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.
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.
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.
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.