There are countless ways in which people can invest their money. The stock market, businesses, bonds, etc. to name a few. But what about real estate? More specifically, Airbnb investments.
Some people have made Airbnb investments their entire career. It’s a full-time job where they generate all of their income. Others that have dabbled in Airbnb investments have done so as an additional way to earn passive income.
The travel industry has been forever changed since Airbnb first started. There’s no question about it. And now, the business is just part of common knowledge. Similar to Uber or Lyft in association with taxis for rideshares. Chances are, you’ve stayed in one if you’ve traveled, or know someone who has stayed in one. But have you wondered what it would be like to be on the other side of it? To actually partake in Airbnb investments as a host.
Airbnb Investment vs. Traditional Real Estate Investments
Whether you are buying a second home for investment, or purchasing an Airbnb, you’ll need to decide which fits best with your needs as they are different. Typically, with purchasing a second home for investment in traditional real estate, the goal is to either flip it and sell it or rent it out. When you’re renting it out, you usually will do a background check and credit score check on potential tenants. They’ll then also sign a longer-term lease agreement, usually 12 months. The renters will move in, will usually need to furnish the home while they’re living there, and you are responsible for the house as the landlord.
Airbnb rentals are shorter-terms, so you’ll be able to host multiple guests a year, even several different guests a month at times.
As an Airbnb host, there are also several other expenses you should consider taking on to attract more guests to your property. For starters, you will need to decorate and furnish the home. The cost of the utilities will be your responsibility, as well as the maintenance of the property. The home insurance you purchase may potentially be different since you’ll have multiple guests a year. And it may be more expensive. Additionally, you may want to include amenities such as television subscription services, or even stocking the kitchen with a coffee pot and free coffee for your guests.
Things To Consider
When looking for an Airbnb investment, check the area out to ensure your property can be profitable based on demand and location. Even though properties near Disney, for example, may be rented every single week, other areas need Airbnb options too. People don’t only utilize Airbnb’s for vacations. People travel for business or other life events all the time, so although location is important, check your area of interest to see how well you can do there.
When checking locations, you need to understand neighborhood laws and restrictions you may encounter. Some communities with HOAs might have strict policies against renting out your property as an Airbnb. It’s imperative to do your research for short-term rental requirements in all areas before purchasing your home.
Airbnb Investments: Pros And Cons
Like any other business venture you choose to participate in, it’s important to weigh out some pros and cons.
- Airbnb’s platform: Once you sign up with Airbnb, you’ll post photos, a description, and hopefully be approved to start finding guests. Airbnb’s platform is so well-known, with visitors looking all the time. This means they’re advertising for you and it’s less effort for you to find your own renters.
- The potential for higher profits: Even though it’s difficult to say how profitable your Airbnb is, you have the potential to earn a lot. Rather than charging monthly rent like in traditional real estate investments, you can charge more per night. As long as you have consistency with guests renting the property, you have very high earning potential.
- Less reliance on long-term renters: The Airbnb property needs to be cleaned in-between each stay, and continuously checked for maintenance. You, or someone you hire, will have access to keep up with the property. You don’t need to rely on ensuring your tenants are helping keep the home in great condition, or paying on time each month.
- Initial costs: Due to the decor and furnishings, as well as potentially including a TV subscription for your guests or free coffee, your upfront costs will be higher.
- Occupancy: With traditional real estate, if you have tenants signing a year lease you know you’ll be earning money each month. With Airbnb investments, you may have pockets of time where your property isn’t getting rented, which means you won’t be making money on it during those times.
- Time: Managing an Airbnb is basically an additional job. At times, you’ll need to communicate with the guests, make sure everything is up to date on the website, clean the property, maintain it, and so on. This can be very time consuming.
Having Airbnb investments can be a lot of work, but the reward can also be great. If you’re interested in purchasing an additional property, you may want to consider working with an expert agent. At Trelora, the real estate agents can assist you with finding the best home that will fit all of your needs.