Buying an Airbnb rental property can be lucrative. With all of the regulations, is it still worth it? Well, the answer is a resounding yes! Here are some good reasons why Airbnb continues to be a good investment.
First, the short-term rental market is on an upward trend. Studies show that the short-term rental market is on an upward trajectory and is expected to grow at 7.9 percent every year. More and more travelers and vacationers are finding Airbnb properties appealing, as they offer more benefits in comparison to traditional hotel rentals.
Second, Airbnb rentals have a higher potential for profits when compared to traditional long-term rentals. This is due to the fact that Airbnb rentals are rented per night rather than per month basis. Even considering things like occupancy rate and vacancy costs, your Airbnb rental would still give you more income.
Last but not least, owning an Airbnb investment can provide you a secondary residence that you can use to spend your vacations. So, you’ll not only be able to use it yourself, but you’ll also be able to earn from it as well. With this in mind, here’s how to buy and manage a profitable Airbnb rental property.
How to Buy and Manage a Profitable Airbnb Rental Property
1. Choose a Top Location
When it comes to real estate investments, location is everything. The location you choose can either make or break your investment.
One of the key determinants of your profitability on your Airbnb investment is the occupancy rate. Obviously, the more guests you’ll have the lower will your occupancy rate will be. What this means is that you should aim for a city that enjoys high visitor numbers.
In the U.S., New York, Texas, Nevada, Florida, and California are the most visited states. But don’t write off smaller towns, yet. They can also make for top Airbnb markets if you do proper diligence.
2. Check out the laws that govern the Airbnb business.
Another important thing to consider prior to buying an Airbnb rental property is the law. Many laws continue to be imposed on the business, especially after the tremendous growth witnessed during the last decade.
So, once you have found a location, the next thing is to research the local laws governing Airbnb investments. You can begin by checking online sources, local newspapers, and the Chamber of Commerce website.
Among other things, make sure you understand what taxes and fees need to be paid as well as what conditions are necessary to operate an Airbnb business.
3. Consider working with an agent.
Working with a professional can help you locate a good location and property for your Airbnb rental business. More often than not, agents have access to the best deals on the market. In addition, they can help you negotiate on a deal and get you a better price than you would if you did it alone.
Remember, though, no two agents are created the same. As such, do your due diligence first prior to hiring one. For best results, hire an agent whose area of specialty involves Airbnb rentals. A good agent will advise you on the local regulatory framework, the best property type, and the best neighborhoods.
4. Set up your budget.
Plan your budget carefully to avoid financial issues somewhere down the road. The ideal property should be one that you can comfortably pay without defaulting on your mortgage payments. So, consider your income sources as well as your ongoing costs.
When shopping for a property, you might find perfect-looking properties that can seem tempting. So, set the maximum price that you can comfortably afford and stick to it. Please bear in mind that the sale price isn’t the only cost you’ll have to cover.
Other costs include insurance, property tax, inspection, appraisal, and closing fees. These can add up to something significant.
5. Buy the right property type.
Naturally, the best property to invest in will be dictated by the nature of your market. For instance, if you decide to buy a property in the mountain or beach to host friends of families on vacation, then a single-family home would make the most sense for you.
If, on the other hand, you decide to buy a property in a busy city with many business travelers, then buying a condo or a small apartment would be a smarter choice.
The type of property usually determines how appealing your property is to guests. If you buy the right property type, your occupancy rate will go up. And, with occupancy rates up, it also means your rental income will go up as well.
6. Conduct a rigorous analysis.
Once you have a few properties you are interested in, the next step is to conduct a careful analysis. Begin with a comparative market analysis (CMA). Essentially, this means finding comparative properties and checking out their performance.
This will ensure that you don’t overpay for your investment, as you’ll be able to establish the fair market value of your rental. If you’re a new investor, it’d just be best to hire a real estate agent or broker to do it for you.
7. Hire a professional property management company.
You should now be a proud investor if you have followed every step mentioned above. Now, being an Airbnb host can be challenging. This is especially so if you work another full-time job. It’s for this reason that Upkeep Media recommends hiring a professional property management company.
A good company will help you determine the rental rate, handle the listing and marketing, screen prospective guests, and repair and maintain the property among other things.
Yes, you’ll have to pay a monthly property management fee. However, it’s also true that your ROI will go up, especially if you hire the right company.
There you have it. Seven tips on how you can buy and manage a profitable Airbnb business. If you find any step daunting, please consider hiring expert services.