Nowadays, courtesy of Airbnb, many travelers are staying in people’s homes rather than hotels. According to recent Airbnb statistics, there are 2.9 million Airbnb hosts and 150 million Airbnb users. It is also interesting to note that Airbnb is active in 81,000 cities around the world. Because of its massive popularity, investing in a successful Airbnb property is one of the best ways of making money in real estate investing. Here are 6 tips on how to invest in Airbnb successfully:
Select a viable location
The return on investment on successful Airbnbs will be determined by the Airbnb occupancy rate. The more guests the rental property has and the fewer days it remains vacant, the more money the real estate investor is likely to make. Therefore, making money with Airbnb requires finding a rental property in a location that usually receives a high volume of visitors, whether business travelers or tourists. However, smaller towns should not be overlooked since they could also be viable locations for investing in a successful Airbnb property.
Choose the most ideal property type
Real estate investors should choose the Airbnb rental property type based on the nature of the target market. For instance, if someone wants to invest in a mountain or beach property, single-family properties or multi-family properties would be appropriate. However, if an investor chooses to buy a rental property in a city that is frequented by business travelers, a condo or small apartment would be ideal for a successful Airbnb property.
Get familiar with the Airbnb laws and regulations
With the rapid increase of Airbnb properties in recent years, many local authorities are now imposing strict rules and regulations on such short-term rentals. Breaking the law could result in penalties and even a jail term for an Airbnb landlord. Therefore, before making a final decision on a successful Airbnb property, real estate investors need to research the Airbnb laws and regulations of the city or town. This information can be found from the Chamber of Commerce website, the local government website, local newspapers and magazines, and other online sources.
Have a budget
Real estate investors should look for an Airbnb investment property that they can pay for comfortably without defaulting on their mortgage payments. Based on their savings and regular sources of income, investors should set a maximum price that they can afford to pay for the investment property. However, keep in mind that there are other hidden costs associated with purchasing a rental property. This includes expenses such as property tax, inspection fees, appraisal fees, closing fees, and insurance. All these costs should be taken into consideration when creating the budget for a successful Airbnb property.
Search for properties exhaustively
Anyone looking for a successful Airbnb property can find leads from friends, family, local newspapers, online listing websites, Airbnb reviews or tools such as an online property finder. Investors should also look out for off-market properties, bank owned properties, and foreclosures.
Hiring a real estate agent can make the search for the ideal investment property much easier. An agent with vast experience in Airbnb rentals will offer advice on the best neighborhoods, the most appropriate property type, the local laws and regulations for Airbnb rentals, and other general Airbnb tips. With their negotiation skills, agents can help investors get a more favorable price on rental properties. Since the agent fee is paid by the seller, buyers don’t have to worry about adding more expenses to their budget.
Analyze the options
After short listing a few several homes that fit their criteria for a successful Airbnb property, real estate investors should then carry out a thorough analysis. The first step should be to conduct a comparative market analysis. This involves looking for comparable homes located close to the ones you are interested in and which were sold less than 3 months ago. Such an analysis will help investors figure out the fair market value for the investment property, thus protecting them from being overcharged.
Besides the comparative market analysis, real estate investors should also conduct an investment property analysis. You can use an Airbnb Rental Calculator which will show the monthly rental income that can be expected from the Airbnb property based on the predominant daily rate and the average occupancy rate of the area. Investors should avoid any rental property that barely breaks even or has a negative cash flow. Another aspect of investment property analysis is calculating the expected ROI in terms of cash on cash return and cap rate. Generally, a good cap rate for a successful Airbnb property should be more than 8%.
Set your price
After buying a property for Airbnb, the investor needs to decide the price for visits. Using Airbnb’s metrics, investors can see what similar homes in the area are charging. This price can be raised or lowered depending on expected surges in demand or the day of the week. To boost the occupancy rate, a successul real estate investor could set a minimum number of nights visitors can stay at the rental property. An extra fee could be charged for additional services such as city tours, equipment rental, and laundry.
Get some help
Being the host of a successful Airbnb property can be quite overwhelming when managed solo. A co-host can help handle the email communications, aid in the check-in process, and provide neighborhood-specific tips to guests. The co-host could be a family member, neighbor or friend. Airbnb allows property owners to add up to three people in their listing. It is very important for such helpers to read and understand Airbnb’s Terms of Agreement for co-hosts.
Airbnb property owners could also consider working with the following related businesses:
- KeyCafe – Allows investors to use specific cafes near their properties as key storage locations
- Properly – Offers cleaning services for rental properties before a changeover to new guests
- Guesty – This is a property management firm that helps property owners with back-end tasks such as bookkeeping
Though these services come at a cost, they make it much easier for investors to run a successful Airbnb property.