Pros and Cons of Buying a Home for Airbnb (2024)

Investing for Airbnb rentals is a popular move that many people have made in recent years. Airbnb has become a popular way to travel and stay. People today are buying a home for Airbnb rental as much as, if not more so, than hotels or motel chains. Why? It’s that home-away-from-home feeling they love.

If you’ve got some money to invest in real estate, and are considering investing in a property, you’ll turn to rent on the Airbnb marketplace. What are the pros and cons of doing so? We’ll highlight some of the primary benefits you’ll derive as a host, and some drawbacks to consider if you’re still on the fence about investing in a property for rental purposes.

What are the Pros of Buying a Home For Airbnb?

So, let’s start with some of the primarybenefits of owning an Airbnb property you plan on renting out to travelers.

1) Cultural Experiences

Think about it: you have people visiting from Japan, Russia, Canada, and virtually any other location in the world. Imagine the stories you’re going to hear as an Airbnb host, and the different cultural mannerisms you’ll be exposed to. If you’ve always wanted to be a world-traveler, but didn’t have the time to resources to do so, you can bring the world to your backyard! Travelers from all walks of life and regions in the world might visit, so you’ll get a little taste of many cultures.

2) Flexibility with Rental Terms

You have control of rental dates. Say you want to take your Airbnb property off the market during the holidays. You might choose to do this, so you can let the family stay for free during their visit. Or, if you have to do major repair work, you can wait until after the New Year (and all the expenses from the holidays) to tackle those repairs. You have full control of when you list, how much you’re listing for, and when to remove the property from the rental list online.

3) Airbnb’s Host Protections

In many countries, Airbnb offers hostprotections. Some risks come along with renting to strangers. In the event ofguest damage, theft, or other losses, Airbnb offers up to $1 million if you’rea member of their host protection plan in some regions of the world.

4) You Can List for Free

Listing your real estate investmentproperty on the website is free of charge. You don’t have to pay fees to alisting website or other third-party sites. All you have to do is take clear,high-resolution images of the property. Incorporate a great description.Include location and amenities. Include the pricing and rental terms. Fromthere, you’re ready to go!

5) High ROI is Possible

You can see a return on the Airbnb investment property you purchased. Especially if you’re investing in a property in a high-tourist region, you won’t have difficulties renting it out. The rentals can pay your mortgage, HOA fees in the area, taxes, and even costs for repairs that are necessary if you’re renting it out enough. So, list away!

What are the Cons of Buying a Home For Airbnb?

There are also some drawbacks to investing in a home, only to turn around and list it for rent through Airbnb. These are some cons.

1) It’s Risky

Think about it: you’re inviting a stranger to stay in your home. You might not be there when they are, but you don’t know who they are. So, you’ll want to do some screening checks, and make sure you know who you’re renting to. It’s not just the fact that they’re strangers. What if they host loud parties or damage the home? It’s on you to do the repair work later on.

2) You’re the Landlord and Maintenance Crew

If something goes wrong, you’re getting a call at 2:00 AM to repair a busted pipe. When repairs are needed, you’re paying for them. Every and anything that goes wrong is on you. So, make sure you have the time to commit to it, and that you’re open to the fact that your renters might call at any time, for the slightest inconvenience.

3) There are some Legal Restrictions

Before you invest, make sure you know the legalities of doing so. For starters, in some regions, you can’t list a property as an Airbnb rental. You might need special permits and licenses before renting.

If there’s major damage/issues with the property, lawsuits might follow if a renter is hurt on the property. Make sure you’re aware of legal restrictions, terms, and understand the implications if something does happen on the property.

Is Airbnb the Right Investment for you?

You can see there are more pros than cons if you’re considering investing in real estate for the sole purpose of renting it as an Airbnb property. But, you should weigh both the good and the bad, before you ultimately choose to make that investment, to ensure you’re ready to take on the challenges if you want to reap the financial rewards of being an Airbnb host.

Real estate investment properties can help garner more income, increasecredit performance, and provide financial security. Beforeselecting an investment property, you must understand the real estate market in the local area.

But how do you locate promising investment properties for sale? Are rental properties a good investment? The most efficient way to answer those questions is through an experienced Realtor who understands the industry. Here are some helpful tips to ensure you ask the right questions to pin down the right Realtor.

1) Find an Investment Realtor with Experience

Just like any profession, before you hire someone, take a look at their resume and experience. A Realtor who understands investment properties will have case studies and references from former clients who’ve worked with him or her in the past. Research the properties discussed in each case study to ensure the references and information offered are accurate.

2) Does the Realtor Know the Local Area?

Understanding the local area is a priceless attribute in real estate. A Realtor who has experience in your area will have a better understanding of the investment property’s value. They’ll be able to find investment properties for sale, and answer questions like, ‘Are rental properties a good investment?’ Whether it’s a commercial investment or you’re taking a stab at becoming a landlord for the first time, a Realtor who knows the neighborhood should be able to help answer the following questions;

• Who will rent my property?
• How likely is it to stay occupied?
• What are the resell capabilities?

Agents Compete, You Win.

3) Connections – It’s all About Who You Know

You’ve heard the phrase your entire life “It’s all about who you know.” This holds true, especially in the world of real estate investments. Someone who specializes in investments will be well-versed in the community and receive opportunities before the property even hits the marketplace.

The first question you should ask a potential realtor is “Do you have the right connections to ensure this process goes smoothly?”

4) Does the Realtor Understand ROI?

Investment realtors are always on the lookout for the best deals for their clients. Finding a good deal is great, butunderstanding ROIis imperative. Before you select a realtor, make sure they understand your financial goals for the investment. These are important points to bring up to the realtor so he can help you find the right property to achieve your goal;

• I’m investing to resell within 5 years
• The property will be used to garner additional income through leasing agreements
• I plan on fixing-up the property in order to sell it at a higher premium

5) Does the Realtor Invest in Properties?

Once you speak to a few candidates, you will find that a lot of investment realtors also invest themselves. Find a realtor who has investment properties because they will have first-hand experience, which means fewer mistakes, less guessing and more trust. Don’t be afraid to ask your realtor questions about their own experience, the trials and tribulations and how they became successful.

An experienced investor-friendly agent will know about1031 exchanges, for example. This allows you identify replacement investment properties and defer taxes, saving you tens of thousands incapital gains taxes.

A Note On Commissions When Buying a Home for Airbnb

Whether you’re buying an investment property or a primary residence, real estate agent commission is typically split 50/50 between the agents who represent the buyer and seller. So, out of a gross 6% commission, your agent would only typically get 3% gross.

Out of that 3%, the agent has to split with their office. This generally ranges from a 50/50 to as high as a 90/10 split. So, on average the actual agent may only get 1.5% of that 6% commission.

Remember, everything is negotiable in real estate. Don’t discount using a Realtor because you think you must pay 6% to 10% in commissions. Agents may negotiate lower rates depending on the type of transaction, the services required, and frequency of business.

For example, if you are a real estate investor selling and buying 10 homes a month, an agent might be willing to work a 50% off deal in exchange for the volume. If they are receiving a referral from a trusted source they may offer a modest discount, while still giving a full-service experience. If you don’t need the agent to host open houses, and they can secure a buyer directly, without having to split with another agent, then they may offer a discount relative to their savings.

Home sellers may also work with their agents on bonuses and incentives. These may be paid by the seller, or out of the listing agent’s commission. For example, offering a $10,000 bonus for a full price offer which closes within 30 days, or contributing 3% of the purchase price toward buyer’s closing costs.

Above all, remember that your Realtor should be there to aid in your home buying process, not just to show you listings. Helping you avoid the wrong time to buy, the wrong location or the wrong house for your budget can all go a long, long way in making sure that you’re happy with the end result. Beyond that, realtors aren’t all the same, and you will need to find one that gels with your interest as a home buyer before choosing to go the length of the field with them.

UpNest, whichis owned by parent companyRealtor.com, uses a proprietary agent matching system that considers closed listings, location of listing, and other factors to provide the customer with 3-5 individual proposals.

The proposal includes commission information, marketing techniques, a Q&A about the agents, local trends, reviews, and more. Once agents start using UpNest’s platform, the matching system evaluates their performance with UpNest, including conversion rates and response time.

UpNest is a no-cost service for home sellers and buyers to find the best real estate agents locally. The UpNest platform allows you to compare multiple agents in your area so you can compare reviews, commission rates, previous sales, and more.

Our network agents have been carefully vetted and often offer competitive, lower than average commission rates to UpNest customers. There is no obligation to sign up with one of our network Realtors, but when you can potentially save thousands on commission – why wouldn’t you? If you’re ready to get started, just enter your zipcode below!