Airbnb Rentals The Pros And Cons Of Airbnb by Joseph Pickett January 6, 2022January 6, 2022 by Joseph Pickett January 6, 2022January 6, 2022 Did you stay at an Airbnb recently? Then you might be considering buying Airbnbs yourself and growing cash flow. Renting an Airbnb to make money while you sleep can be lucrative. But there are considerations, too. Don’t worry! Mashvisor is here to help you evaluate the pros and cons of Airbnbs. With our suite of helpful financial tools, you can quickly gauge if investing in an Airbnb is a fit for you. Please continue reading to discover everything you should know about the pros and cons of Airbnb. We’ll look at the pros of Airbnb investment properties first, followed by the cons. Pros Airbnbs Can Be Lucrative Everyone enters rental real estate with the idea to generate positive cash flow. But some rental strategies can net more profits than others, depending on the situation. If you own an Airbnb that is rented most of the time, you can make plenty of money. In fact, your after-expenses profits might be higher than renting the home to a single tenant. For example, in Dallas, the average apartment rents for $1,423 per month with an average cap rate of 1.95%. That’s $17,076 per year if your tenant signs for one year. And average rental income is about $1,680 for a regular rental apartment. So that’s about $56 per day. But what about if you decide to Airbnb the same Dallas apartment? The average cap rate is 3.22%, which nets about $2,870 per month. That comes to $95.60 per month. Or $34,400 per year. So you can almost double your income with a fully rented Airbnb. When thinking about the pros and cons of Airbnb, doubling your income is a big pro! Also, the short-term rental strategy with Airbnb allows some hosts to stop working full-time. However, the income is good enough sometimes to become a full-time host. Various Types Of Tenants When you rent your apartment traditionally, you are entirely dependant on one tenant paying rent. However, if you do your due diligence and things work out, this can be perfect. But what happens if your tenant loses their job? Or if they just stop paying? Your income takes a beating, and it can take months to evict them. You earn income from many tenants each month when you do an Airbnb. Each daily or weekly tenant is a small part of your monthly cash flow. If one or two tenants cancel, it has a minimal effect on your income. More Flexibility Renting your place out for a year means having less control. However, as an Airbnb host, you have complete control over who stays and for how long. This means your income level for the property is mainly up to you. If you want to earn as much money as possible, you can Airbnb the property every day. But if you have other plans for the unit and want it vacant, you can do that, too. Listing Is Free Listing your property for rent on the Airbnb site is free. It’s nice not to have to pay for advertising costs, right? Information you can include on the Airbnb listing at no charge includes your host profile, property description, and photos. And you get to take advantage of all the marketing features of the Airbnb site. You only pay Airbnb a fee when the property is rented. Learning Opportunity When you run an Airbnb, you’re operating a business. You will need to market the home, attract renters, make sure they’re happy, and maintain the property. For the right person, Airbnb offers an incredible rental learning opportunity. You’ll learn about property management, guest relations, customer service, and real estate operations. There are many Airbnb success stories online in various real estate markets where the host started small and eventually turned their rental business into a cash cow. You can do it, too! Guest Reviews Ever rented your apartment to a tenant that turned out to be a nightmare? A background check is helpful, but it doesn’t uncover every potentially unpleasant tenant. But with Airbnb, there are reviews about every guest who uses the platform. This lets you know more about the person who will rent your property. Knowing your Airbnb guest tomorrow has 20 positive reviews gives you peace of mind. House Hackers Wanted! Many new real estate investors get their start by house hacking. House hacking means buying a multi-family property and living in one unit. Then you rent out the others. For example, you might purchase a fourplex in Orlando and rent out three units to Disney World vacationers. You live in the four-unit and take care of the property yourself. House hacking allows you to live in your rental property. So, you’re effectively combining your mortgage expenses. The money you save every month in mortgage payments you can use to buy more properties. Scaleable Many potential investors aren’t sure if they should focus on long-term or short-term rentals. But going the Airbnb route can help you make up your mind. For example, say you have a 3-bedroom condo in Las Vegas. You’re new to rental properties, so you only want to rent your condo for one weekend per month. Airbnb lets you get your feet wet to see if being a host appeals to you. Then, if you like it, you can offer your condo every weekend or even every day. People who enjoy Airbnb can scale up and buy as many properties as they can afford. Some even purchase a multi-family property with four, 10, or more Airbnb guests staying at once. Meet People Another advantage of Airbnb investment property is you get to do more than just make money. Many hosts develop long-term friendships with their guests. If you host in your own home, Airbnb is a fantastic way to meet people from around the country and world. Take time to talk to your guests, and you can often find they have intriguing stories to tell. Airbnb Does Much Of The Work Real estate investors know the business can be a lot of work. But Airbnb provides low-cost marketing and the ability to get bookings on their site. The website also has an easy-to-use system for bookings and payment. It’s nice to be able to rely on Airbnb to handle bookings and payments – less work for you! Damage Protection Ever had a tenant wreck your apartment? Unfortunately, many rental property owners have been there. But Airbnb features a Host Guarantee program to minimize this risk. The program offers up to $1 million in damages to Airbnb properties. This can give you the peace of mind to move forward with your Airbnb business. Many Guests Aren’t There Much Many Airbnb guests are on vacation, so they often don’t spend much time in your place. Instead, they usually just want somewhere to sleep and put their belongings. So you may not have as much maintenance and repairs with Airbnb as you might think. Cons The pros and cons of Airbnb include some things that might make you think twice in some situations. So let’s take a look. Hosting Takes Work A list of Airbnb pros and cons is never complete without noting that hosting is a lot of work. It is a job that takes a ton of time and energy once you have more than one or two units. You need to be available to respond to guests at any time. And you need 24/7 availability when you have someone staying at your property. Being an effective host requires you to be skilled in customer service, communications, property management, and more. Many hosts say Airbnb rentals take more work than long-term rentals. Remember, it’s your job to keep your property in a well-maintained and attractive condition at all times. If you get too many complaints, Airbnb will get involved. Some hosts save themselves work by using a cleaning service, but this adds to your monthly costs. Also, remember there is a lot of competition with other hosts. So if you want a lot of bookings, you need to spend extra money to ensure the property looks attractive to guests. Higher Risk Long-term rentals usually involve doing a background and credit check on the renter. Airbnb does have guest reviews. And the payment is processed as soon as the guest books it. But there aren’t any background checks. Restrictions On Airbnb Rentals When looking at the pros and cons of Airbnb, it’s critical to understand state and local regulations. Not every city allows them. For example, in San Francisco, you only can do Airbnbs in certain situations. Specifically, you can’t rent your property without being in it yourself for more than 90 days per year. Violators can be fined up to $484 per day. Also, you’re required to live in residence at least 275 days per year. If you have a rental in Santa Monica, California, you may be out of luck. This southern California city has enacted strict restrictions on short-term rentals. As a result, most Airbnb listings in the city were effectively made illegal. Further, many HOAs have restrictions on using homes for short-term rentals. So you will need to check with your HOA to see if your rental is legal. Restrictions on Airbnbs are often put into place to ensure enough housing for city residents. But if you own an Airbnb in a more restrictive city, it will limit your income. Unsteady Income A long-term rental offers income every month (if you have a solid, paying tenant). But an Airbnb rental could sit empty for a while, especially in the off-season. Airbnbs can be lucrative, but you need to get comfortable with making less money part of the year. Costs You can list your Airbnb rental on the Airbnb website for free. But you need to pay a roughly 3% service fee for every confirmed booking. Fussy Guests Your Airbnb needs to be attractive and stylish to generate plenty of cash flow. What kind of carpet does your house have? Does your apartment building have a gym and spa? Airbnb guests have many options in popular cities. So they want to think they are getting a great deal. However, remember that many Airbnb guests are on vacation and want a luxurious place to relax in. Changing Behavior At Home If you have Airbnb guests in your extra bedrooms, you need to change your at-home behavior. The kitchen and bathrooms must always be neat, and you need to keep your behavior in check. If you like wandering around your home in the buff, Airbnb might not be for you! Higher Expenses Renting a long-term unit or home means the tenant pays for utilities. But Airbnb owners must cover electricity, cable, Internet, water, and cleaning. You also must provide towels, toiletries, and linens. And remember there is a lot of competition. To make your Airbnb stand out from the others, you need a fantastic description, professional photography, and solid furniture. On the other hand, a long-term rental property is usually rented unfurnished. Bad Reviews Happen Dealing with the public regularly means you will eventually get some bad Airbnb reviews. No matter how hard you try, some guests are difficult to please. But if you have mostly positive reviews, it shouldn’t be a big deal. Summary It’s clear there are many pros and cons of Airbnb. Deciding to be an Airbnb host is a huge decision. But thousands of people make passive cash flow with Airbnb. if you find the right Airbnb investment property and manage it well, it can be extremely lucrative. We at Mashvisor are dedicated to helping real estate investors find the best Airbnb rentals for their portfolios. That’s why we offer our Property Finder to locate the most profitable properties in various markets in the United States. The Property Finder helps you find the best-performing homes and apartments in your favorite markets. Each property is sorted to show the best Airbnb property possibilities based on Price Income Occupancy rate Cap rate Cash on cash return When you partner with Mashvisor, you’ll find weighing the pros and cons of Airbnb is much easier. Airbnb can be an attractive business with compelling cash flow, and Mashvisor is here to help you realize your dream. Sign up for Mashvisor now and get 15% off. Start Your Investment Property Search! START FREE TRIAL Airbnbairbnb rentalsShort-Term Strategy 0 FacebookTwitterGoogle +PinterestLinkedin Joseph Pickett Joseph Pickett has been a writer and editor for digital media since 2011. He writes about real estate, mortgages, finance, legal and medical topics. An Ohio native, Joseph currently resides in San Antonio, Texas. 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