What are the four major aspects that can affect your Airbnb rental income?
If you’re a real estate investor and you’re interested in investing in Airbnb rental properties, then one of the main aspects that you should keep in mind is your Airbnb rental income.
Your Airbnb rental income is the main determinant when it comes to the profits that your Airbnb rental property will generate.
When talking about Airbnb rental income, I’m mainly talking about the comparable rental income as well as the cash flow that your Airbnb rental will have. The comparable rental income will take into consideration the property’s occupancy rate, while the cash flow will take into consideration all the expenses that will incur on your rental property.
So, what are the four main aspects that can affect your Airbnb rental income that you should take into consideration?
Airbnb Rental Income – Occupancy Rate
As I mentioned above, when talking about Airbnb rental income, I’m mainly talking about comparable rental income and cash flow.
When it comes to comparable rental income, it is necessary to take into consideration the property’s occupancy rate.
The property’s occupancy rate is the amount of time during a year that a property will be occupied by a tenant. The comparable rental income will take the occupancy rate into account in order to be able to compare the property’s rental income with other properties that might have a higher or a lower average occupancy rate.
The occupancy rate of a property can also be semi-controlled by the real estate investor or the owner of the property by properly managing and advertising the property.
For example, Airbnb reviews are among the most effective factors that can drastically increase or decrease a property’s occupancy rate. An Airbnb property that has a high number of positive ratings will typically have a much higher occupancy rate and will be in higher demand.
You can use Mashvisor’s occupancy rate calculator to see how Airbnb reviews can affect your occupancy rate. If your Airbnb property has an occupancy rate of 50%, for example, and you would like to increase it to 55% to achieve higher returns, you can use Mashvisor’s tools to see how many reviews the property needs to increase its overall occupancy rate by 5% to reach your desired outcome.
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Airbnb Rental Income – Property Management
Professional property management is another major aspect that you should take into consideration when investing in an Airbnb rental.
Short-term rental properties, in general, require a lot of time and effort into managing them due to the high frequency of tenant turnover.
For this reason, it is always recommended to hire professional property management when investing in Airbnb rentals, or at least to include it in your calculations and financial planning, as you will most probably be hiring professional property management at some point or another.
Professional property management will typically charge you 8-12% of your property’s rental rate, which should definitely be taken into consideration when calculating the projected Airbnb rental income that your property will have.
Airbnb Rental Income – Location
Of course, with any real estate investment, the location of the investment property is the first thing that you should take into consideration.
Before investing in any rental property, whether it is a short-term or a long-term rental, you should always pick a location that matches your investment goals and strategy.
Airbnb rentals, in particular, can have drastically different performances from one market or neighborhood to another.
When picking a location for your Airbnb rental, you should ask yourself:
- Is it legal to run a short-term rental in that location?
- What legal restrictions does that area have, and how will they affect my overall Airbnb rental income?
- Does the location attract a high number of tourists and travelers?
- Is the average Airbnb cap rate high enough in the area?
- What’s the average Airbnb occupancy rate in the area?
These are all questions that you must answer before investing in an Airbnb property.
Mashvisor’s platform can help you answer most of these questions by providing you with Airbnb analytics and averages for each area or neighborhood, allowing you to know whether a location is good for an Airbnb rental property investment quickly and without hassle.
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Airbnb Rental Income – Seasonality
Lastly, one of the aspects that can greatly affect the rental income of your Airbnb property is the seasonality or the time of the year.
When considering the location of the property, you should do some research to see what are the peak times for tourism and travel to the area.
If the area typically attracts tourists and travelers during the winter season, for example, then you should find a property that you can use as a winter vacation home, and you should design your property and furnish it accordingly in order to attract the highest number of tenants to your property.
Investing in an Airbnb property that only performs well during certain seasons or times of the year means that you should plan your investment accordingly, and you should account for the change in its performance when calculating the returns and the rental income.
Bottom Line
There are several other aspects that can affect your Airbnb rental income. However, these 4 aspects are generally considered the main aspects and will have the most noticeable effect on the rental income that your Airbnb property will generate.
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If you’re looking to find the best Airbnb rental property to invest in based on accurate readings and projections, analytics, data comps, historical performance, market and neighborhood averages, and much more, head over to Mashvisor and use the platform to begin your search and find the perfect investment property to purchase in less than 15 minutes.