Investing in an Airbnb Property

Investing in an Airbnb Property

Airbnb is undoubtedly leading the way for the vacation rental ownership market. Airbnb is a worldwide sensation with properties located in 190 countries. As of November of this year (2018), 640,000 people have invested in and are hosts of an Airbnb property.  As others see the popularity of the site and its competitors, many wonder if they should jump on board and invest in their own vacation rental property.

Investing in an Airbnb Property

Many people that would’ve otherwise never thought to rent out their home or apartment are looking into buying a piece of property just to get in on the popularity of Airbnb. Thinking of doing the same? Before you invest there are a few considerations you will want to take in account:

1. Research the Local Rules and Ordinances

Before purchasing a property for short-term rental, research the rules and ordinances in the area. Some cities enforce certain rules that limit short-term rentals in favor of long-term rentals. Depending on where one lives, they may find that investing in an Airbnb property breaks the law.

Moreover, some local rules force renters to pay additional taxes and fees on the income generated with their Airbnb. Similarly, these renters may also be forced to obtain certain licenses to be able to rent out their property.

2. Ensure that the Property Can Also Be Used for Long-Term Renting

Buying a property specifically for Airbnb? Be sure that the property is also available for long-term renting. As business is always ebbing and flowing, it isn’t feasible to solely rely on revenue from short-term rentals.

3. Keep Tax Rules in Mind

Renters that set their Airbnb property lower than the market value may find that they are disqualified from using the property as a tax write-off. Before setting the rates or the property, research the IRS tax code and ensure that the property is in accordance with federal guidelines.

4. Review All the Expenses of Your Short Term Rental

While renting a room in one’s apartment on Airbnb requires little additional effort, renting an entire property tack on extra responsibility for the renter. In addition to maintaining the property by repairing and cleaning it, the owner must pay for the water gas, cable, electric, and Internet. All of these should be reflected in the price of the rental.

Don’t invest in an Airbnb if all the aforementioned considerations haven’t been made. Failing to consider these four things can turn a potentially profitable investment into a loss.