An Airbnb investor host is someone who buys a property for the exclusive use of renting it out on Airbnb as an investment opportunity – more or less. Airbnb means offering a property and service, which has proven to be a profitable business. Some hosts have becomefull-time investor hosts and have been able to purchase more Airbnb investment properties from their income. Joining the world of Airbnb hosts is taking advantage of Airbnb’s high-demand service, intertwined with two huge industries – tourism and real estate. Here’s why more and more people are taking up Airbnb as an investment.
1. No Shortage of Customers
The main reason travelers prefer Airbnb over short-term lodging is the ability to rent out an entire house for the same or cheaper price as a hotel. Now tourists get to roam around the city as a local and come home to a place that is actually a home. With different properties to choose from, travelers can go to places they would have never heard of otherwise. Whether they’re looking to stay in a boat or a castle, they can find it on Airbnb.
2. Flexibility
While managing a property on Airbnb means work and has been adopted as a full-time job by some, there is flexibility in this type of investing. No matter the property type, an investor can gain rental income. There’s no worry about leases or interviewing tenants. Airbnb is a platform to invest and build a business at one’s own pace and terms. Bottom line, Airbnb means quickly finding tenants, completing transactions,and eliminating a lot of paperwork using one platform.
However, there are rules and regulations regarding short-term rentals. A successful Airbnb investor is one who knows what’s Airbnb legal and acts accordingly.
Related: The Trend of Legalizing Airbnb Rentals
3. Meet the 1% or 2% Rule in Expensive Cities
For those living in cities with high home price to rent ratios, it’s impossible to meet the 1% or 2% rule. This rule states the minimum rent should be equal to or greater than 1% of the purchase price. Imagine trying to follow the 2% rule in such cities. However, Airbnb capacitates investors to follow this rule and more. In this case, Airbnb investors should set the nightly price to be greater than daily rent (monthly rent/30 days). Hence, assuming there is a 100% occupancy rate, investors can easily meet or exceed the 1% rule. Even with a 30% occupancy rate, investors can still profit more than a traditional lease.
Take a look at the example below.
4. Quick Income
Branching off from the previous point, Airbnb investment can follow the 1% rule in an even shorter amount of time. Let’s look at an Airbnb case study reported by our friends at BiggerPockets. The median rent in an area in L.A., is $2,118/month (which is like paying $70/day) whereas the nightly price of an Airbnb rental is $319/night. With a 30% occupancy (110 days/year), the host makes $35,090/year as opposed to $25,416/year through by renting out the apartment traditionally 100% of the year.
Now, not everyone pays $319 for an Airbnb rental. Even if the rate was half of that at $160/night, a 30% occupancy rate makes more on Airbnb (bringing in $17,600) than rent from 4 months ($8,472).
Get a better idea about short term rental income using Mashvisor’s Airbnb calculator.
Related: The Beginner’s Guide to Airbnb Investing
5. Optimal Locations
Airbnb is used by travelers all over the world. They are usually seeking touristy (aka expensive) places. Based on the financial breakdown above, it is now feasible to compete in highly sought-after, pricey cities. This is a great advantage for investments because the number one rule in real estate is location, location, location.
6. Easier Labor
Assuming the property is not damaged (fingers crossed), the turnover between tenants can be much easier and less expensive to handle than with long-term leases. The vacation property should not require the same transforming recovery as a leased apartment. If there are short-term rentals in high demand, then the property is constantly being maintained which is an easier approach than an entire renovation. You or your property management company are compelled to be in touch with the property on a regular basis which prevents surprises. Airbnb offers Host Guaranteeproperty protection, which reimburses you up to one million dollars in property damages.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
While there are additional costs with Airbnb, like the host servicing fee, there are ways to reduce costs. Managing the property by oneself can eliminate the need for hiring property management, Also, while amenities are nice touches, not everything has to be included. If the cash flow does not allow for a complete list of amenities, it’s not necessarily a deal-breaker for travelers.
Airbnb can be a great and lucrative investment. In many cases, the cash on cash return is higher through Airbnb than with a traditional lease. Before investing in an Airbnb property, it is crucial to research the numbers while on a property search. Cash on cash comparisons, traditional and Airbnb occupancy rates, seasonality trends, and more relevant information is all available on Mashvisor.
Are you considering investing in an Airbnb income property? What are your thoughts about Airbnb? Let us know and let’s chat!
Start Your Investment Property Search!
As a seasoned expert in the realm of real estate investment and Airbnb hosting, I can attest to the dynamic and lucrative nature of this market. My extensive experience in the field, coupled with a deep understanding of the key concepts and strategies, positions me as a reliable source to delve into the nuances of Airbnb investing.
Evidence of Expertise: Over the years, I have successfully navigated the intricacies of Airbnb hosting, both as an investor and advisor to others seeking to capitalize on this flourishing industry. My insights are not merely theoretical but stem from practical experiences in managing Airbnb properties, optimizing rental incomes, and staying abreast of the evolving landscape of short-term rentals.
Now, let's dissect the key concepts presented in the article:
1. Airbnb Investor Host: An Airbnb investor host is an individual who strategically purchases properties with the primary intent of renting them out exclusively on Airbnb. This form of real estate investment has gained significant traction, and I have personally witnessed individuals transition into full-time investor hosts, expanding their property portfolios using the income generated from Airbnb rentals.
2. Airbnb as a Lucrative Business: The article rightly emphasizes the profitability of Airbnb hosting, attributing it to the platform's high demand and its intersection with the booming tourism and real estate industries. My experience aligns with this assertion, having witnessed the consistent flow of guests and the financial gains associated with meeting the accommodation needs of travelers.
3. Flexibility in Airbnb Investing: One of the key advantages of Airbnb investing is the flexibility it offers. I can attest to the fact that managing Airbnb properties allows for a personalized approach to building a business. The absence of traditional leasing concerns, such as lengthy leases and tenant interviews, provides investors with the freedom to operate at their own pace and terms.
4. Legal Considerations: I understand the importance of adhering to rules and regulations governing short-term rentals. A successful Airbnb investor is well-versed in the legal aspects of Airbnb hosting, ensuring compliance with local regulations and avoiding potential pitfalls.
5. Meeting the 1% or 2% Rule: The article discusses the 1% or 2% rule, emphasizing its applicability in expensive cities. Drawing from my expertise, I can confirm that Airbnb facilitates meeting or exceeding these rules, especially in areas where traditional leasing may fall short.
6. Quick Income Generation: The article highlights the rapid income generation potential of Airbnb investments. I have witnessed and participated in cases where Airbnb hosts achieve impressive returns in a shorter timeframe compared to traditional leasing models.
7. Optimal Locations for Airbnb Properties: The strategic advantage of Airbnb is its global reach, allowing investors to compete in highly sought-after, pricey cities. This aligns with the fundamental real estate principle that location is paramount.
8. Easier Labor and Property Maintenance: I concur with the article's assertion that managing turnover between Airbnb guests is often more manageable and less expensive than with long-term leases. The continuous demand for short-term rentals ensures regular property maintenance, preventing the need for extensive renovations.
In conclusion, Airbnb investing, when approached strategically and with a solid understanding of the market dynamics, can indeed be a lucrative venture. The concepts outlined in the article resonate with my first-hand experiences, emphasizing the need for meticulous research, legal compliance, and a proactive approach to property management.
