by Shawn Boday | Apr 25, 2024 | Airbnb, Business, Housing Market, Real Estate, Real Estate Investing, Real Estate Tips, Real Estate Value
For many people, owning a vacation home is a dream come true—a place to escape the hustle and bustle of everyday life, create lasting memories with family and friends, and potentially generate rental income. However, like any investment, vacation home ownership comes with its own pros and cons. In this blog post, we’ll explore the advantages and disadvantages of investing in a second property for vacation purposes.
Pros of Vacation Home Ownership:
- Personal Use and Enjoyment: The most significant benefit of owning a vacation home is the ability to use and enjoy the property for personal getaways. Having a second home allows you to escape to your favorite destination whenever you want, without the hassle of booking accommodations.
- Rental Income Potential: Renting out your vacation home when you’re not using it can provide an additional source of income. With the rise of vacation rental platforms like Airbnb and VRBO, it’s more accessible to market your property to travelers and earn rental income to offset ownership costs.
- Potential for Appreciation: Like primary residences, vacation homes have the potential to appreciate value over time, especially in desirable vacation destinations. By investing in a property in a popular area with solid market fundamentals, you may be able to build equity and realize capital gains over the long term.
- Tax Benefits: Vacation homeowners may be eligible for certain tax deductions, such as mortgage interest, property taxes, and operating expenses related to renting the property. Consult with a tax professional to understand the tax advantages available to you as a vacation home owner.
- Diversification of Investments: Owning a vacation home can serve as a form of diversification within your investment portfolio, providing exposure to real estate assets in addition to stocks, bonds, and other traditional investments.
Cons of Vacation Home Ownership:
- High Initial Costs: Purchasing a vacation home involves significant upfront costs, including the down payment, closing costs, property taxes, insurance, and ongoing maintenance expenses. Additionally, you’ll need to factor in monthly loan payments if you’re financing the purchase with a mortgage.
- Ongoing Maintenance and Upkeep: Owning a second home requires ongoing maintenance and upkeep to keep the property in good condition. From routine repairs and landscaping to unexpected maintenance emergencies, these expenses can add up over time and cut into your rental income.
- Vacancy and Seasonal Demand: Depending on the location and seasonality of your vacation home, you may experience periods of vacancy when the property sits unoccupied. This can be particularly challenging in areas with fluctuating demand or during off-peak seasons when rental income may be limited.
- Risks of Property Management: Renting out your vacation home includes property damage, liability issues, and potential conflicts with renters. Hiring a property management company can help mitigate these risks, but it also adds to the overall cost of ownership.
- Market Volatility and Economic Factors: The value of your vacation home is subject to market fluctuations and economic factors beyond your control. Changes in tourism trends, local regulations, interest rates, and economic conditions can impact your area’s property values and rental demand.
Conclusion:
Owning a vacation home can be a rewarding investment that provides years of enjoyment and potential financial returns. However, it’s essential to weigh the pros and cons carefully and consider your long-term financial goals, lifestyle preferences, and risk tolerance before deciding. By conducting thorough research, assessing your budget and investment objectives, and consulting with real estate professionals, you can decide whether vacation home ownership is proper for you.
by ireilly | Nov 2, 2022 | Airbnb, Business, Real Estate, Shawn Boday
Getting started with Airbnb requires a lot of faith. Most people are nervous about investing in short-term rental property, especially since it can be hard to determine if it’s a good investment. There are a lot of questions that people have when it comes to investing in these types of properties. An Airbnb investment is when you purchase a property intending to rent it short-term through Airbnb. Since over four million hosts globally, this type of passive income has become very popular. Most hosts who participate in Airbnb start as part-time workers and then grow to own multiple properties. There are many ways to make investing in this type of property work for everyone. Before you commit to becoming a host on Airbnb, it’s important to understand the various risks and benefits associated with this type of investment. Here are some of the pros and cons of investing in this type of property.
Pro: Passive income
One of the most attractive aspects of investing in a property on Airbnb is the possibility of passive income. This type of income is a revenue stream that doesn’t require you to actively participate in the operation. For instance, a traditional nine-to-five job doesn’t constitute passive income because the amount of money you earn is related to how much you work. Since you can earn money through bookings on Airbnb, this type of investment is considered passive income. In addition to not requiring you to actively participate in the operation, the amount of work you put in doesn’t directly reflect how much you earn. With passive income, you can boost your regular income or replace it with something completely different. For instance, many people who invest in Airbnb as a side project end up taking it on as their full-time job.
Con: High operating costs
The operating costs associated with running a property on Airbnb can be very expensive. You have to pay for various expenses such as electricity, internet, and regular cleanings. If you didn’t choose to rent out your property through Airbnb, these costs would be shouldered by a long-term tenant. Before you commit to becoming a host on Airbnb, it’s important to understand the various risks and benefits associated with this type of investment.
Pro: Some expenses are tax-deductible
Expenses that are related to running a property on Airbnb can be tax-deductible. These include marketing and advertising, as well as insurance and accounting fees. Many hosts don’t realize that these expenses can significantly impact their income. By reducing these expenses, you can maximize your earning potential and write off some of the costs. If you’re not aware of the exact laws in your state, it’s important to consult a tax professional.
Con: Higher down payment
The down payment required for a vacation rental property is significantly higher than for a primary residence. Usually, hosts need to put down 10%, though it can go up to 25% depending on the strength of their application. Before you commit to becoming a host on Airbnb, it’s important to understand the various risks and benefits associated with this type of investment. One of the biggest expenses that you’ll have to spend is on the quality of your furniture and decor.
Pro: Higher revenue during peak season
Through Airbnb, you can rent your property to short-term tenants and set your own rent rate. Unlike long-term tenants, you don’t have to lock yourself into a fixed rate. You can also adjust your pricing during the peak season to reflect the changes in the tourism industry. One of the main advantages of becoming a host on Airbnb is that you can earn a higher income than you would with a long-term tenant. However, this doesn’t mean that you can avoid the risk of instability. Since there’s no guarantee that your property will be rented, you have to accept the possibility of instability.
Con: Airbnb properties can be time consuming
Getting the proper resources to manage your property on Airbnb can be daunting, especially if you don’t have the necessary skills to make it easy for you. One of the most effective ways to reduce the time that you spend on your property is by using a management software like Lodgify. This online platform allows you to manage all of your tasks and activities from one place. One of the most effective ways to manage your property on Airbnb is using a channel manager. This tool connects all of your listings to the top travel agencies so that you can avoid double bookings.
by Shawn Boday | Jun 29, 2022 | Airbnb, Real Estate Investing, Shawn Boday
Airbnb has had a huge impact on travel accommodations, and those who have chosen to stay in an Airbnb may wonder if hosting an Airbnb rental is a good investment. Becoming an Airbnb host is appealing in several ways, including the ability to add to your income without being an expert in real estate. However, hosting an Airbnb may not be right for everyone because there are some disadvantages to it as well. It is important for potential Airbnb hosts to research and learn if hosting an Airbnb will be a good decision and investment for their life.
The first thing potential Airbnb hosts should learn is the difference between an Airbnb and traditional investment property. Airbnb rentals are short-term with several different renters over time, and traditional investment properties are for tenants who plan to stay for a very long time, even years or decades in some cases. The next thing potential Airbnb hosts should do is research the market to find out if any outside circumstances are causing it to change, such as the recent COVID-19 pandemic. The pandemic had a huge impact on the Airbnb industry by creating quite a decline in customers in 2020. However, there has been a recent surge in Airbnb customers who are becoming more comfortable with the pandemic, trying to find ways to stay safe and have a fun vacation at the same time. Those people find comfort in an Airbnb that is located in a travel destination place that is both secluded and desirable.
Potential Airbnb hosts must also consider the legalities and expenses that come with renting out an Airbnb, including maintenance, furnishing the property, extra amenities like Internet and entertainment subscription services, utility bills, home insurance, and specific Airbnb laws in each state. On the upside, it is possible for someone to have an Airbnb almost anywhere since many people use Airbnb for business and events that could take them anywhere in the country instead of just the standard vacation spots that were once the norm. If potential Airbnb hosts price their rental correctly and does their best to make their rental appealing to potential tenants, an Airbnb can be a very smart investment income.
by Shawn Boday | Dec 3, 2018 | Airbnb, Business, Real Estate, Shawn Boday
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.
by Shawn Boday | Mar 28, 2018 | Airbnb, Home Buying Process, Housing Market, Real Estate, Real Estate Tips, Renting, Shawn Boday
With more and more people flocking to popular towns and cities, combined with the increase of all things digital, Airbnb is a company that couldn’t have arrived at a better time in the digital age. In fact, there really wasn’t another time where Airbnb could have thrived in the way it does now. And while it has helped countless people make their vacations more affordable, as well as benefit those renting out their own properties, is it possible that this app has also brought some trouble to the real estate market along the way?
Property Owners are Catching On
Property owners are concentrated on buying properties in cities that draw large crowds of tourists. You may be wondering where Airbnb ties into this statement, but this is where it gets interesting. Current property owners and people looking to purchase property to rent out have grown keen to the fact that Airbnb can be a helpful indicator of places that are seeing a booming influx of visitors, which in turn signals to property owners that their city may very well be a hot commodity for all things hipsterdom and tourism
So, what has happened as a result is that many property owners are beginning to raise the prices of their rental properties in an attempt to capitalize on a bustling metropolitan area. Also, current property owners in cities where this is occurring are also optimistic as it provides them with a chance to sell for a much higher price than they bought.
Growing Competition
Airbnb rental properties can be money-making machines. If you operate an Airbnb in a sought-after travel destination, you are likely to acquire a continual, large-sum of revenue each year. With this in mind, property owners have opted for renting their spaces out short-term for the whole year as opposed to on a long-term basis (short-term means more money). Now, since long-term rentals are becoming increasingly less available, this has pushed property owners into a heightened sense of competition, which in turn causes prices to go up due to demand.
Airbnb is a great tool for people looking for places to stay while vacationing and for people looking to make some extra profit. But if the invisible hand of Airbnb continues to increase the prices of the housing market, we may be headed for a destination that no one wants. The conversation on how to create and maintain sustainable housing costs while allowing people to continue their ventures on Airbnb is a dialogue that is certainly worth having, both for the tourists, locals, and property owners.
