Ever since it was established in 2008, Airbnb became the preferred short-term rental site for many travelers looking for cheaper accommodations and a home-like experience during their vacations. For hosts, the platform represents a great way to make money out of their rental properties.
Many homeowners explained that renting out on Airbnb helps them earn extra income that they use to pay their mortgage. As for real estate investors, owning an Airbnb investment generates positive cash flow and a good ROI. If you’re interested in this strategy for investing in real estate, you might be asking: what kind of Airbnb profit margin can I expect to earn?
Of course, not all Airbnb hosts and investors are getting the same returns. How much money can you make on Airbnb ultimately depends on numerous factors. The most important ones are your property’s location, monthly Airbnb rental income, and Airbnb expenses.
There are other factors, of course, but these are the ones that will affect your real estate investment the most. In this blog post, we’ll show you how you can figure out what kind of Airbnb profit margin you can expect before buying an Airbnb based on these factors and using Mashvisor’s top real estate investment tools: the Airbnb Real Estate Heatmap and the Airbnb Profit Calculator.
#1 Mashvisor’s Airbnb Real Estate Heatmap
The first factor you need to consider before buying Airbnb rentals is the location. When it comes to picking the best area for Airbnb investment, you must check the short-term rentals laws and regulations in your market of choice. This is because some cities (like Los Angeles) ban investors from owning an Airbnb and others enforce strict laws like how many nights you can rent out on Airbnb and the taxes you need to pay.
These regulations will affect your profit margin. Meaning, investing in short-term rentals in cities with no Airbnb legal issues helps you make the most money on Airbnb. You can read about Airbnb regulations in major US cities on the Top Locations category of the Mashvisor blog.
After making sure you won’t run into legal issues for starting an Airbnb business in your city, the next step is to run a real estate market analysis. This analysis shows you how Airbnb investments are performing in different areas within the city.
Hence, this lets you know where to get the best Airbnb profit margin according to historic and current data combined with predictive analytics. To do this analysis, you need the Airbnb Real Estate Heatmap that Mashvisor provides. This tool allows you to estimate Airbnb income and other metrics for the overall location of your choice.
As you can see, the Airbnb Real Estate Heatmap shows a color-coded overview of Airbnb rentals’ performance according to your metric of choice. You can choose to analyze markets based on Airbnb rental income, Airbnb cash on cash return, or Airbnb occupancy rate.
These are critical numbers that you need when deciding is Airbnb profitable or not in a certain location. Colors range from green to orange to red, with green meaning high-performance potential and red meaning low-performance potential. This reveals a lot about the short-term rental demand in that area, which has a direct impact on Airbnb profits. In other words, you’ll have data that tells you if the location is fit for buying Airbnb for sale.
#2 Mashvisor’s Airbnb Profit Calculator
The second tool you need to estimate Airbnb income is the Airbnb Income Calculator (also known as the Airbnb Estimator). This is the ultimate tool to find out how much money can you make on Airbnb. Why? This tool allows you to analyze your rental property based on accurate and reliable Airbnb data and analytics.
Meaning, rather than spending weeks or months gathering necessary data and organizing them into spreadsheets, you’ll find what you need using the Airbnb Calculator in a matter of minutes. And we’re not just talking about rental income and expenses, but a whole lot of other data that will help you calculate your Airbnb profit margin and ROI.
Let’s take a look at how to use Mashvisor’s Airbnb Calculator and what Airbnb investment metrics and data it provides you with.
Say you’ve found Airbnb properties for sale and want to know which one allows you to make the most money on Airbnb. If you’ve found these properties on Mashvisor, simply click on each listing to access the rental property analysis page.
If you’re interested in a particular Airbnb for sale that’s not on Mashvisor, you can manually add it. This will also allow you to get an analysis. This is what Mashvisor’s Airbnb Rental Property Calculator looks like:
As you can see, it contains three main sections. First is the finance/mortgage calculator in which you select how you’re planning to pay for the Airbnb investment. If you choose a mortgage, the tool will include mortgage payments (which significantly affect Airbnb profit margin) in your monthly expenses.
Next to the mortgage calculator, you’ll see a rental strategy comparison. This is where you’ll get the Airbnb analytics needed to make smart decisions. Basically, this section shows you how the property will perform as a long-term rental and a short-term rental.
The comparison takes into account traditional and Airbnb comps in the area and shows you the following data: monthly rental income, monthly expenses, cash flow, cash on cash return, cap rate, and occupancy rate.
The last section is a breakdown of all the property expenses you’ll expect when owning an Airbnb investment. As mentioned, expenses are among the key factors affecting the Airbnb profit margin. Along with the regular expenses that come with any rental (repairs, maintenance, insurance, etc.) there are other expenses the Airbnb investors must keep in mind.
For example, while some hosts can manage their rentals, others will opt to hire Airbnb property management. These hosts should add property management fees to their expenses. Also, because short-term rental properties have higher turnover, many hosts hire cleaning services to clean the property after each stay. Cleaning fees are other expenses to account for and which you’ll find pre-estimated on the Airbnb Calculator.
Start using Mashvisor to find and analyze profitable Airbnb rentals in your real estate market of choice today!
Estimating Airbnb Profit Margin Made Easy
Is Airbnb profitable? According to Mashvisor’s short-term rental data, yes. However, doing proper analyses and understanding how much money can you make on Airbnb is necessary for any real estate investor before buying an Airbnb. After all, finding Airbnb investment properties for sale that promise good ROI is key to success when investing in the short-term rental market.
Thanks to Mashvisor’s tools, the process of estimating your Airbnb profit margin has become easier than ever before. Of course, there are many things that savvy investors do to attract more guests and, thus, increase their profits. If you already own an Airbnb investment, consider these 9 Tips to Increasing Your Airbnb Profit.
Want to start using Mashvisor’s tools to guarantee to make the most money from Airbnb? Click here to start your 7-day free trial with Mashvisor and subscribe to our services with a 15% discount after!