Without a doubt, Airbnb offers fantastic opportunities for real estate investors. One thing that makes Airbnb real estate investing a popular investment strategy is that you don’t have to buy a new property to use exclusively as an Airbnb property. You can also make money by renting out a spare room in your primary residence.
While renting out a room on Airbnb has its advantages, it’s not always the best way to invest in Airbnb. In this blog, we are going to look at why you should buy an Airbnb property instead of renting out your home.
4 Reasons to Buy an Airbnb Property Instead of Renting Out Your Home
Before you decide to turn your primary residence into an Airbnb rental, you should ask yourself: Is it better to buy Airbnb property? Before you decide, you might want to think about how both options would impact your lifestyle and the success of your business.
Here are some of the reasons why buying an Airbnb property could be the better choice:
1. You Can Find a More Profitable Real Estate Market for Airbnb
Many people with spare rooms in their houses rush into renting them out on Airbnb without really understanding how the Airbnb business works. As a result, many end up being disappointed when their house stays vacant for several weeks or even months.
Before you consider renting out your house on Airbnb, the first thing you need to find out is whether your property is located in a top Airbnb market. After all, location is a key determinant of your Airbnb return on investment.
An ideal real estate market for Airbnb investment is one with a high influx of tourists and business travelers. These markets usually have popular tourist attractions or hold different major national or international events every season. It’s possible that your town or city is simply not a place that attracts enough tourists for you to make good money with Airbnb.
As you can see, investing in Airbnb locally is not always viable. Regardless, this shouldn’t stop you. Buying an Airbnb property allows you to find a better performing housing market. If you want to find Airbnb for sale with the highest Airbnb profit margin, you should not limit your search at all. You should even consider an out of state Airbnb.
Related: Owning an Airbnb Investment Out of State: Is It a Good Idea?
But how do you find the best market for Airbnb investment? It boils down to doing a thorough real estate market analysis. You should research the market at both the city level (macro-markets) and neighborhood level (micro-markets).
Using Mashvisor to Find the Best Market for Airbnb Investment
You can easily find the best cities for Airbnb investment in the US housing market by checking for up-to-date Airbnb data on Mashvisor’s blog.
After choosing a top city, you can do a neighborhood analysis using Mashvisor’s real estate heat map to find the best-performing neighborhood in the city you have selected. This neighborhood analysis is based on real estate metrics such as average listing price, Airbnb income, Airbnb cash flow, Airbnb cash on cash return, and Airbnb occupancy rate.
Hiring Airbnb Property Management
As we have seen, having the whole nation to pick from makes it easier to find Airbnb markets with the best return potential. However, you are probably asking yourself, “How will I manage an Airbnb investment that isn’t close to home?”
While some people find success with managing an Airbnb remotely, you can always hire professional Airbnb property management to take care of the day-to-day tasks. This also allows you to earn passive income. A reliable and proficient Airbnb property manager will also help to increase your rate of return.
If you are considering hiring a property manager, be sure to include property management costs in your ROI calculations. However, if you have picked a good Airbnb market, you should be able to afford professional management.
Related: Airbnb Property Management Fees Breakdown – Are They Worth It?
2. Better Airbnb Regulations
The second reason why you should consider buying Airbnb property instead of renting out your home is due to Airbnb regulations. Some cities in the US have enforced strict regulations or total bans on Airbnb properties. Such regulations could affect your Airbnb return on investment negatively.
For example, in many cities, there is a cap on Airbnb occupancy rate – you can only rent out your property for a certain number of days in a year. In other locations, you will have to pay high fees for permits or taxes in order to operate which will bring down your bottom line. Your home may even be located in a residential zone where short-term rentals are not allowed at all.
If your house is located in a city with unfavorable Airbnb regulations, it would be better if you buy an Airbnb property in another housing market. As we have seen with our first point, finding the best real estate markets for Airbnb investment boils down to doing a thorough market analysis.
However, before you begin shopping for Airbnb for sale, be sure to also check the local regulations regarding short-term rentals. This way, you will avoid any legal issues.
3. You Can Find a Better Airbnb Rental Property
Not every property is great for the Airbnb rental strategy. Apart from location, you should also consider other property features that could impact your Airbnb return on investment. This may include property type, number of rooms, size, condition, etc. For instance, multifamily properties generally generate a higher Airbnb return on investment than single family homes. And if your home only allows you to rent out a single room, you’ll be making much less money than if you had a whole investment property to rent out or one where you could rent out multiple rooms at once.
If you base your property search on these factors, it’s possible to find an Airbnb rental property with a higher Airbnb ROI than your house. Even with good management, it’s difficult to turn a bad Airbnb investment property into a good one.
To easily find investment properties that are ideal for Airbnb investment in your area of choice, use Mashvisor’s Property Finder. This tool allows you to narrow down your property search based on your criteria. You can use the following filters to find a high return Airbnb:
- Location
- Miles
- Budget
- Rental strategy
- Property type
- Number of bedrooms
- Number of bathrooms
To find the best Airbnb property to buy among those in your list, you need to run the numbers. As a real estate investor, you want to invest in a positive cash flow property. Mashvisor’s Airbnb profit calculator is the ultimate tool for investment property analysis. This tool uses Airbnb analytics and machine-learning algorithms to quickly provide you with key metrics such as:
- Airbnb income
- Cash flow
- Cash on cash return
- Cap rate
- Airbnb occupancy rate
4. Your Private Life Is Less Affected
One disadvantage of renting out a room on Airbnb is the loss of privacy to some extent. Moreover, you will be required to forego your personal tastes and tailor the house to meet travelers’ preferences in terms of interior design and decoration. Sometimes, guests may also be a nuisance.
If you don’t fancy the idea of sharing your house with strangers and want to keep your primary home private, you should consider buying a separate Airbnb property.
Related: Want to Succeed with Airbnb Real Estate Investing? Read This!
The Bottom Line
Airbnb offers investors the platform to make money by renting out a spare room or a separate investment property. However, buying an Airbnb property allows you to find better Airbnb investment opportunities and ultimately earn more money.