Despite all the regulations surrounding the business, buying an Airbnb investment property still remains lucrative. The following are some reasons supporting this.
To begin with, studies continue to show that the short-term rental business, which includes Airbnb, is growing at 7.9% year after year. This means that an increasing number of vacationers and travelers continue to find Airbnb attractive. This is unsurprising considering the benefits that Airbnb offers in comparison to traditional hotel rentals.
Second, Airbnb rentals are more profitable than traditional long-term rentals. For example, consider a 2-bedroom property that rents for about $2,000 a month. Then, consider how much the same property would be able to make if it was an Airbnb investment.
With a reasonable rate of $100 per night, that would mean $3,000 per month in rental income. Even taking considerations like vacancy costs and occupancy rate, an Airbnb investment would still be able to net you more.
Owning an Airbnb investment would also provide you with another home that you could use for your family’s vacation.
Evidently, buying an Airbnb investment property can be lucrative. That said, just like any other real estate investment, due diligence is key. To learn more about different kinds of rental properties, check out this rental management glossary.
The following are top tips on how to buy and manage a profitable Airbnb rental property.
Tip #1: Hire an agent.
Making mistakes is easy if you lack the skills and experience. Hiring an agent is especially recommended if you are just starting out in the real estate world. Remember, buying a property investment is a huge financial undertaking. As such, making a mistake can turn out to be a rather costly one.
Hiring the right agent can help you tap into their networks and help you secure the right property easily. Additionally, they may be able to help you get a good deal through negotiation.
No two agents are created the same, though. So, make sure to do your diligence prior to hiring one.
Tip #2: Come up with a budget.
Budgeting will help keep you on track. Your goal would be to find a property that you can comfortably afford to pay mortgage payments for. And to achieve this, consider your income as well as your expenses.
When property shopping, it’s easy to get carried away by properties that look perfect. Avoid that temptation at all costs. Stick to your budget and only consider properties that fall within your budget range.
Remember there are other expenses you’ll likely have besides the sale price. These include closing fees, property tax, appraisal, and insurance.
Tip #3: Pick the right location.
While it may sound cliché, location is indeed everything when it comes to real estate investing. Location, location, location is every real estate agent’s catchphrase. Buying in the right location can mean higher property appreciation and greater demand for your Airbnb rentals.
There is no denying it, the occupancy rate is the greatest determinant of your Airbnb investment’s profitability. A higher occupancy rate means more income for you. But, how exactly do you achieve a higher occupancy rate?
Well, you can do that by buying your property in an area that enjoys high visitor numbers. Just to give you an idea, Florida, New York, California, Nevada, and Texas are the most visited states. Smaller markets can also do well.
Tip #4: Check out the laws.
A smorgasbord of laws governs vacation rental investments. And many continue to be enacted, as the business continues to witness tremendous growth.
So, once you’ve settled on a certain location, the next thing you need to do is research the local laws governing vacation properties. The Chamber of Commerce website is a good place to start. You could also check the local newspapers as well as other online sources.
Tip #5: Buy the right property type.
The nature of the market typically dictates the type of property to buy. For instance, it would be smarter to buy a small apartment or condo if buying in a busy city with many business travelers.
On the other hand, it would make more sense to buy a single-family home if buying a property on the beach or mountain to host families and friends.
Tip #6: Hire a property manager.
Congratulations! You should now be a proud Airbnb investment owner if you have followed all the aforementioned steps. That said, that’s only half the battle. The other half involves the property’s management.
If you don’t have the time or are inexperienced, hiring a property manager is the way to go. A professional property manager brings a lot of value to the table. He or she can help you determine the rental rate, handle property advertisements, screen prospective tenants, and handle all repair and maintenance tasks on your behalf.
Buying a real estate property is not that easy as it seems. Luckily, these tips can help you make the right decision the first time.