The Airbnb strategy continues to be popular as more real estate investors are discovering its potential to generate significant profits. Generally, Airbnb real estate investing is producing great returns across the world. In fact, with good planning and management, an Airbnb rental property can pull out more revenue than a traditional rental. This is enough reason to invest in vacation rentals.
However, simply owning an Airbnb rental property does not guarantee that you are going to make a profit. To be successful in the short-term rental business, there are many things you have to consider. Here is a step-by-step guide to help you reap the full benefits of an Airbnb strategy:
1. Finding a Desirable Location
You have decided to invest in Airbnb, got your finances ready, and you are now thinking of buying an Airbnb investment property, where do you start? Well, to begin your property search, you must first find a suitable location. The profitability of your Airbnb rental will greatly depend on its location.
You can always change the property to how you want it to be, but the location is permanent. Therefore, finding the right location should be your priority, even before the rental property itself.
For the Airbnb strategy to work, the location should be right for this strategy. A good location for an Airbnb rental strategy is one that receives a large number of visitors and tourists. The area should have a number of recreational activities nearby. This creates a strong demand for short-term rentals.
Other important factors to consider when looking for the best cities for Airbnb investment include affordability, public transportation, and the presence of amenities like shops, restaurants, nightclubs, etc. All of these factors will determine the Airbnb occupancy rate and the expected return on investment of your investment property.
After researching these factors, you should have a few locations in mind. To be sure about their profitability, you can use Mashvisor’s Heatmap Tool. With this tool, you simply enter the location and you will be able to see how well the Airbnb rental strategy is performing in the area based on useful Airbnb data such as Airbnb rental income, Airbnb cash on cash return, and Airbnb occupancy rate.
2. Understand the Local Airbnb Regulations
After finding an investment location, the next step to ensure success with the Airbnb strategy is to check the local Airbnb laws and regulations. To avoid paying hefty fines that will affect your ROI or even getting your Airbnb investment shut down, it’s vital to do things by the book.
Just because the Airbnb rental strategy is quite popular nowadays doesn’t mean that that you can invest just anywhere. Some cities don’t have friendly regulations for short-term rentals.
Some cities in the US have banned the purchase of property for use as Airbnb rentals. Others may require Airbnb hosts to get a business license or special permit. In addition, there may be legal restrictions to regulate the property type allowed for listing on Airbnb.
Therefore, it’s important to carefully check the Airbnb regulations in your city of choice before investing to ensure that you aren’t doing anything illegal. You don’t want to get your investment property up and running only for it be shut down because you are violating city laws on short-term rentals.
3. Searching for a Profitable Rental Property
After ascertaining that the Airbnb rental strategy is both lucrative and legal in your city of choice, you can now begin searching for properties for sale. There are a number of vacation rentals in the market, all of which are different. This makes zeroing in on one investment property a challenging task.
Your budget will also determine the kind of property you can afford. To quickly find the best property for you, it’s good to have an investment criterion.
Mashvisor makes your property search quick and easy. You can use our Property Finder tool to find the best Airbnb investment property in your city of choice. Depending on your investment criteria, you can select properties using filters such as location, rental strategy, property type, and the number bathrooms and bedrooms.
You will get a list of income properties for sale that best match your investment criteria with the highest potential cash on cash return.
4. Analyzing the Investment Property
To find the best deal, you need to run the numbers. Success in real estate investing depends on the numbers behind the deal. These numbers determine whether buying a particular investment property makes financial sense.
You need to account for all expenses associated with owning an Airbnb rental so as to estimate the expected profit. Some of these expenses include Airbnb service fee, insurance, mortgage payments, taxes, etc.
To make sure that you are investing in a property with the best Airbnb return on investment, you need to run numbers or real estate metrics like Airbnb rental income, cash flow, Airbnb cash on cash return, Airbnb cap rate, and Airbnb occupancy rate.
You can quickly run an Airbnb investment analysis using Mashvisor’s Airbnb profit calculator. All you have to do is input your expenses and the calculator will give an estimate of expected Airbnb return on investment.
5. Preparing the Property for Guests
You have found and bought a profitable Airbnb rental. However, you can’t list it on Airbnb the way it is. You need to optimize it to cater to travelers. Consider the needs of your potential guests and what will make them feel comfortable. Look to give your guests an experience of the city they will live to remember. You can prepare the vacation rental for your guests in the following ways:
- Renovations: If the house is old or in bad condition, consider revamping it to improve its quality to a level suitable for the stay of Airbnb guests. This may involve repairs, repainting, or even changing the overall design.
- Provide basic essentials: Travelers will need some basic essentials during their stay for them to feel at home. This includes Wi-Fi, toiletries, towels, cutlery, cooking essentials, an ironing board, etc.
- Furniture and decorations: Selecting the right furniture and décor will make your Airbnb rental more attractive to potential guests.
- Ensure safety: Provide fire extinguishers, operational smoke detectors, first aid kits, and clear instructions for operating available systems and equipment.
If you offer guests something that your competitors don’t, they are likely to come back and also leave positive reviews. Nonetheless, be careful not to overspend in this step to avoid eating into your profits.
6. Setting Your Airbnb Rental Rate
Many real estate investors new to the Airbnb rental strategy find this step to be one of the most challenging. You want your price to be high enough to bring positive cash flow but low enough not to push potential guests away. So, how do you determine the right rental rate?
To find the right balance, review the Airbnb rental comps. In other words, you need to look at what other Airbnb hosts in the area, with short-term rentals similar to yours, are charging. This will show you how the Airbnb strategy is performing in the real estate market and help you to set a competitive rental rate. One easy way to find these comparables is to use Mashvisor.
It is also important to note that the demand for Airbnb rentals is seasonal. Therefore, your Airbnb pricing strategy should be dynamic to factor in the season. You can make your nightly rate higher during the hot season and adjust it during the low season.
7. Listing the Rental Property on Airbnb
Now that you have determined the right price to charge your guests, the next step is to list it on Airbnb. How you present your property on Airbnb will greatly influence the number of bookings you get and your occupancy rate.
To make sure that your listing stands out, make it as appealing as possible to prospective guests. Your listing should include a captivating title, a summary of what makes your property unique, a list of amenities, your location, high-quality professional images, the dates that the rental property is open for guests, and any other important listing information.
8. Promoting the Airbnb Property
To maximize your bookings and increase your Airbnb revenue, you need to have a solid Airbnb marketing strategy. To be one of the top Airbnb hosts, you can’t rely solely on Airbnb traffic to your listing. You also need to draw in potential guests who are yet to use Airbnb.
Therefore, make your listing visible across the web by promoting your rental property with advertising. You can use social media, relevant websites, and forums.
9. Airbnb Property Management
You need to properly manage your property and your guests for your Airbnb business to run smoothly and be profitable. Since guests will be checking in and out of the Airbnb property, it’s inevitable that maintenance and repair will be needed.
It is vital to keep the property clean and well-maintained at all times if you want to ensure that there is customer satisfaction and positive Airbnb reviews. For the tasks that you can’t do on your own or don’t have the time to, you can hire experts in these areas. For instance, you can hire plumbers, cleaners, electricians, etc.
You need a guest management strategy to manage check-ins and check-outs, and ensure guests’ requests are met in a timely manner. You should also invest in Airbnb property management tools to keep you organized and for automation.
Automation can help in managing all aspects of bookings on Airbnb and eliminate the need for a professional manager. It will also allow you to develop an Airbnb growth strategy since you won’t be distracted by the daily management activities you used to do manually.
For instance, you will have time to network by attending Airbnb and real estate focused events. This way, you can potentially attract new clients, partners, and investors.
The Bottom Line
The Airbnb investment strategy can be a very lucrative one. However, it is not as simple as acquiring a rental and listing it on Airbnb. Without following the right steps, it will be hard to have a successful Airbnb business. Make sure you do your due diligence and understand every step well before you get started.