Have you been wondering how you can invest in a lucrative rental property? Read on to find out how our Airbnb revenue calculator can help you.
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Since time immemorial, investing in real estate has been a surefire way of generating handsome returns. Many investors, especially newbies, struggle to make their first step in real estate investing. Fortunately, getting started isn’t as complicated.
One way of real estate investing that has become increasingly popular is Airbnb rental properties. For starters, these are short-term rentals where tenants (referred to as guests) book your rental for a short period (a minimum of one night).
There are many reasons why Airbnbs have become a popular investment strategy. First, they offer higher potential returns compared to their traditional long-term counterparts. You can set an attractive nightly rate and make your property available for booking for as many nights as possible. Second, they offer you flexibility since you can also use the property yourself.
While these advantages can be convincing enough, investing in any property doesn’t guarantee you handsome returns. Competition is getting tougher as many investors rush to enjoy short-term rental advantages.
As such, you need to use the right real estate investment tools to ensure that you stay ahead of your competition. This is where Mashvisor’s Airbnb revenue calculator comes in.
Stay with us to the very end to find out how this tool can be beneficial in your investment journey.
5 Challenges of Investing in Airbnb Rentals
While investing in Airbnb rentals is a lucrative venture, there’s no doubt that there are some challenges that most investors face.
Here are some challenges you can expect when investing in Airbnb properties. Keep in mind that these are challenges that an Airbnb revenue calculator will help counter.
Airbnb Laws and Regulations
Airbnb regulations are the biggest stumbling block for real estate investors. As Airbnb popularity grew, most local governments came in to regulate the industry. Some banned the properties outright, while others passed strict laws for investors to adhere to.
For example, you could find that your city has placed a cap on the maximum number of days you can rent your property as a short-term rental. You could also find that there are zoning laws that prevent you from owning an Airbnb in certain neighborhoods.
Besides, Homeowners’ Associations (HOA) also have their own rules and regulations for Airbnb properties within their neighborhood. For example, some have a maximum number of guests you can host.
Investors should set out to research their local Airbnb laws and regulations to avoid falling into legal trouble down the line. Also, ensure you check that the laws aren’t outdated.
The main challenge is that some of this information is hard to come by, especially since these laws aren’t universal.
Choosing a Profitable Location
One of the main factors to consider before investing in Airbnb rentals is location. Your location determines how much you can set as your nightly rate and how much expenses you’ll spend from your earnings. Not all locations are good locations for short-term rentals. Besides, locations that are suitable for traditional rentals may not necessarily be good for Airbnb rentals.
When it comes to great locations for Airbnb investment, your best bet is with tourist cities. Cities with bustling tourism activities receive a good number of visitors every year, meaning that you’ll enjoy a good Airbnb occupancy rate.
For example, Miami is a great tourist city, hence one of the top markets for Airbnb rentals. Other examples include Las Vegas, Orlando, and Austin.
Since many guests come to have vacations in these cities, they’re probably going to be looking for accommodation. Many of them will prefer Airbnb rentals over expensive hotel rooms.
You can set a higher nightly rate in such locations since the demand is high.
Many investors are unable to access data and analytics to help them choose profitable Airbnb locations. Analyzing locations manually would mean gathering copious amounts of data and carrying out various calculations manually, which could lead to a lot of errors.
Setting a Reasonable Nightly Rate
Many investors are unable to set a reasonable nightly rate. A reasonable nightly rate is one that’s fair so that your target market doesn’t run off to your competitors, but is also profitable enough to leave you with enough returns after expenses.
How do you set a reasonable nightly rate?
The best way to set your rent is by using Airbnb rental comps. Rental comps are comparable properties with the same features as your property and located within the same neighborhood.
Airbnb rental comps give you an accurate picture of how much you can charge since they are already active short-term rentals. Sadly, not every investor is able to access accurate Airbnb rental comps data.
Property Management
Property management is an important aspect of real estate investing, whether traditional or short-term rentals. With Airbnb properties, property management can be a little bit trickier compared to traditional rentals since they require you to be present during check-in and check-out.
As such, you must ensure that the property is cleaned every time guests check out, welcome new tenants, and continuously market the property to ensure a consistent flow of guests.
While this may seem like an uphill task, the good news is that you can hire someone with experience to do all the heavy lifting for you. You can choose to work with an individual property manager or outsource all the management tasks to a property management agency.
Keep in mind that this would mean having to pay a certain fee from your rental income (in most cases, 10%). However, consider it an investment that allows you to think about your core business tasks with minimal distractions.
Handling Guests
At this point, you realize that Airbnb investments involve quite some work. Airbnb properties have a high tenant turnover. You could host several groups of guests in a single week. This means that you need to stay on top of your organizing skills.
One of the biggest risks with Airbnb properties is hosting irate or rowdy guests. Some irresponsible guests will damage your items or disturb the neighbors. You must know how you can handle such tenants.
Remember, Airbnb has a reviews feature, and many guests don’t skip bad reviews. You must find a balance between treating your guests well and maintaining order.
Related: 10 Things to Include in a Short Term Rental Agreement
What Is an Airbnb Revenue Calculator?
An Airbnb revenue calculator is a type of investment property calculator that is specifically designed to help real estate investors, both newbies and experienced ones, find profitable Airbnb rental properties.
Also known as an Airbnb calculator or Airbnb profit calculator, this advanced real estate technology tool helps you perform both real estate market and investment property analyses.
You can analyze properties on the MLS database, off-market properties, and foreclosed homes. In case you’re interested in a specific property, you can enter its address to estimate its profit potential.
One huge advantage of using the best Airbnb calculator is that it eliminates the amount of time and energy that you’d use to analyze the market, search for a property, and calculate returns.
If done manually, these processes can last you up to three months. A good Airbnb calculator has the potential to carry out all three processes within 15 minutes. You can spot and analyze real estate investment properties before anyone else does.
What Will an Airbnb Revenue Calculator Do for You?
Once you’re done studying the market, looking at rental comps, and searching for prospective properties, it’s time to perform an investment property analysis. For this task, an Airbnb revenue calculator will help you access all the important numbers and indicators with just the click of a button.
The numbers you can access include the following:
- Property listing price
- Estimated expenses
- Estimated rental income
- Estimated cash flow
- Airbnb cash on cash return
- Airbnb cap rate
In some cases, your research or experience as an Airbnb host may indicate that the Airbnb property will perform differently and yield different numbers from what’s projected. As such, the calculator should allow you to tweak different figures and see how they’ll affect your return on investment.
Related: Airbnb Property Analysis—Find Out if You’ll Turn a Profit in 10 Easy Steps
What Data Should I Expect From the Airbnb Revenue Calculator?
Now that we’ve seen what an Airbnb revenue calculator can do for you, what kind of figures and metrics can you expect from this tool?
Property Listing Price
The first thing that the Airbnb calculator will show you is the amount of money you can expect to pay for the listings you’re interested in. Keep in mind that the listing price isn’t necessarily always the sale price. However, it gives you a picture of roughly how much you can expect to pay.
Don’t forget that the amount of money you pay for the property is one of the core factors that determine your rate of return on investment.
Airbnb Rental Income
All real estate investors want to know how much rental income they can make from their Airbnb properties every month. A good Airbnb revenue calculator will help you estimate your rental income.
This step is important since it’s one of the figures used when calculating your return on investment. It’s also why this tool is sometimes called the Airbnb price calculator since it helps you calculate the prevailing Airbnb nightly rate in your market and neighborhood.
Airbnb Rental Expenses
In real estate investing, you have to spend money to make money. You can’t avoid this, particularly on Airbnb properties where maintenance needs are more demanding.
An Airbnb calculator provides you with the one-time and recurring costs that you can expect to pay to maintain your short-term rental. The expense estimates you get are based on the prevailing rates in the current market conditions.
The Airbnb revenue calculator provides you with one-time startup costs, such as home inspection, closing costs, furniture, and property repair costs. You also get estimates for recurring expenses, such as—
- Property insurance;
- Taxes;
- Property management fees;
- Utilities;
- Maintenance and cleaning; and,
- HOA fees.
Airbnb Occupancy Rate
Short term rental occupancy rate is one of the most important metrics for analyzing an Airbnb property. The Airbnb calculator usually needs two variables when estimating Airbnb rental income: the Airbnb nightly rate and the occupancy rate.
Airbnb occupancy rate refers to the ratio of the number of days your property is booked to the number of days you made it available for booking in a year. You ought to know that Airbnb occupancy rates vary depending on the season. In short, you experience more bookings in a particular season compared to other seasons.
The higher the occupancy rate, the higher the rental income. You should aim for properties with a potential of at least a 50% occupancy rate. This means that your property will be booked for more than half of the year.
An Airbnb revenue calculator should provide you with accurate occupancy rate data for your property. The figure should be obtained from reliable Airbnb data from the entire neighborhood and not just a few nearby properties.
Airbnb Cash Flow
Cash flow is the difference between income and expenses. It’s one of the most important metrics since it helps you see whether the property makes financial sense.
Calculating this metric is quite easy once you have Airbnb rental income and expense estimates. An Airbnb calculator will provide you with cash flow estimates for the investment property you’re interested in.
You want to invest in a property with positive cash flow. This means that you make enough to settle the property expenses and still earn a handsome profit.
Airbnb Cap Rate & Cash on Cash Return
Cap rate and cash on cash return are the two main return on investment metrics. The main difference between the two is that the cash on cash return accounts for the financing method used to acquire the property, while the cap rate doesn’t.
While you may have all the necessary figures needed to calculate these two metrics, carrying out the calculations manually could be time-consuming and prone to errors. Thankfully, an Airbnb calculator provides you with fast and accurate results.
Getting access to these metrics will help you understand whether a certain Airbnb property is worth your time and money. You’ll make better investment decisions using an Airbnb revenue calculator.
Where to Find the Best Airbnb Revenue Calculator
Mashvisor is your one-stop shop for all your real estate investing needs. We provide you with the best Airbnb revenue calculator in the market today. Our tool has all the features we’ve looked at above to help you get started in your investment journey and make wise business decisions.
Mashvisor’s Airbnb Revenue Calculator
Our Airbnb revenue calculator is very easy to use. To start with, it provides you with precalculated numbers such as property expenses, taxes, and rental income. In case your research or experience shows that some numbers could be different, you don’t have to worry.
The calculator is also interactive so that you can change any numbers you feel are different and see how they could affect your return on investment. Simply enter all the relevant information and let the calculator do the rest.
One reason why our Airbnb calculator stands out from the rest in the market is that we offer data and analytics for both long term and short term rental strategies. This allows you to run a side-by-side comparison of how your property could perform if you implemented either of the strategies and choose the optimal one.
Overall, our Airbnb revenue calculator takes a huge burden off your shoulders and helps you save both time and money.
Start your real estate investing journey in a profitable location today by signing up for a 7-day free trial.
Key Takeaways
Airbnb rental properties have become increasingly popular among real estate investors. They offer a higher monthly rental income compared to traditional rental properties. However, that’s not to say that investors always have a straightforward investment journey.
Some of the most common challenges investors face include finding Airbnb laws and regulations in their markets, spotting suitable locations and neighborhoods for short term rentals, and setting a reasonable nightly rate that’s profitable enough.
The answer to all these problems is using an Airbnb revenue calculator. This tool helps investors conduct comprehensive market and property analyses. In addition, you can get a property’s important metrics, such as estimated rental income, cash flow, cash on cash return, and cap rate.
Mashvisor has the best Airbnb revenue calculator in the market. Our tool will hold your hand in your investment journey and provide you with all data and analytics you need to make smart business decisions. You don’t have to worry about data accuracy since we pull our data from reliable sources.
Book a demo today to see how our tools will help you in your journey.