properties, which often are great opportunities for real estate investors looking to grow their short-term rentals portfolio.
Properties in Lender Pre-Foreclosure
Investors can buy properties prior to a foreclosure auction.
A good use of your time is to find out which auction firms are used by the lenders who do business in your market.
Find out if they have an email list that notifies investors of impending auctions. Depending on the rules in your state, you might have a chance to buy a property before it’s auctioned.
If you have relationships with lenders’ REO managers, they may contact you about a property before it goes to auction.
Short Sale Properties
The short sale definition means that the lender agrees to allow the property to be sold for less than the loan balance. The borrower may or may not be relieved from their obligation to pay the difference.
For investors looking for money-making Airbnb investment opportunities, short sales are a great opportunity to buy potential short-term rental properties for below market prices.
There are different ways to find short sales in your area. You should be following up with all these sources on a regular basis if you want to be aware of short sales coming on the market:
- Online property marketplaces: On such websites, you can get a list of short sale properties in two clicks, by using a filter in the navigation panel. This also applies to the other distressed property types described in this article.
- Public records: Mortgages and loan deeds of trust are recorded at the county courthouse, as are notices of action taken against delinquent borrowers.
- County recorder or clerk of court offices: You can find Notices of Default, sometimes called Lis Pendens, at the county recorder’s or Clerk of Court’s office.
- Brokers: Real estate brokers are aware of upcoming short sales that they or others in their firm are handling.
A person’s real estate can be taken and sold at auction to pay delinquent taxes. This includes local property taxes and state and federal income taxes.
Property tax recovery actions are also recorded at the county courthouse, just like lender foreclosure actions. Your county’s website may offer lists of these properties.
The IRS website provides a list of foreclosed properties around the country. Your state’s Department of Revenue may also post a list like that.
County Owned Properties
A county or municipality may own property of varying types, including commercial, industrial, or residential.
Residential property would be owned by the county due to the previous owner’s failure to pay property taxes.
We discussed how to find those properties in the previous two sections.
5. Look for Abandoned Properties
You should be regularly driving the markets where you own or would like to own a property. This will alert you to Airbnb investment opportunities.
When you see properties that appear to be abandoned, look up that property in your county’s tax records.
The records will show the property address and the owner’s address. If the owner’s address is not the same, it’s likely that the owner either inherited the property or is an investor.
If the investor/owner lives elsewhere (absentee landlord), this can be a good opportunity for you.
An abandoned property indicates that the owner isn’t able (or willing) to properly maintain their asset, and they might be ready to sell.
This guest post has been contributed by our friends at HouseCashin.