Considering Airbnb As A Real Estate Investment Plan: Is It Genuinely Worthy?

Dated: July 16 2020

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Unlike before, Airbnb has changed from the previously small vacation rental market into an international industry. Now, almost everyone sings praises of Airbnb investment, including homeowners having an extra room. While leasing out a spare room in your apartment is one thing, investing in a property with the aim of renting it out on Airbnb is a different game entirely.

How well do you know Airbnb real estate investment? Is it a great idea for investors?

Well, the truth is that how well you can benefit from Airbnb real estate investment will depend on several conditions. If you do it correctly, it can be your most significant source of income. However, before jumping into the train of Airbnb real estate investment, there are specific considerations which you should make to avoid failure. First off, endeavor to ask yourself the following questions: How Much Do I Stand to Gain? While you are considering the perfect Airbnb investment strategy, it is pertinent that you do your math correctly. With the several variables attached to short-term rentals, you have to consider some factors while analyzing what you expect to see as ROI from your Airbnb investment.

Firstly, you should determine your cap rate, predict your market’s occupancy rate, and cash-on-cash return. By so doing, you can have a rough estimate of how much you can make from a specific property. Such information will help improve your chances of success. If you find it difficult to compile the metrics, you can make use of Airbnb analytics. Also, with the Airbnb profitability calculator, you can assess several Airbnb properties, then make a comparison between them to determine a property that will yield the best ROI for your investment.

What are the Stated Regulations?

Across the US, several Airbnb restrictions have been laid down over the last two years. For instance, regions such as San Francisco and New York have strict laws that limit what is allowed and what is not permitted when it comes to Airbnb. Also, cities such as Chicago and Albuquerque have implemented taxes on Airbnb properties, and consequently, it has led to increased overhead costs. Hence, endeavor to consider the regulations seriously while making your calculations on the property’s ROI. In some cities, there are regulations regarding the maximum and a minimum number of occupants or limitations concerning unoccupied properties by the owners. Some have even gone as far as issuing a municipal license before an investor can start operating Airbnb rentals in the city. All the effort, time, and money will eventually affect the Airbnb profit margin and overall cost. Eventually, such limitations and regulations may turn Airbnb into an unworthy investment in that particular city.

So, ensure that you study the laws, regulations, permits, and taxes of the relevant city where you intend to invest in short-term rentals carefully before proceeding. Is it worthwhile to invest in my city? While considering Airbnb property investment, many individuals often resort to investing in rental properties close to their area of residence. If you plan to manage the property by yourself, it could be a great decision; you will be able to answer guest’s needs promptly as well as access the vacation rental quickly. But, choosing to invest near home doesn’t always end as the best decision; in fact, you will hardly find the best real estate investment close to the investor’s home. If your city features restrictive Airbnb policies, low rate of vacationers, and huge housing prices, then investing in a faraway region can be more rewarding. In some cities, Airbnb property investment is more profitable and usually generate a higher income.

If your current city doesn’t support Airbnb investment, you are best advised to choose a region that can offer a high return on investment for your Airbnb property. To run a short-term rental outside the investor’s cities, most investors request the services of vacation rental managers, who will oversee the operations of the properties. Even though the services of rental managers will be an added cost, it will reduce your stress significantly and help convert your Airbnb property into a reliable means of generating passive income. Also, professional vacation rental managers possess the skillset to enhance occupancy rates, as well as income.

However, there is a new question that arises as a result: without local knowledge, how can you purchase a property outside of your region, city, or state?

Many real estate investors consider choosing a property in a housing market where they have little knowledge or experience as unadvised, most especially as location matters a lot in Airbnb investments. To solve this problem, you may use Heatmap analysis tool to gain more info about the new area and also determine the best neighborhood that will generate the best ROI; it will help have a fair competition with the local competitors. How well is the Vacation Rental Market Performing? Currently, the situation is highly fantastic. A short-term vacation rental is enjoying a vast and fast-rising market. Thus, investing in Airbnb property can lead you to an extremely profitable market. Also, as short-term rentals are giving vacationers wonderful experience compared to the conventional hotels, the Airbnb growth is skyrocketing every now and then. Consequently, there are enormous demands, and this may just be the perfect time to join the market.

To Sum Up: Is Airbnb investment-worthy? Without any doubt, one of the most impressive real estate investment strategies in the current market is Airbnb. To generate income massively through Airbnb, endeavor to answer all the questions listed herein correctly. After performing market analysis and you have found the right property, in the most appropriate state having a suitable cap rate, then you are halfway to a colossal investment success to come.

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