Airbnb investing has quickly become the optimal strategy for making money in real estate. This is mainly because it’s now well-known that short-term rental properties generally yield higher returns than traditional, long-term rentals. However, not any property is worth listing on Airbnb. This explains why Airbnb revenue can vary drastically from one host to another. As a result, before listing part of your home on Airbnb or buying an Airbnb investment property, you should ask yourself: is being an Airbnb host worth it? How much money can you make from Airbnb as an investment strategy?
To answer these questions, Airbnb investors must do the same amount of research required when making any other kind of investment. There are certain factors that determine what kind of Airbnb profit you can expect to gain. By researching these factors, and with the help of Airbnb analytics, you’ll find the answer as well as understand how to maximize your Airbnb revenue. Keep reading to learn the factors that will affect your Airbnb profit margin. We’ll also introduce you to the best tool that provides Airbnb analytics and helps you estimate the Airbnb income in a matter of minutes!
#1 Airbnb Laws and Regulations
To conduct an Airbnb investment analysis, the first step is determining your location. Where you choose to invest in short-term rentals has a huge impact on your Airbnb profit for many reasons. First off, there are Airbnb regulations in many cities across the US which vary from city to city. Some cities have strict regulations regarding the type of property that can be listed on Airbnb, the number of days you’re allowed to rent out the property per year, licensing requirements, and more. Some cities have even banned Airbnb rentals that are non-owner occupied. It’s best for Airbnb investors to avoid such cities including Los Angeles, New York, and San Francisco.
Thus, depending on your location, owning an Airbnb investment property can be highly regulated. Airbnb laws can affect your costs which, in turn, affects how much you can make from Airbnb real estate investing. As a result, you must always check Airbnb regulation in your city before renting out on Airbnb and assess how they’re going to affect you and your revenue. This is will also help you avoid getting into trouble with the law. As you can expect, it’s best to choose cities with the most flexible regulations governing Airbnb rentals.
#2 Real Estate Market & Neighborhood
After learning about the best cities for Airbnb investments with lenient regulations, the next step is knowing which of these cities make for profitable locations. Most importantly, you want to find cities that have strong economies with tourism as a leading industry. This indicates that vacation rentals are in demand. Another thing to consider is seasonality trends as they affect the Airbnb occupancy rates and, thus, how much you can charge for your short-term rental accommodation. You can find cities that provide high Airbnb return on investment on our blog. There, you’ll find the latest Airbnb data of major real estate markets in the US.
In addition, when speaking of location, we’re also speaking of neighborhoods within the city. This is because every neighborhood’s investment potential can differ from the city’. One neighborhood may be a popular Airbnb location while another never sees a single tourist. To find a profitable neighborhood, you can quickly perform neighborhood analysis using our Real Estate Heatmap. With this tool, you can find the best neighborhoods for making money with Airbnb through using filters like listing price, Airbnb rental income, Airbnb cash on cash return, and Airbnb occupancy rate.
To learn more about Mashvisor’s Real Estate Heatmap and other tools, click here.
#3 Cost of Running an Airbnb Business
How much money can you make from Airbnb also depends on the rental property expenses. Of course, starting an Airbnb business comes with costs and expenses that you need to consider as they’ll have an impact on your cash flow. Cash flow is simply your monthly rental income minus your monthly rental expenses subtracted. If your rental income exceeds the costs of operating a short-term rental, then you can expect positive cash flow which leads to a good ROI. Now, there are plenty of costs to consider from the costs of obtaining a business license, taxes, insurance, Airbnb property management fees, tenant turnover, and Airbnb host service fee.
Q&A: How much does Airbnb charge from hosts? 3% of the cost of each reservation.
All hosts should make sure that their Airbnb rentals are cash flow properties. For this reason, we introduce Mashvisor’s Airbnb Calculator – the ultimate tool for Airbnb investors in the US. If you have access to this tool, you can quickly check Airbnb analytics for any listing on the platform. Our Airbnb data comes directly from Airbnb.com so you can guarantee that it’s reliable and accurate. Among the data that the tool provides are cost estimates. This includes both one-time startup costs and recurring rental property expenses. If you have your own estimates, you can simply edit the values and the interactive Airbnb Calculator will immediately show you how they affect your cash flow and Airbnb return on investment.
For more details, read Airbnb Rental Calculator: The Ultimate Tool for Airbnb Hosts
#4 The Airbnb Rental Property Itself
Say that you’re in a good neighborhood for starting an Airbnb business and you’re sure that you can cover the costs of investing in Airbnb. If you don’t already own a property, you’ll want to start searching for Airbnb properties for sale. However, as we’ve already mentioned, not any property is worth renting out as a short-term rental. Hence, the property itself is one of the factors that answer the question “is Airbnb profitable?” As a result, analyzing the property is a critical step in your Airbnb investment analysis. Running a rental property analysis is the only way you’ll ensure that your property will make the profits you’re aiming for as an Airbnb rental.
Mashvisor’s Airbnb Calculator (also known as the Airbnb Estimator) will also help you in this step. For every listing, Mashvisor provides a readily-available analysis including the main ROI metrics which were estimated using the Airbnb Calculator. This allows you to get a better projection of how much money can you make from Airbnb per month and over the long-term. Besides rental expenses estimates, our calculator will estimate your comparable rental income, cash flow, cash on cash return, cap rate, and Airbnb occupancy rate. This way, you can easily compare different investment opportunities and select the best Airbnb property for investment. Moreover, you also get to see the property’s potential when renting it out on Airbnb vs renting it out traditionally to make sure that you’re going for the optimal rental strategy.
#5 Airbnb Comps in the Neighborhood
The final factor that helps you answer how much money you’ll be making from Airbnb rentals is how rental comps are performing. Airbnb rental comps are properties that are similar to yours in the same area. Checking the performance of these properties is crucial because they help you get an understanding of the rental rate they’re charging and, hence, set a competitive rate for your Airbnb investment property. However, finding Airbnb comps by searching manually on Airbnb can take time. This is why successful Airbnb investors use real estate investment software such as Mashvisor’s which helps you find what you need in a matter of minutes
For every listing, our Airbnb Profit Calculator provides a set of active Airbnb comps that you can compare to one another to understand how they’re performing. This list of rental comps displays their similarity, distance, address, occupancy rate, nightly rate, monthly rental income, as well as their ratings/Airbnb reviews. You can download this data in the form of a CSV report to complete your analysis and understand how to maximize your property’s earnings. Additionally, you can click on each comparable and Mashvisor will take you straight to the original Airbnb listing so you can do your own comparison if you’d like.
Related: Where to Find Reliable Airbnb Comps for Investment Properties
Final Words for Airbnb Investors
So, is Airbnb profitable? Depending on the above-mentioned factors, it could be. The only way to really understand how much money can you make from Airbnb is through performing the required market research and investment analysis. When signing up for a real estate investment software like Mashvisor, however, you’ll get all the Airbnb data and analytics you need to make a decision more efficiently. Want to give our Airbnb Calculator and other tools a try? Start your 7-day free trial with Mashvisor now.