Whether you're a seasoned Airbnb property investor or are just starting your Airbnb investment journey, it's always good to know where you stand. As you become more familiar with Airbnb rentals, you will inevitably learn a lot - but are you optimizing your Airbnb assets?
Are you missing out on key benefits while allowing unnecessary downsides of Airbnb properties to hurt your passive income?
Call The Short-Term Shop today about the most lucrative short-term rental properties to maximize your Airbnb business profits, and our experts can show you how to boost your rental cash flow with amazing rental investments.
Here are 10 things you must absolutely consider when investing in Airbnb rental properties.
Make Sure You Have Enough Money for Your Airbnb Investment Property
There are currently over four million Airbnb hosts across the globe, in over 190 countries. In other words, there's no shortage of competition! That’s why using your capital wisely plays an important role in optimizing your Airbnb rental. Airbnb investing can be significantly easier if you start off right. As you continue, be sure to use a portion of your income from renting for reinvestment to keep the property in consistently good shape.
After all, both short-term rentals and long-term rentals can be infinitely scalable if you start your rental property business the right way.
Assuming you have to purchase a rental property (and aren't using your own), your money reserves should be anywhere from $3,000 to $6,000 to start.
The Cost of Getting into the Airbnb Market
Money talks and money walks. As a listed Airbnb host and investment property owner, you will have to cover the following expenses on your properties:
- Mortgage down payment
- Short term rental insurance
- Airbnb property purchase price
- Investment property taxes
- Amenity and furnishing costs
- Origination fees
- Monthly utility costs
Also, depending on the number of guests you have, be prepared to spend money on routine maintenance to keep your Airbnb property clean and attractive. The money spent will pay for itself. After all, to maintain a strong Airbnb business you need an Airbnb that guests love.
What Kind of Guests Is Your Airbnb Rental Right For?
Every short-term rental is different. Likewise, every guest is different too. Typically defined as a 'target demographic', your type or class of guests means everything.
What's your preferred renter profile? Envision your ideal guest or renter. Do you prefer individuals or small groups? Are families and/or couples ideally suited for your property and location?
Many property owners fail to accurately target prospective guests, which leads to extended vacancies, poor stays, and unintended consequences. Also, remember to stay authentic in your marketing - it’s not ideal to advertise your property as one thing only to have the guests show up and not get at all what they expected.
A Good Investment Is Only as Good as Its Guests
If your guests aren't happy, neither are you.
From a hands-on homestay experience to a completely detached, digital interaction, your relationship with your short-term rental guests is critically important. Whether they're young or old, budget travelers or affluent vacationers, a single tenant or a rambunctious party of 12, know your clientele.
Proper guest communications can go a long way toward establishing expectations and guaranteeing a fruitful experience for all.
Know Your Airbnb Rental Market and Capitalize!
If you're getting started or your short-term rental property is not producing the Airbnb business you expected, take a look at the area. Is it tourist-friendly with nice beaches, mountain retreats, or popular dining and entertainment?
How about nightlife accommodations or community amenities like concierge service, swimming pools, or fitness studios?
Investing In Well-Located Airbnb Properties Is Crucial
Are there opportunities for education and businesses like good universities and up-and-coming sectors? If an emergency happens, is medical assistance readily accessible? Is the area in high tourist demand?
Once you know the local market, you can determine your monthly rent rate, occupancy rate, and investing potential. If you have the right property, your Airbnb business doesn't have to be a second job - it can be your full-time job! Better markets equal higher profits.
Don't Let Rental Properties Violate Rules, Regulations, or Local Laws
Speaking of the ideal market (and ideal customer), what are the local Airbnb laws like in your region? Sometimes, zoning laws and municipalities can be finicky. They may prohibit certain Airbnb investment properties or make it exceedingly difficult to make a decent passive income.
Not All Areas Are Ideal for Airbnb Investing
Many Airbnb hosts get themselves in trouble by renting to large, boisterous parties that disturb neighbors or violate Homeowners Association (HOA) rules. If one party's Airbnb experience is another party's miserable existence, your investment strategy is likely to fail.
Moreover, every property management company or landlord must conduct regular inspections to ensure tenants are using the property properly. The property must adhere to local laws.
As always, talk to a local real estate agent or contact a leading expert in rental property investments to understand the local laws before you invest in Airbnb.
What Type of Airbnb Property Are You Investing In?
Just as your target demographic and market matter, so too does the type of Airbnb property you own. All of these factors are interrelated. For instance, if the location of your property is in a popular beachside town, the property could be a high-rise apartment right on the water, or a small rancher that sits back a few streets.
Airbnb Property Comes in All Shapes and Sizes
Perhaps you have a log cabin with a mountain view or a small studio space in the heart of a major urban center. Depending on the location of an Airbnb property, the market, and the area's property laws, the type of property may change drastically (as well as the rent price).
Multiple properties demand multiple strategies. Single-family, multi-family, apartment, or condo? Or just a small corner room in a house? No matter what property type you're working with, ensure that it's optimized for profit.
Don't Make the Same Mistake as Other Investors
Many Airbnb hosts don't carefully examine the success of relevant property types. Guests in a given area may be looking for a certain number of beds and bathrooms or square footage. Perhaps they prefer stucco builds or certain architecture like Victorian or Colonial.
Before you start investing, know the Airbnb property type most likely to succeed and keep your occupancy rate consistent. Consult experts in the hottest markets if you're unsure.
Will You Put Investment Property in Your Name?
You're in Airbnb assets for a reason. You want to make the most of your income, paying the least amount required to the taxman. That's why it may be a good idea to form a legal entity such as an LLC. You don't have to do this, but it will definitely help you reduce tax liabilities on your earned income.
Protect Your Rental Investments Through an LLC
Besides the income benefits, you may also enjoy personal liability protection. If you have a short-term or long-term tenant who is especially problematic, this liability protection can be invaluable. Aside from asset protection and tax advantages, having a business entity also lends credibility to your Airbnb business.
Whether you own just one house or have many popular properties, you can make your Airbnb business more respectable with a formal corporate structure.
Be Specific About Airbnb Rental Conditions and Requirements
You can either choose to invest using an entity structure or stay as an informal business. Regardless, your Airbnb investment property must be appropriately marketed. When you list your property on the website, be sure not only to use vivid photos and captivating descriptions but also be specific about the specifics.
What this means is very simple. Be sure to list any additional fees or charges, such as a cleaning fee. Are you pet-friendly? Is there an automated lock or passcode to get into the building? Are there certain amenities guests should know about? How about parking requirements or restrictions?
By detailing all of the specifics, you ensure your guests have the best experiences possible.
Remember, Airbnb Investing Is Not Like a Long-Term Rental
Your average long-term tenant will sign a lease for at least six months. This means the renter is a true tenant and not just some weekend or short-term guest. With Airbnb, the stays are much shorter. As such, you or your property manager will have to address certain issues on a more frequent basis. These duties and responsibilities can vary widely depending on guests, property type, and unforeseen circumstances.
Airbnb Investment Properties Can Be More Hands-On Than Traditional Rentals
Long-term tenants will typically handle their living area of the property. They'll do their laundry, clean the dishes, stock up on supplies, and just generally maintain cleanliness and preparedness. Long-term tenants might even manage landscaping depending on the lease terms.
With Airbnb rentals, this all changes. You may have to provide new linens, handle property damage or faulty appliances, address utility issues, stock up on supplies, and more. Compared to a traditional rental, an Airbnb property may require significantly more legwork.
That said, your Airbnb asset can also provide more income than a traditional rental. It all depends on how you manage your investment. If you want to brush off the added responsibilities of managing your short term rental, you can always hire a third-party management company to take care of things and earn a more passive-oriented income.
Your Airbnb Income May Fluctuate, But the Potential Is HIGH
When it comes to a long-term rental, you have a legally binding agreement that basically guarantees you consistent rent payments for months. This means you spend less time seeking renters, marketing the property, and worrying about rental income.
With Airbnb properties, you don't enjoy this same level of consistent traditional renting. You may be unable to reliably predict your income or determine the ratio of how much you invest versus how much you earn.
Know The Pros and the Cons of Airbnb Rentals
If your Airbnb properties are in seasonal markets with high turnover and vacancy rates, it can be difficult.
Of course, if you're investing across diversified properties and locations, you may be able to have short-term guests all the time. It varies. If you can charge higher short-term rates consistently, your Airbnb earning potential is tremendous.
Call an investment rental specialist if you're seeking guidance about what property type or location may work best with your goals and lifestyle.
Not a Property Owner? Use Airbnb Arbitrage to Your Benefit!
Finally, if you're not the property owner, but simply rent the place, you can actually make money off of it! Airbnb arbitrage is where you sublease your place to someone else or rent it short-term. Of course, not all landlords want you to rent out the place they rent to you. This can make for unexpected difficulties and complexities.
Although this rental arbitrage is legally sound, it may be prohibited in certain areas. Furthermore, you'll need to talk to your landlord or property manager first. Always be upfront with the property owner if you’re looking to sublet to someone else.
The Best Cities to Invest in Airbnb
Whether you're using Airbnb arbitrage or renting out your palatial gated estate, you can always stand to gain from smart Airbnb investments. From Honolulu to Boulder, Boston, Washington, and Orlando, there are many cities and states where Airbnb properties make a terrific investment.
Want to take the headache and hassle out of these investments and build a predictable, powerful passive income? Tired of crunching numbers, worrying about markets, and debating where to put your precious money?
Find the hottest markets with the most lucrative investment opportunities in the country. Contact The Short-Term Shop, a premier short-term rental acquisition company, today.