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Airbnb Investment Strategy

Despite the continued pandemic, investing in Airbnb still seems to be a profitable idea. According to Airbnb statistics, hosts have made more than $110 billion through holiday rental investments as of October 2020.

While investing in Airbnb rentals may provide significant returns, it also comes with certain hazards. Check out these tips for purchasing a vacation rental property and optimizing your rental revenue to make sure you go into this enterprise with your eyes wide open.

What Is Airbnb Investing and How Does It Work?

When an investor buys a home to offer it (or individual rooms) on Airbnb rather than utilizing it as a main residence, this is known as an Airbnb investment. Unlike a standard rental model, this technique enables real estate investors to profit from a variety of properties and tenants.

Pros and Cons of Airbnb vs. Traditional Real Estate Investing

As a real estate investor, you have many options. One of them is to invest in Airbnb. You may also invest in conventional real estate. Traditional real estate investment is purchasing a property to rent it out for an extended time (usually for six months and longer).

Before you decide to invest in short-term rentals, make sure you weigh all of the advantages and disadvantages of this approach over typical real estate investment.

Airbnb Investing Advantages 

A more profitable investment than conventional real estate

Unlike conventional real estate investment, you may make more money by charging more each night. According to FortuneBuilders, a well-managed Airbnb home may generate two to three times the earnings of an unfurnished, long-term rental. In reality, the average nightly rate climbed in 2021, despite the pandemic. According to our estimates, the average nightly cost in the United States will exceed $200 in 2022.

A wonderful source of passive income

Property owners have more chances to produce a stream of passive income as Airbnb and other holiday rental sites have grown in popularity in recent years. Short-term rental investing is still a realistic investment strategy that enables Airbnb hosts to make a fortune, even though it requires constant hard work. Using tools and software solutions to automate the majority of your everyday duties is the key to managing various obligations.

You have more control over your own house than you would if you were renting.

While it takes more effort and incurs more costs, it may make upkeep more manageable. You will be alerted about any maintenance concerns sooner since you will be welcoming new visitors more often, giving you greater control over your house. When maintaining an Airbnb rental, you may also alter your pricing regularly and raise them during peak seasons or special events. This also means you have more flexibility over your pricing strategy. 

More options for the sort of visitor you wish to target.

In addition, hosts may opt to be more discriminating about the kind of visitors they wish to attract. On the other hand, landlords are frequently required to sell their homes to the general public.

You are free to utilize your holiday property as you like.

While you shouldn’t allow your plan to drive your Airbnb investment, utilizing your rental homes as holiday homes is an appealing bonus. You will be allowed to utilize your Airbnb property as a second home as an Airbnb host. All you have to do is put days on your Airbnb calendar that you don’t want to be available.

Cons of Investing in Airbnb

Increased costs

When you rent to long-term renters, you are less engaged in their renting experience and are just responsible for property maintenance and the occasional emergency. However, as a vacation rental owner, you’ll have to pay extra to provide your Airbnb visitors with a fantastic experience.

For example, an Airbnb host’s usual costs include 

  • High-quality furnishings 
  • Decor 
  • Linen 
  • Towels 
  • Kitchen utensils 
  • Additional facilities to pleasure visitors, such as certain basic food items 
  • Wi-Fi 
  • Cleaning fees 
  • Utilities.

You need to factor in initial fees when you’re just starting in the hosting industry. You’ll need to pay extra for suitable insurance and good pictures for your listing.

Regulations for short-term rentals and Airbnb

Local governments enact strict restrictions and regulations about Airbnb in several areas. These rules might make it difficult to maintain a high occupancy rate since they limit the number of days you can rent your property each year.

Unpredictable income

While a short-term rental might make you more money, it can also make your cash flow more unpredictable. For starters, you’ll likely need a few open days each month for maintenance or preparation. Second, seasonality is a major consideration when making an Airbnb investment.

Finding visitors

 As a new investment, it will be more difficult to locate guests since you will most likely only have a few five-star ratings. Don’t be afraid to ask your visitors to post a review if you want to increase the number of reviews you have.

You’ll need to advertise your Airbnb accommodation regularly to keep your calendar full. You’ll need to learn and implement various methods to attract new and recurrent reservations, from crafting an amazing listing to being active on social media.

More Work Daily

On a daily level, Airbnb investing demands a greater effort. Unless you employ an Airbnb property management firm, it will be your obligation to ensure that your property is constantly available and that everything is in working order.

How Do You Find the Best Airbnb Investment Property?

1. Consider the season and the location.

The fact is that not all places are lucrative in the same way. Destinations, where hosts can acquire a house for a low price yet have a steady stream of visitors are perfect. According to AirDNA, a town like Lahaina in Hawaii, for example, has pleasant weather all year, making it one of the most lucrative destinations.

2. Conduct extensive market research

You must look for a site that draws a significant number of visitors throughout the year. You should look for a home within walking distance of a variety of attractions and activities.

Once you’ve found a potential site, be sure to look into the local rules and regulations surrounding short-term rentals. Local governments in several places throughout the globe have begun enacting legislation and regulations to regulate or, in some cases, outright outlaw Airbnb. As a result, do extensive market research before acquiring any properties by reviewing local government websites and other reliable sources.

3. Make a rough estimate of your possible profits and costs.

You should evaluate your possible earnings and expenditures to guarantee that you can afford your house (including all the hidden costs associated with maintenance). When exploring a new investment option, this will assist you in staying within your budget.

4. Consult with Airbnb’s business advisors.

It’s not always easy to figure out which cities are suitable places to invest. A famous tourist destination’s market may already be saturated in certain cases. Some of the most lucrative niches may not have even crossed your mind. Airbnb business advisors will assist you in identifying areas that you may have overlooked and provide helpful advice on how to choose the finest Airbnb investment property for your needs.

5. Make use of analytic software

AirDNA and Mashvisor are two tools that may make the procedure considerably simpler. AirDNA, for example, has a tool that allows you to compute average daily rates. Mashvisor also has a good Airbnb investment calculator you can use to figure out crucial ROI parameters like cash flow and cap rate.

Additionally, Lodgable has direct integration with AirDNA. 

How to Get the Most Money Out of Your Short-Term Rentals [Top 5 Techniques]

Decide on your ideal visitor.

It’s critical to have a clear vision of the ideal sorts of visitors you’re attempting to attract to set up your company for success. It’s a lot simpler to manage your Airbnb investment if you know who your ideal visitor is and what they enjoy and hate.

What do they do for a living? What are their ages? Is it with their family or as part of a larger group they travel to? If your target visitor is a family of four, for example, you’ll want to make sure your rental is kid-friendly, large, and has entertainment alternatives.

Come up with a business idea

A well-written business plan can assist you in developing a sound strategy, identifying potential hazards, and obtaining funds to buy a home or expand your Airbnb venture. It contains techniques, a frame of reference, and objectives that will assist you in making the greatest option for your company. The following components of your vacation rental business plan should be included: 

  • Your business objectives
  • An overview of your short-term rental company’s history 
  • Your value offer
  • Your management structure 
  • Your financial plan 
  • A guest analysis 
  • Competitor research 
  • A marketing strategy 
  • Market your short-term rental

You’ll need a marketing strategy in place to drive reservations and increase your occupancy rate. You should combine physical and online marketing methods for the greatest outcomes.

Designing and publishing flyers and brochures for local tourism boards are efficient offline marketing methods. Business cards are still a viable option. For example, you may give local eateries, equipment rental firms, and other tourist attractions your business card in return for promoting their services to your clients.

Setting up a direct booking website optimized for search engines, albeit time-consuming, is a terrific idea. Build a YouTube channel for your property, post on Instagram, and create a Facebook business page for it to help you develop your online profile. As your list of previous visitors grows, you may utilize email marketing to send periodic newsletters about local events, new attractions, and special discounts.

Think about outsourcing your mundane tasks.

You’ll have more control and freedom if you manage your Airbnb venture on your own. This method, however, will leave you with less time to spend on building your company.

Furthermore, if you are new to the market, you will need to learn a great deal about the hosting procedure. Enlisting the support of specialists may help you bridge the gap in your knowledge and abilities while also saving time. At the absolute least, you should delegate your cleaning duties. It’s also a good idea to have an assistant on hand to handle any onsite issues.

Decide to choose vacation rental software.

Signing up for vacation rental software is a good decision and outsourcing some chores like cleaning and maintenance to other organizations. An excellent vacation rental program will save you several hours each week at the very least. You may develop your company without taking on additional everyday duties by automating as many of your daily chores as feasible.

Lodgable has helped 100’s property managers grow the profitability of their business. Schedule a demo with one of our sales reps today to learn more about how we can help grow yours too!

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