Millions of people use Airbnb every year to find temporary accommodation for a vacation, business trip, or to explore the city for a future move. Demand for Airbnb property rentals is growing despite restrictions during the pandemic. It can be said even that the new realities during the coronavirus rampage contributed to the increase of the Airbnb business profitability. After all, guests often prefer to rent secluded houses than hotel rooms.
Whether investing in Airbnb property will be the right decision for you and why a short-term lease can be more profitable than a long-term one, we will learn from this article.
Pros and Cons of Buying Property for Short-Term Rent
Is it worth investing in an Airbnb property? Consider the advantages and disadvantages of the rental business so that you can answer the question objectively.
Pros of buying a house for an Airbnb activity:
- The additional income that can become basic, stable, and high. With the right management of the rental business, choosing the optimal location, a well-furnished home, and creating excellent advertising, you can count on a regular flow of customers.
- Personal Purposes Usage. You can live in the house during the summer or spend the holidays in a change of scenery. Decide on your own the days when you can book a house for yourself.
- Profitable investment for the future. When your children grow up, you can stop the rental business and leave the house at their disposal or move there personally. You can also sell your ownership in the future, put money in a bank account and secure a decent retirement life or buy a house in another convenient place.
- Coverage of certain expenses thanks to guests. You can charge cleaning fees to customers who are guests at your home. Thus, your housing will always be in order, and minor problems will be solved at the stage occurrence. Also, in some areas, the owner can pay the mortgage on the rental house with the guests’ money.
Cons of buying property for vacation rental:
- Poor payback and profitability. If you miscalculate or choose an unpopular location for your rental home, the cost of buying a property may not pay off or be recovered too slowly. And irregular clients’ visits carry the chance of profit’s lack.
- Frequent visits to your home are great. But each guest carries a potential danger to your property. That is why taking out insurance for the property’s host is a must if you want to avoid many problems.
How to Start Investing in Real Estate for Airbnb
Careful preparation before buying a short-term rental property will help you avoid further complications in managing your business and lay a solid foundation for its development.
Here are some important steps to take at the beginning of your journey.
Choosing a Location to Buy
How often guests visit your property depends on its location. Where can be the largest flow of customers? In places rich in tourist attractions, located near the sea coast or a picturesque lake, as well as in the central parts of cities, near important communications. You can read more about the issue in this article https://www.hostyapp.com/the-best-us-cities-for-airbnb-business-in-2021/.
Pay special attention to seasonality. Rare visitors won’t like to go to the windy seashore in winter. That’s why you should also familiarize yourself with the main period of the tourists’ influx and determine: are you ready for an irregular flow of customers? Or is it still better to give preference to a more stable booking in a city visited by tourists at any time of the year?
Check out the number of similar listings in the selected area and evaluate your competitiveness.
Search for Local Laws and Taxes for Airbnb Owners
Once you have chosen a location that you think will be ideal for your target audience, take the time to study the legal aspects. In some townships, the rental business is highly regulated or may even be banned. To place your listings on the Airbnb platform, you may need permission from the authorities, obtaining a license, paying a fixed fee, etc.
An unpleasant surprise can also be a limit on the number of days that your property can be rented to clients (60-90 days are possible). And this does not have a very positive effect on the level of income.
Determining the Most Appropriate Type of Property
What kind of real estate to invest money in? It depends on the place of purchase and the target audience.
If you are defined to rent housing in the city center to people who have come on a business trip, small apartments for one person will be a great solution. You can join a homeownership association by purchasing a condo. These are separate flats in multi-storey buildings. The owner will have to pay for the common house maintenance.
You can also buy a townhouse with land, away from the noise of the city. The advantage of such ownership can be the presence of personal territory, and the disadvantage is the proximity of other people.
In the case of choosing a coastal area for a future rental house, it is better to opt for a separate building with several rooms, where a large family can accommodate. You can count on free space, fewer restrictions, and more privacy there.
Search for Your Future Property
When choosing a suitable house, check its condition: whether it is necessary to make repairs or will such a purchase be profitable? Clients prefer housing that has its own zest. Homes in an unusual style can attract the attention of guests: nautical, rustic, ethnic, etc. You may be able to find a ready-made option for sale. But it will most likely need a redesign. Therefore, rate your financial capabilities in advance.
Explore what other hosts in the nearby area offers so that your home can be as good as others, and even stand out with special conditions.
Create a rough budget for expenses and income. You need to determine how much money you will spend on the house, its repairs, and furnishings, license fees, insurance, maintenance, and cleaning. Also, guess how much money you can earn per month on rent.
You will be able to calculate how quickly your property’s investment will pay off and when it will start to generate income. If the monthly real estate costs are more than earnings, the business will be unprofitable.
Finding a Source For Financing the Purchase
If you don’t gather enough money to own a property, you can use the services of a mortgage broker. You will have an opportunity to pay the monthly installment for your real estate from the booking’s income. A specialist may help if major banks refuse to accept rental income to repay a loan.