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Investing in real estate is good for people who want to make money work for them. And this is because, with real estate investments, you can buy a property and use it to earn more. Now there are many ways to use an acquired property for profit. But perhaps the ones that are gaining more traction are short-term rentals on Airbnb.
But what is Airbnb?
If you're an avid vacationer, you've probably heard of the app that can connect you with people who will let you stay on their property for a period of time. This app, called "Air Bed and Breakfast" or Airbnb, was launched by two industrial designers who moved to San Francisco in 2008.
They couldn't afford to pay rent for their apartment during this time, so they decided to earn extra by letting people who couldn't find hotels rent their space temporarily. And long story short, their strategy became a massive hit because it expanded into a vast network of 4 million hosts worldwide. And up until today, their platform continues to create more opportunities for hosts and real estate investors in general.
Related: Airbnb CEO: It Took Us 12 Years to Build, and We Lost Almost Everything in 6 Weeks
Long-term vs. short-term rentals
Real estate investments include property rentals, and there are two main ways to earn from them: Long-Term Rentals and Short-Term Rentals. When I started as a real estate investor in 2012, all my properties were long-term rentals. But in 2017, I transitioned all of them to short-term ones, most of them through Airbnb.
Why? There were a lot of factors that made me decide to go all-in with Airbnb:
1. You make less money on long-term rentals.
Did you know that when done correctly, you can make a $2,000 average monthly profit on Airbnb? Of course, many things must be considered to get to this number. Plus, you can make less or more than this amount every month.
But the point is, with Airbnb short-term rentals, you can determine your price, and no other person has a say. You can't do this with traditional long-term rentals. With long-term rentals, you can only set a fixed amount and increase your rent by 3% to 5% a year.
2. You are under bigger obligations as the landlord.
There are several things to consider when hosting a long-term rental, and one of those is that your tenants may never deep clean or take care of repairs on your property. The reason is simple: they won't be staying there forever. Ultimately, the obligation still falls on your shoulders.
Another fact worth mentioning is that you won't be able to evict your tenants easily. Now, the stipulations change from city to city and state to state, but typically after 30 days of staying, your guests acquire certain rights.
Case in point: In 2020, the government passed an Eviction Moratorium where landlords are not allowed to evict their tenants on the grounds of non-payment. This was, of course, helpful for a lot of tenants all over the country. But now, some landlords are still owed thousands of dollars in back rent, and they may never get the chance to go after them again.
3. With Airbnb short-term rentals, you don't have to work like an employee.
Short-term rentals are passive in nature, which means that if you have a property, you can still earn even if you're not around. Add this to Airbnb's online platform, and your market potential gets wider.
But here's the thing: you may still be trapped by working around the clock to manage your listing. Thankfully, there is a way to build a system and create a team that operates the business on your behalf. We use this innovative business model with Airbnb, which has since accelerated our cash flow and offered tremendous growth.
4. You don't have to buy properties to get started.
If you're familiar with cash flow goals for long-term rentals, you've probably heard that the aim is to earn $200 per unit per month. This is all well and good, but if you're trying to replace a job that gives you $5,000/month, this income won't give you much. You still need to own at least 25 units to get there.
So what you can do instead is to buy a couple of units, give them a nightly rate, and launch them on the platform to start getting bookings and recover your returns faster.
But what if you don't own properties and still want to do Airbnb? Well then, all you need to do is apply the Arbitrage Model.
The Arbitrage Model, also called subleasing, is where you rent properties from other landlords, get their permission in writing, and then launch their property as your short-term rental on Airbnb. Yes, this strategy is perfectly legal and lets you start a business without buying properties.
Related: How to Make Money Online: The Basics
Are there other ways to start an Airbnb, even if you don't own properties?
Yes. Aside from subleasing, there are two more ways to launch an Airbnb business without much capital.
1. Co-hosting
With the co-hosting strategy, you don't have to buy or own properties because all you have to do is to manage and help hosts manage their listings. This method allows you to learn more about the business and earn.
2. Using O.P.M (Other People's Money)
A balance transfer is when you transfer the money available on your credit card into your checking account. You can then use this money to sublease a property and start your own Airbnb business without using any of your money.
Airbnb is a great platform for real estate investors. Its innovative business model will allow you to create positive cash flow, get started even if you don't own properties yet, and enjoy the time, location, and financial freedom that most people only dream about.
Related: How to Start a Business with Only $1,000
As a seasoned real estate investor and Airbnb enthusiast with a track record dating back to 2012, my deep understanding of the industry is rooted in both practical experience and a keen awareness of market trends. Over the years, I've transitioned from long-term rentals to exclusively focusing on short-term rentals through Airbnb, a decision based on a comprehensive analysis of various factors.
The article you provided delves into the realm of real estate investments, specifically highlighting the shift from long-term to short-term rentals on platforms like Airbnb. Let's break down the key concepts discussed:
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Introduction to Airbnb:
- Airbnb, short for "Air Bed and Breakfast," was founded in 2008 by two industrial designers in San Francisco who initially used the platform to rent out their space to cover their rent expenses.
- The platform has since evolved into a global network with 4 million hosts worldwide, providing opportunities for hosts and real estate investors.
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Long-Term vs. Short-Term Rentals:
- Real estate investments can involve two main types of property rentals: Long-Term Rentals and Short-Term Rentals.
- The author shares a personal experience of transitioning from long-term rentals to short-term ones, particularly through Airbnb.
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Advantages of Airbnb Short-Term Rentals:
- The article highlights several reasons for favoring Airbnb short-term rentals:
- Higher Profit Potential: The ability to earn an average monthly profit of $2,000 through Airbnb, with flexibility in setting prices.
- Lower Landlord Obligations: Compared to long-term rentals, short-term rentals entail fewer obligations for property maintenance and tenant issues.
- Passive Income Nature: Short-term rentals are portrayed as more passive, allowing property owners to earn even when not physically present.
- The article highlights several reasons for favoring Airbnb short-term rentals:
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Challenges of Long-Term Rentals:
- The drawbacks of long-term rentals are discussed, including limited income potential, increased landlord obligations, and challenges associated with tenant eviction.
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Innovative Business Models for Airbnb:
- The article introduces alternative approaches for entering the Airbnb business without necessarily owning properties:
- Arbitrage Model: Renting properties from other landlords and launching them as short-term rentals on Airbnb.
- Co-hosting: Managing and assisting other hosts with their listings.
- Using O.P.M (Other People's Money): Utilizing a balance transfer from a credit card to fund a property sublease.
- The article introduces alternative approaches for entering the Airbnb business without necessarily owning properties:
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Benefits of Airbnb for Real Estate Investors:
- The article concludes by emphasizing the advantages of using Airbnb as a platform for real estate investments, citing its innovative business model, positive cash flow potential, and the opportunity to achieve time, location, and financial freedom.
In essence, the article provides a comprehensive overview of the evolution of Airbnb, the dynamics between long-term and short-term rentals, and innovative strategies for individuals looking to enter the Airbnb business without substantial capital investment.
