Have you considered adding new Airbnb rental properties to your real estate portfolio?
To achieve this goal, you must follow the key steps to avoid wasting time, effort, and money.
Finding the right property in a prime location is critical to the success of any real estate investment business. The same is true for purchasing an Airbnb rental property. To assist both new and experienced investors in their search for the best Airbnb rental, we've compiled a list of the most important steps to take.
Is Airbnb Real Estate a Good Investment?
Purchasing traditional investment properties can be rewarding, but investing in an Airbnb vacation rental business has the potential to provide you with higher returns if you play your cards correctly. Let's take a closer look at the advantages and disadvantages of owning Airbnb vacation rentals:
Pros of Airbnb Rental Properties
- Property owners can charge a higher nightly rate than traditional renting, meaning Airbnb income can be higher than rent from a long-term rental.
- Easy and low-cost advertising through listing on Airbnb.
- No long tenancy headaches and going through lengthy legal procedures for evictions/selling.
Cons of Airbnb Rental Properties
- High guest turnover means more frequent daily hosting tasks, like cleaning. This means you forego the passive income associated with long-term rentals
- Risk of low occupancy during slow seasons
- Higher initial costs when you furnish and decorate your Airbnb property.
How to Buy Airbnb Property: 7 Key Steps
Choose a Top Location
One of the most important determinants of your return on investment with Airbnb rentals is the occupancy rate. Naturally, the more guests you have and the fewer days a month your property stays vacant, the more money you will make. This means that you should look for a city that enjoys a large number of visitors – whether tourists or business travelers.
To choose a good location for your rental property, you should find the occupancy rate at the city level as well as at the neighborhood level to assure that your future investment property will enjoy the highest possible rental demand. Always remember the real estate mantra location location location.
Check Out the Airbnb Laws and Regulations
After the tremendous growth of the short-term rental industry in the last decade, local authorities have started imposing strict regulations and sometimes even prohibitions on the work of Airbnb rentals, especially non-owner occupied ones. The last thing that you want as a real estate investor is to break the law and face legal and financial penalties. Consequently, before you make your final decision on a housing market for your vacation rental, you should research the local Airbnb rules and regulations governing short-term rentals.
Decide on the Most Appropriate Property Type
The nature of your market will dictate the best property type to invest in. For example, if you go for the city center of a busy city flooded with business travelers, it makes the most sense to buy a small apartment or a condo, provided that the homeowners association allows short-term leases.
If, on the other hand, you decide to buy an Airbnb property on the beach to host families or friends on vacation, the smarter choice will be a single-family home.
The property type will determine how attractive your property is to guests, which will push your occupancy rent and hence your rental income up or down. Moreover, the type of rental property you buy will also set the price you have to pay for it, which affects the return on investment.
Set Up Your Budget and Plan Your Financing
Speaking of property value, the best investment property is one that you can comfortably afford without risking a default on your mortgage payments and a consequent foreclosure.
To achieve this goal, you have to budget carefully. Take into consideration all your regular sources of income as well as your ongoing expenses in addition to your savings. Set a maximum price that you can afford with your budget and stick to it. In the property search process, don’t get tempted by perfect-looking properties beyond your budget.
Remember that the actual price of the property is not the only cost you will have to cover. There are many additional, sometimes hidden expenses associated with buying an investment property such as closing fees, appraisal, inspection, property tax, insurance, etc. Altogether they can add up to several thousand dollars.
Of course, there are also financing options available to help real estate investors purchase a property. There are also ways to enter the short-term rental industry without owning a property at all.
Search for Your Real Estate Investment Property Thoroughly
Once you know how much you can spend on your Airbnb rental, start searching for actual properties on sale. Exhaust all possible sources such as online listing websites, the real estate sections of local newspapers, friends, and acquaintances.
Don’t go for MLS properties only but also actively look for foreclosures, bank-owned, and off markets properties as they can bring your return on investment significantly higher due to the low price you’ll have to pay for them.
Throughout the property search, keep your budget in mind. Don’t fall for a property that you cannot afford. After all, you are buying an investment property to make money from, so your decision should be rational and based on numbers. You are not buying your dream home to live in.
Work with an Agent
Hiring a real estate agent can help you find a good property for your Airbnb rental business. Agents and brokers are professionals who have access to the best deals on the market. Moreover, they have the necessary negotiation skills to get you a much better price than what you can achieve on your own.
We at Elite LUX Homes aim to achieve the best results, do reach out to us for guidance when planning to purchase your AirBNB property. Through our experience with Airbnb rentals we will be able to advise you on the top neighborhoods, the best property type, and the local legal and regulatory framework.
Conduct Thorough Analysis
Once you have identified a few properties which match your budget and other search criteria, make sure to perform careful analysis. Start with comparative market analysis or CMA.This means finding a few properties similar to the ones you’re interested in which are located in close proximity and which were sold no more than a couple of months ago. Check out their prices and account for the differences between them and the properties you are considering. This will help you establish the fair market value of your Airbnb rental and assure that you don’t overpay for it.