Despite the ongoing pandemic, investing in Airbnb still looks like a lucrative strategy. Whether you’ve stayed in an Airbnb rental or have just heard about the lucrative possibilities of owning a sought-after short-term property, owning a portfolio of Airbnb rentals may seem like a smart way to boost your passive income. Using the Airbnb platform—or a competitor such as VRBO or HomeAway – to rent properties can be a lucrative real estate investment strategy, but it also has challenges. So, to ensure that you embark on this venture with eyes wide open, check out these suggestions for buying a vacation rental property and maximising your rental income. Here are some of the key pros and cons of Airbnb as an investment strategy.
What Is Airbnb Investing?
Airbnb investing refers to when an investor buys a property to list it (or individual rooms) on Airbnb, as opposed to using it as a primary residence. Unlike a traditional rental model, this strategy allows real estate investors to generate income from various properties and renters.
Pros and cons of Airbnb as an investment strategy
Before you decide to invest in short-term rentals, make sure you weigh all of the advantages and disadvantages of this strategy over typical real estate investing.
Pros of Airbnb investing
High profit margins
The biggest advantage of an Airbnb investment strategy would have to be the profit margin. Most investors are lured in by the numbers — you can make between two to three times the revenue you could with a long-term rental. It’s also a great way to hedge against inflation. As average prices go up, your mortgage loan remains the same, which provides you with more cash flow. The average nightly rate varies by location, but the better experience you provide, the more you can charge.
A great source of passive income
As Airbnb and other vacation rental platforms have become more popular in recent years, there are more opportunities for property owners to generate a stream of passive income. While it does call for continuous hard work, short-term rental investing is still a viable investment strategy that allows Airbnb hosts to build a fortune. The secret of handling multiple responsibilities is using tools and software solutions that can help automate the bulk of your daily tasks.
A diversified portfolio of tenants
If you are lucky to find a tenant that pays a monthly rent on time, renting your property to a long-term tenant has its advantages. Though, when your tenant pays late or fails to pay rent one month altogether, the repercussions can be felt for a while. On the other hand, with Airbnb investing, you collect income from various tenants regularly. This means that each renter is responsible for only a part of your income which can reduce the overall effect of issues with a renter.
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.
Greater control
While it requires more work and has higher expenses, it can be easier to manage the maintenance. As you will welcome new guests more often, you will be informed about any maintenance issues sooner giving you more control over your home. Also, when running an Airbnb rental, you can change your prices regularly and increase them during the high season or events. This means you have greater control over your pricing policy as well.
Cons of Airbnb investing
Higher expenses
When you rent to long-term tenants, you are much less involved in their renting experience and you will only be responsible for maintaining the property and the odd emergency. However, as a vacation rental owner, you’ll have to spend more to provide a brilliant experience to your Airbnb guests.
Short-term rental rules and Airbnb regulations
In many cities, local authorities are instituting harsh rules and regulations relating to Airbnb. These laws can often make it difficult to boast a high occupancy rate as they can limit how many days per year you may rent out your property.
Irregular income
While a short-term rental can yield more profit, your cash flow could be more inconsistent. For starters, you probably need a few vacant dates per month for repairs or preparation. Secondly, seasonality also plays a huge factor in an Airbnb investment.
Finding guests
When you are a beginner investor, it will be harder for you to find guests as you will most likely still have only a handful of five-star reviews. To grow the number of your reviews, don’t hesitate to ask your guests to leave you a review.
More work on a day-to-day basis
Airbnb investment requires more work on a day-to-day basis. It will be your responsibility to see to it that your property is always ready and everything is in perfect working condition unless you hire an Airbnb property management company.
