By The Mashvisor Team
Airbnb investments are a perfect way to generate passive income. They are suitable for you whether you’re getting started in real estate investing or you’ve just heard about them and desire to explore their potential.
Airbnb properties are a great option for investors who want to invest in rental properties but wish to forgo the responsibilities of being a traditional landlord.
That said, here are some benefits investors enjoy when running an Airbnb property:
Higher Potential Return on Investment
Owning an Airbnb rental property with a good occupancy rate consistently throughout the year can generate higher profits than renting out the same property as a traditional rental. Remember, you’re charging the rental rates on a nightly basis instead of the traditional monthly basis.
Picture this: Let’s assume you purchase an apartment and get a long-term tenant who pays $1,500 per month for it. If you lease the property to the tenant for a year, your income within a 12-month period will be $18,000.
Now, let’s say you list the same property on Airbnb as a short-term rental for $150 per night. Of course, you won’t host guests every night of the year. Assuming you enjoy a 50% occupancy rate, which is 182 days of the year, you’ll make $27,300. This is more than you’d make from a traditional rental by about $10,000.
Keep in mind that these numbers are just rough estimations to show that short-term rentals can offer higher returns. They don’t represent the actual housing market figures. The amounts could be higher if the property’s fair market value as a vacation rental appreciates. They could also be lower depending on the property expenses and taxes.
Diverse Portfolio of Renters
With traditional long-term rental properties, you lease your property to a single tenant for an extended period. This is synonymous with putting all your eggs in one basket. While it can be beneficial for you when the tenant is financially stable and treats your property well, it can also be detrimental should they miss out on a payment or cause too much damage.
Airbnb rentals give you the opportunity to collect rent from different tenants regularly. Each guest is a small percentage of your total rental income. If any of them cancels their booking or fails to pay, it might not have that much of an effect. In other words, renting out to multiple guests lowers the risk.
Potential Passive Income
Most investors are usually looking for an investment that won’t require their presence or energy to generate an income. While passive income investments still require some level of work, the win for you is that you get a good income with little to no effort.
Once you’ve purchased a rental property and listed it on Airbnb, you can sit back and earn money every time your property gets a booking. You don’t have to be present to entertain your guests or keep them company. Simply list the property and always ensure it’s in top condition.
Keep in mind that an Airbnb investment property generally requires more maintenance and management. Airbnb property management tasks include responding to queries on Airbnb, managing bookings, handling guests on check-in, ensuring guests enjoy their stay, and cleaning the property after each check-out. These tasks can be a bit overwhelming.
However, the best thing about these properties is that you can choose a vacation rental management platform to help you streamline the process and take care of these tasks.
Minimal Wear and Tear
In a long-term rental property, the extended use of furniture and other utilities causes wear and tear. The effect may not be that pronounced in a short-term rental since the guests keep moving in and out. The wear and tear reduce significantly since the property isn’t used daily. Moreover, whether you cater to the needs of vacationers or business travelers, short-term guests are likely to spend most of their time outside and only minimal time in your property.
Also, remember that you carry out maintenance tasks every time a guest moves out. It’s easier to spot any issues early and nip them in the bud before they morph into bigger ones. This isn’t the case with traditional rentals since long-term tenants may fail to report issues, and you can’t constantly be checking on the property.
Since the wear and tear decreases, your maintenance costs may reduce with time since there’s little to no work when fixing the property.
Many real estate investors buy their Airbnb properties to also serve as their second homes. The best thing about Airbnb rentals is that you can pull the listing down any time you want. You can decide when your guests can book your property and for how long they can stay.
This means you can have regular breaks for you and your family to enjoy the property. Whether you’re an absentee owner who needs to use it for your vacation or a local owner who wants to host visiting family and friends, enjoying the property for personal use is a huge perk of buying a vacation rental over a long-term rental.
You also benefit from flexibility when it comes to your Airbnb pricing strategy. Airbnb doesn’t define what you should charge on a weekly or nightly basis. This is your work. You can charge as high or as low as you want. However, you want to keep your rates competitive, having in mind other short-term rentals in your area.
Ensure you check with the local authorities before buying an Airbnb property. Depending on the location of your choice, your dream may fail to take off. Some areas have strict laws and regulations that make it harder for investors to own and operate short-term rentals. Others have placed a cap on the number of nights you can lease out your property as an Airbnb. This can significantly cut down the potential rental income you can make from your Airbnb investment.
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Airbnb rental properties have become increasingly popular with both investors and renters. Investors love them since they can be very lucrative, while tenants prefer them since they’re more affordable compared to hotel rooms and other means of accommodation. If you’d like to take advantage of this blooming real estate investing strategy, be sure to do your homework before buying an Airbnb property.
Mashvisor is an industry-leading source of residential real estate data and analytics in the US market. They help investors find profitable Airbnb and long-term rental properties quickly and confidently. They’ve turned 3 months of real estate research and analysis into 15 minutes.
One of the main discussion points between real estate investors is the debate about whether you should list your property on Airbnb or choose traditional long-term renting. Which strategy is more lucrative and can generate better ROI? Let’s discuss the pros and cons of each.
Due to the coronavirus pandemic and travel limitations, Airbnb hosts experience a drop in bookings and are scrambling to find new guests. To keep their businesses afloat, many of them are turning their property into Airbnb long-term rentals. But is it a smart approach? Let’s find out.
Thinking about real estate investment to make money outside your 9-to-5 job? Buying a vacation rental home might be the best way to enter the real estate business and become a property investor.