Have you ever given any thought to expanding the number of houses that you rent out via Airbnb by purchasing more homes? You may avoid wasting time, effort, and money by ensuring that you achieve your goal by ensuring that you perform the appropriate measures. You should read the advice that Daniela Andreevska, the Director of Marketing at Mashvisor, has provided for increasing your short-term rental business by locating and purchasing the appropriate Airbnb investment property.
Finding the ideal property in an ideal location is the secret to the success of any real estate investment venture. The same is true when investing in an Airbnb rental home.
Discover the best locations for an Airbnb investment in some countries.
If you want to be successful and make a lot of money with Airbnb, the first thing you need to do is acquire a valuable house. This is true regardless of how talented you are at maintaining homes and entertaining guests on the platform. To assist both inexperienced and seasoned investors in their search, we have created a list of the most important steps to consider when selecting the best Airbnb property. This list can be seen here.
Is Airbnb Real Estate a Good Investment?
Purchasing any conventional investment property may be profitable, but if you play your cards correctly, investing in an Airbnb holiday rental company might potentially provide higher profits. Let’s examine the benefits and drawbacks of owning Airbnb holiday homes in more detail:
Pros of Airbnb Rental Properties
- Airbnb revenue may exceed rent from a long-term rental since property owners may demand greater nightly rates than conventional renting.
- Property owners may automate their vacation rental operations with the help of vacation rental software.
- Simple and inexpensive advertising using an Airbnb listing.
Cons of Airbnb Rental Properties
- High guest churn entails more frequent daily host duties, such as cleaning. The passive revenue that comes with long-term rentals is thus forfeited.
- Low occupancy risk during off-seasons
- When you equip and decorate your Airbnb house, there are higher upfront fees.
How to Buy Airbnb Property: 8 Key Steps
There are a few steps that will help you on your journey if you’ve decided to join the market and purchase your own Airbnb home. Make sure you start your company off on the right foot by following these crucial steps:
Choose a Top Location
When calculating your return on investment, one of the most important elements to consider is the occupancy rate of the Airbnb homes you own. Naturally, the number of guests that stay at your property and the number of days each month that it is available for rental will directly correlate to the amount of money you bring in.
This implies that you should seek a location with a sizable population of visitors, including both leisure and business travelers.
Start with a few destinations that are already well-known to tourists, but don’t forget the possibility that smaller towns might also be ideal markets for Airbnb investments. Keep in mind that New York, California, Florida, Nevada, and Texas are the states that get the most tourists each year. More about the TOP 20 US Cities for Airbnb Investment read here.
You need to evaluate the occupancy rate at both the city level and the neighborhood level to guarantee that your future investment property will have the highest possible rental demand. This can be done by looking at both the city level and the neighborhood level. Always keep in mind the three most important words in real estate: location, location, and location.
Check Out the Airbnb Laws and Regulations
Because the market for short-term rentals has expanded so significantly over the past ten years, local governments all over the world and in many cities in the United States have started to impose stringent rules and sometimes even ban the operation of Airbnb rentals, particularly those that are not owner-occupied. This is especially true for rentals that are not owner-occupied.
As a real estate investor, breaking the law and incurring fines and other consequences is the last thing you want to do. As a result, before settling on a housing area for your holiday rental, you should learn about the local Airbnb policies that apply to short-term rentals. Examine the websites for the chamber of commerce, the local media, and other internet resources. Make sure you are completely aware of the restrictions on running an Airbnb company in a specific market, as well as the taxes and fees you will be required to pay.
Decide on the Most Appropriate Property Type
The demographics of your area will determine which kinds of real estate are most suited for investment. For this reason, it makes the most sense to invest in a small apartment or condo in the heart of a lively city that attracts a large number of business travelers, provided that the local homeowners association allows for short-term rentals.
If, on the other hand, you want to acquire an Airbnb property on the beach or a cabin in the mountains to host families or friends while they are on vacation, a single-family home will be the best choice for you to go with because of the flexibility it offers.
Your occupancy rent and, therefore, your rental income will be impacted by the kind of property you own, which in turn will have an effect on how desirable your property is to guests. In addition, the cost of the rental property you buy will be determined by the kind of rental property you buy, which in turn will have an effect on the return you get on your investment.
Set Up Your Budget and Plan Your Financing
The best real estate investment property is one that you are able to purchase without putting yourself in danger of falling behind on your mortgage payments and having to go through the process of foreclosure as a result.
In order to accomplish this goal, you will need to make some sound financial choices. In addition to your salary, you should include in all of the regular sources of money you get, as well as any ongoing expenses and savings. Determine the largest price that your financial plan will allow, then commit to paying that amount. During the process of shopping for a new house, you should take care not to let yourself get enticed by flawless properties that are priced over your budget.
Keep in mind that the actual cost of the property is not the only expenditure you will have associated with the property. The purchase of an investment property is accompanied by a number of additional expenses, some of which may go undetected by the buyer. These expenses might include things like insurance, property taxes, appraisal fees, and more. When you put all of them together, the sum may be several thousand dollars.
When it comes to assisting real estate investors in the process of purchasing a property, financing options are, of course, also available. It is also possible to join the market for short-term rentals without having any previous experience in property ownership. The following is a list of some of the most common strategies that may be used to finance your short-term rental business:
An Airbnb loan is a kind of finance created especially to assist aspiring Airbnb hosts in buying Airbnb rental property. The terms, interest rates, and other conditions could be a little different, but the way it works will be comparable to other house loans.
Home equity loans
A home equity loan sometimes referred to as a second mortgage, is a typical financing choice for a property owner who already owns a main dwelling and is seeking to buy a second property. You may fund your investment by receiving a lump payment or a line of credit via a home equity loan.
But if you don’t make your payments, it will put your principal residence up as security. Therefore, before taking on extra debt, you must certain that you can pay the payments.
Rental arbitrage is a wonderful choice if you’re seeking a means to launch an Airbnb company without owning real estate. This comprises borrowing a brand-new house from another owner to put it on the market as a holiday rental.
Even though it could need some persuasion, if a property owner is comfortable with you operating their home as a holiday rental, you might benefit by outearning the rental fee you’d have to pay.
Search for Your Real Estate Investment Property Thoroughly
After you have established how much you are able to spend on your Airbnb rental, you should immediately begin your search for real residences that are currently up for sale. Make use of any and all resources that are available to you, such as the real estate sections of local newspapers, online listing websites, neighbors, and other people you know.
Instead of concentrating only on MLS listings, you should actively seek bank-owned, off-market, and foreclosure houses. This is because the reduced costs necessary to acquire these homes might result in a return on investment that is far higher than that of MLS listings.
When looking at different homes, remember to keep your financial constraints in mind. Try to steer clear of purchasing a property that is out of your price range. After all, the reason you are investing in real estate is to make money, therefore the decision you make needs to be rational and based on factual evidence. You are not acquiring your dream home; rather, you are purchasing a home to live in.
Work with an Agent
You may discover a decent house for your Airbnb rental company by working with a real estate agent. Professionals with access to the greatest offers available on the market are agents and brokers. Additionally, they are skilled at negotiating and will get you a far better deal than you could on your own. Сheck-out 4 questions to consider before you hire a vacation rental management company.
Additionally, the agent fees are paid by the seller rather than the buyer, so you don’t need to worry about adding extra expenses to your budget. Choose a real estate agent with expertise in Airbnb rentals for the best outcomes. They will then be in a position to advise you on the finest areas, property types, and local legal and regulatory frameworks.
Conduct Thorough Analysis
Once you’ve narrowed down your search results to a select few homes that fit both your budget and other requirements, be sure to give them a thorough study. CMA, or comparative market analysis, should come first.
This entails locating a few houses that are comparable to the ones in which you are interested, that are nearby, and that was recently sold—no more than a few months ago.
Examine their costs and take into consideration how they compare to the homes you are thinking about. This will ensure that you don’t overpay for your Airbnb property and will assist you in determining its fair market value.
The study of the properties themselves comes next in your real estate analysis. By predicting the monthly rental revenue from your short-term rental based on the market’s average occupancy rate and the prevalent daily rate, investment property research begins.
Make a list of all the up-front, ongoing, and other expenditures involved in purchasing and maintaining a rental property. The only way to guarantee that your home will generate a positive cash flow is to do this. In the vain hope of soon having better luck, never settle for a property with a negative cash flow or one that barely breaks even. Only invest in homes with a strong cash flow.
The estimated return on investment should also be calculated using the cap rate and cash-on-cash return. A decent cap rate is over 8%, however, real estate experts disagree on what exactly qualifies as a high cash-on-cash return since it relies on your financing strategy.
Use Real Estate Investment Tools and Big Data
After reading about the previous phase, you may be anxious about all the data you need to gather and the calculations you need to run before you can purchase a house to rent out on Airbnb or another comparable site. Indeed, real estate analysis requires a significant amount of time and work.
Investors often find out that the property they have been researching for a few weeks or even months has been sold before they can decide whether or not it will make their money.
However, real estate investment offers a simple answer to this issue. The development of highly complex real estate investing tools that make the lives of property investors simpler and more fun has been made feasible by the growth of machine learning and AI.
Real estate analysis is now quicker, more precise, and more dependable thanks to the utilization of large property data and predictive analytics. Use these resources if you want to thrive in the fiercely competitive world of real estate investing in general and short-term rentals in particular. Additionally, by listening to Real Estate 101’s episode on Airbnb Investing Deep Dive, you may discover more about how to launch a short-term rental company and make investments in Airbnb properties.
One of the finest short- and long-term methods to gain money is via real estate investment. Airbnb rentals are one of the numerous possibilities available for property investments since, in most US regions, they provide a greater return on investment than conventional, long-term rentals.
The secret is to purchase the appropriate property, and by following the 8 steps indicated above, you now know how to achieve so.
Mashvisor is a real estate data analytics tool that helps investors locate profitable rental homes in a couple of minutes, such as those that are listed on Airbnb.
You may easily access information and analysis on tens of thousands of homes and other properties around the United States. Three months of research may be reduced to fifteen minutes with the help of Mashvisor’s rental property calculator, property finder, and heatmap. If you’re new to MasterHost, you may save 25% on your first membership.
If you have a hard time keeping your investment property in order, it doesn’t matter how good it is as an investment. Start utilising vacation rental software to eliminate the possibility of mismanagement and make sure you don’t miss any essential components of running your company. When you implement Hosty, the following functions will become available to you, allowing you to set your company on autopilot:
- Manage numerous listings on Airbnb, Booking.com, and Vrbo/HomeAway without worrying about duplicate bookings.
- Use a centralised inbox and prerecorded messages to elevate your guest communications to the next level.
- In a matter of minutes, you may have a fully functional, professionally designed website for your vacation rental.
- Increase the number of positive ratings you get as a host by having your visitors’ experiences reviewed automatically.
- You may programme cleanings, delegate responsibilities, and track progress.
- Use our direct booking management solution to easily handle all of your direct reservations.
- Connect your Stripe account to Hosty so you can start accepting payments right now.
- Make time-sensitive business reports in a flash.