- Becoming a successful Airbnb property investor boils down to return on investment (ROI). Real estate is a significant investment, and just like any other – you do not want to experience losses.
- The key to Airbnb investing is the ideal property at the best location. Even if you are an excellent Airbnb host and manager, you will not maximize profits unless you invest in a suitable property.
- Various considerations come in handy when determining the profitability of an Airbnb. For example, the location, quality of services, and property types. Carefully search for the ideal house location to ensure that you put up an attractive Airbnb offering.
- The following is a list of vital factors to consider as you research and analyze Airbnb properties for sale.
Determine Airbnb Rules and Regulations
An influx of Airbnb investments has flooded the real estate investment industry recently. As a result, many local authorities have put strict legal measures on Airbnbs. In extreme cases, the laws ban short-term rental services. For example, the laws of New York state that you cannot rent out a unit for less than 30 days.
As a real estate investor, you should abide by the rules and regulations. Airbnb rules vary based on state and could change with time. Thus, a smart investor should check reliable sources to understand the nitty-gritty of Airbnb rules in your preferred area. Review the applicable regulations on your local government’s website and the chamber of commerce.
Failure to abide by the set laws puts you at risk of financial and legal lawsuits. Some repercussions of a failure to comply with the law could ruin your investment in the long run.
Long story short: the ideal state is one whose Airbnb rules and regulations do not compromise your short-term rentals’ ROI potential.
Select a Prime Location
The golden real estate mantra remains the same for Airbnb investing: location, location, location. Your property’s location is one of the major determinants for the occupancy rate, i.e., the number of guests who lodge in your Airbnb over time. The higher the occupancy rate, the more cash flow you get, and the higher your return on investment.
As you look for a suitable location, ask yourself: is the area well known, desirable, and attractive to many travelers?
Determine the occupancy rate at the city and neighborhood levels to gauge your potential rental demand. Whereas famous tourist locations are usually in cities, do not overlook small towns with attractive sites.
Desirable, high-demand locations include beaches, downtowns, national parks, mountains, and areas close to major city events. You are better off with an appropriately attractive location anyway, since it draws visitors all year round. Vacation rental property in a busy location saves you the seasonality fluctuations and provides a steady cash flow.
Use Real Estate Investment Tools and Big Data
Real estate data collection, analysis, and calculations are hectic and consume a lot of time. Nonetheless, AI and machine learning advancements provide efficient solutions to analyze the data. As a result, real estate analysis is now quicker, dependable, more accurate, and can provide easy-to-understand predictive analytics. Airbnb’s rental calculator and rental property finder are two common real estate investment tools available.
Predictive analytics keep you ahead of the competition in real estate investments, specifically short-term rentals.
Airbnb Rental Calculator
With an Airbnb rental calculator, you assess the potential profitability of different properties. First, you feed the costs you incur into the calculator. Then, the tool uses industry data to estimate the return on investment. The search criteria for many calculators are simple, and you only need a few details—for example, your preferred cities, budget, type, and the number of bedrooms. You may also contact a real estate agent and work this out together or to confirm your findings.
Rental Property Finder
A rental property finder allows you to view available profitable properties from anywhere. First, you provide a list of preferences and search criteria; then, the property finder analyzes data to generate suitable options. Insightful information you get from a rental calculator is cap rate, cash flow, and cash on cash return.
Determine Your Ideal Property Type
First and foremost, the ideal investment property gives you a high occupancy, which translates to a higher return on investment. People want to stay in the best locations at peak times.
Second, a profitable Airbnb real estate depends on how your location matches the target guests. Based on your target market, you can go for bungalows, hostels, villas, guest suites, condos, etc.
An apartment or condo is ideal if you want a rental property in a busy town. Remember, many business and solo travelers enjoy the serenity of condos and apartments within cities. Nevertheless, you should first confirm that the homeowners association (HOA) does not forbid short-term leases.
On the flip side, single-family homes or beach homes will do if your target guests are families or big groups looking for a vacation rental. The property type you buy determines the price you pay, the property’s attractiveness, and the occupancy rate.
In a nutshell, your Airbnb property type is a significant determinant of your potential profitability and return on investment.
Do a Thorough Analysis
Here is a quick checklist for a thorough analysis of the Airbnb market:
- Based on the amount you can comfortably spend, check out properties within your price range.
- Read newspapers and journals, use a property finder tool, or check online listings websites.
- Examine the distinctions between comparables and your desired property to estimate fair market value.
- Last, identify a few properties before narrowing down on the final choice.
Bank-owned foreclosures and off-the-market properties go for a lower price. So, you can gain a higher ROI for such properties – if you can find them and are able to purchase.
In general, it’s best to buy Airbnb property from a guest’s point of view, especially if you will not live in the house. Ask yourself what guests want and consider your clients’ needs to attract more occupants.
Aim your analysis to predict the revenue you anticipate from your investment based on daily and occupancy rates. From your estimation, compare the total expenditure and potential profit you will make. Needless to say, do not plan to buy a property that barely breaks even or does not generate profit.
Create a Budget
As the fundamental real estate investment principle dictates, don’t buy a property that you cannot comfortably afford or one that will put you in bad debt. You would not benefit much if you purchased a costly property and then failed to pay your mortgage or faced foreclosure. Analyze your income and recurrent costs, then determine the amount you can spend on investment.
Do not forget extra costs besides the basic property price when you set a budget. Other expenses include appraisal costs, inspection fees, insurance, property taxes, and additional hidden charges. If you are not sure about the other costs, find and discuss with an Airbnb investment pro to guide you through.
When you conduct a property search, you will find many lucrative properties beyond your budget. The temptation to go for a property beyond your means for its earning potential is high, but you should not fall into the trap. High-dollar properties may leave you unable to keep up with the expenses and face a compromise on your finances.
Collaborate With Real Estate Agents
Real estate agents are a win-win situation to get the best deals. First, a reputable agent understands the most delicate details of the real estate market. Such details include the legal and regulatory environment, the best property types, and the finest communities in a given region. Also, with powerful negotiation power, your agent could even net you a better deal than you would obtain independently.
The financial advantage of a real estate agent is that the seller caters to the agent’s fees. So, you do not add expenses to your preliminary budget by using their services.
Working with a real estate agent is a pretty simple process. After you’ve established the person or agency you wish to work with, you can get started. First, you need to find and inform your agent of the preferred property type. Then, the agent prepares a list of available options and walks you through your ideal property.
When choosing an agent, preferably go for one who has worked with Airbnb rental properties before. You will want an experienced agent who offers advice on the most popular locations and peak seasons.
Our Airbnb Agents are Here to Help You Find the Perfect Property
Our real estate agents specialize in finding Airbnb properties to buy for existing and new hosts. At TFS Properties, our professionals have a track record of success with our clients. Here are just a few highlights:
- Our Airbnb’s produces a passive 8-12%+ Net Cash Flow
- Our Airbnb’s are a passive investment option. We will help you find the property, buy it, design it, and place it into one of our property management team’s Airbnb super host accounts to help you start earning money right away. We also use dynamic pricing and adjust the price of the Airbnb based on what events are being held or if there is a major holiday. During these times our team will up the price of your rental ensuring the highest possible profit from your Airbnb.
- From acquisition to booking the Airbnb we can take care of the client from A to Z.
- Our team spends countless hours researching which markets across the United States are good Airbnb markets and will use this information to help guide our investor’s purchases.
- After everything is set up, our property management team will take care of issues that arise and manage your reservations for you. All the investor has to do is log into their online portal and see how their investment is doing.
Check the Service Coverage
Airbnb management calls for proper care and maintenance practices. Such activities include regular sanitation, repair, and other services. You might not need some of these services, especially repair, immediately after buying the property. Nevertheless, you are better off if you confirm that most of the required services are within the area just in case.
Even if you live near your property and think you can manage everything single-handedly, never bargain with essential services. Guests always look for well-maintained properties with good reviews. If something goes wrong and you cannot service all your guests well, you might get a bad review. And everyone in the online age knows that bad reviews can kill business.
Note that some repairs like serious plumbing issues and vital HVAC repairs call for skilled professionals. You would not want to impinge upon your guests’ comfort with delayed services. So, it’s best to confirm that you can get essential sanitation, repair, and maintenance services within your area before investing in an Airbnb property.
Short-term rentals can be lucrative, and Airbnbs are becoming increasingly high-demand rental properties. When searching for Airbnb properties for sale, several factors should be considered before making the investment leap, including:
- Location, location, location
- Researching local rules and regulations for Airbnb rental properties
- Finding the right property type
- Budgeting – and potentially working with a real estate agent
- Service and home repair coverage
Online rental property finders and local real estate agents can be valuable resources when searching for Airbnb properties for sale.
With the rental property market trending towards short-term rentals, now is the time to research and consider purchasing an Airbnb property to boost your investment income.