How to Invest in Airbnb as a Beginner?

The real estate rental strategy is one of the most reliable ways of making passive income. But it’s a long-term investment strategy that requires more work. However, if you’re an investor looking for alternative ways to grow your ROI with your rental property in a short period, Airbnb can be a good option. 

Research on clever shows that 60% of travelers and vacationers prefer Airbnb over comparable hotels when out of town. Alternatively, about 54% of homeowners consider renting their property through third-party websites like Airbnb. Moreover, about 80% said that renting out their property on a third-party website is a reliable way of making passive income.

According to the above report, there is a high demand for Airbnb, and the competition is fairly high. So to be successful at Airbnb as a beginner investor, you need to understand what you’re getting into and know how to navigate this competitive venture.

This article will highlight what you need to know about Airbnb, how to navigate the process, and how to invest in Airbnb as a beginner and become a successful host. Without further ado, let’s get to it!

What’s an Airbnb Rental Strategy?

Airbnb is a short-term rental strategy that allows homeowners to rent out their property to vacationers and travelers who want a place to stay other than a hotel. This strategy requires you as an investor to list your property on a digital marketplace and connects you to motivated renters.

The investment strategy got its name from Airbnb, an American company, that runs an online marketplace for lodging to provide homestays for vacationers and tourists. Airbnb is usually referred to as an Uber of hotels because, like Uber, this company doesn’t have a single property. The company serves as an intermediary between the renter and the homeowner.

Now that you’ve understood what Airbnb is, let’s talk about the pros and cons of this strategy over others.

Pros of the Airbnb Rental Strategy

Although Airbnb started in 2008, it has been a popular investment strategy among homeowners and property investors alike. But what brings about the fast adoption of this strategy? Here are some of the benefits that made Airbnb so popular in a short time.

1. Flexibility

Airbnb rental strategy offers flexibility and convenience, i.e., you have more control over your property. Unlike long-term rental strategies, you have more control over your home as an Airbnb host.

Furthermore, switching between short-term and long-term strategies is easy. Either you want to be a host for a very long period, or you want to make an extra income for a short time, it’s possible with Airbnb. All you need to do is list the property on the online marketplace for lodging whenever you want or remove it anytime you feel so — you’re not obliged to be an Airbnb host for life.

2. High Return on Investment (ROI)

A well-furnished Airbnb that’s close to popular tourist attractions can generate a higher cash flow than a one-term rental property. Top Airbnb hosts confirmed that their property generates about twice or thrice the cost of renting out the property as a rental. 

As an Airbnb investor, you have all it takes to generate more revenue with your property. You have the freedom to set the price according to your preference and based on the property’s location.

So, to increase your cash flow, all you have to do is to be on top of your game. Ensure your property is well furnished, clean, and provides all necessary things a renter may need. You must also learn to take advantage of some period. 

Related: What Is ROI in Real Estate? A Complete Guide

3. Easy to Manage

Despite being required to be neat and ready for use always, an Airbnb property is still easier to maintain than a long-term rental property. Why? As an Airbnb investor, you get more involved and know more about the property. So when something gets damaged, you can get it fixed as soon as possible before it turns awry and minimizes the cost of repair.

Furthermore, to be a successful Airbnb host, your property should be in good shape — well maintained and cleaner. That means you should monitor the property, i.e., once a visitor leaves, you get the property ready for the next. And since you’d understand the day-to-day activities of your property, you’d minimize the cost of maintenance.

4.  Safety

The freedom to choose a renter makes Airbnb a safer type of investment. Even if the company suggests you a renter, you can still screen the tenant before accepting the offer. 

If you rent your property to a destructive tenant, you don’t need to worry. Airbnb has set aside about a million dollars ($1,000,000) to cover up for any damages caused by the renter. 

Cons of Investing in Airbnb

While you now understand what Airbnb is and its benefits, it’s also necessary to be familiar with the cons of investing in Airbnb. This way, you have a balanced view of what to expect. And also, you could make informed decisions about your investment and arm yourself with the needed tools to be successful.

1. Regulations and Rules

Another problem with becoming an Airbnb investor is that you’d have to deal with regulations. You’d need to understand local laws and HOA rules that could incur high fines and fees if broken. Although you also need to keep up with rules as a long-term rental investor, Airbnb rules are more stringent. Plus, some rules can be specific to the cities you live in.

So to avoid incurring fines for breaking the law, you need to keep up with the rules and regulations more often. What do the HOA rules say about the strategy? Does the zoning law support it? What permits do you require to qualify your property for this type of investment? 

2. Unstable booking

As an Airbnb investor, you should also understand that booking is not always guaranteed. Although Airbnb is more lucrative than long-term rental, there are still days when the demand would be low. 

Furthermore, because you have a low turnout rate doesn’t mean you should abandon your property. You have to keep up with the maintenance and management. And this means all expenses on the property will come from your pocket.

3. Fees and Expenses 

Like in our definition above, before your property can qualify for Airbnb use, list it on the online marketplace — and this comes with a fee. Airbnb requires every host to pay a listing commission of about three percent of the rent for every renter you get. You may also need to pay a special permit fee before your property can qualify for this type of strategy in some states.

Moreover, you need to understand that Airbnb properties incur more tax than other properties. In some cities, hosts need to report every stay to the Tax bureau. While in some states, you need to pay tax for each overnight stay on your property. Overall, be ready to spend more on fees and expenses.

Related: Airbnb Fees Investment Property Owners Should Know About

4. Requires More Work

Although Airbnb is lucrative, it requires more work behind the scenes to keep up with the required standard. That means, to make your property a perfect choice for vacationers and tourists, you need to be proactive about maintenance and cleaning. However, unless you hire a professional cleaner to handle the maintenance for you, this process is usually stressful and exhausting.

On the other hand, there are some other aspects that require more of your time. Processes like handing over the keys to the renter, updating your listing on the company’s platform, screening tenants, and filing taxes require more attention. However, if you think you can’t do this, you can hire a professional property manager to get things done on your behalf. But you should know this service comes with a premium fee.

Factors to Consider When Investing in Airbnb

As we already said, Airbnb is a very lucrative strategy. But this can only be true if you know how to navigate the competitive market. So, in this section, we’ll discuss the factors you need to consider to navigate this rough path of Airbnb investing as a beginner. With no more ado, let’s dive in!

1. Location

Like any other investment strategy, location also affects the potential of your Airbnb property in generating ROI. So before investing your sweat equity in the property, understand the demand for Airbnb properties in your area. Know the occupancy rate and the profitability of the property. 

Furthermore, since the primary customers of Airbnb are travelers and tourists, you need to understand your community. Are there any centers of attractions in your city that may bring visitors from outside? If there is, how close is your property to the attractions? 

Alternatively, you also need to consider the situation of things when the demand for Airbnb drops. What will the market be like then? Will converting your property to long-term rental be profitable?

Related: How to Choose the Right Location for Rental Properties

2. What Does the Local Law Say?

Even if your property is located in a great location, being ignorant about local laws guiding this investment type can kill your business. What does the local law say? What are the HOA regulations? And What permits are you required to take? Find answers to this question. And you can do that by:

• familiarizing yourself with the rules and regulations
• joining local homeowners communities
• acquainting yourself with fellow Airbnb investors, 
• and, if the need arises, talk to a professional. 

3. Time and Schedule

Either you’re investing part-time or full-time, investing in Airbnb requires time. For your property to generate a high return on investment, it needs to be top-notch. It requires regular maintenance and cleaning. Also, you should be ready to meet potential renters every time.

So, are you free? Can you endure the energy required in cleaning and maintenance? Or do you have the equity to hire a professional cleaner? 

4. What Do You Want?

Apart from serving as a guardrail, a plan keeps you focused. So before going all in, understand the purpose of investing. What type of tenant do you want on your property? What’s your investment budget? What property type do you plan to list as Airbnb? And if your investment fails, what’s your exit strategy?

5. Run the Numbers

As with all other investment strategies, analyzing your potential investment property is also essential. Doing a detailed analysis will help make informed decisions and will also increase your profitability. Fortunately, you don’t have to analyze on your own anymore — technology has made up for this. There are different tools out there you can use. And one of them is the Property finder tool by Mashvisor. 

The Mashvisor’s property finder is an analytic tool that uses AI to find the best and profitable investment properties in your preferred area. Based on the information provided, this analytical tool scours the property database and highlights the list of properties that aligns with your investment goals. 

To use this tool, visit the property finder page and follow the steps below.

• On the tool’s page, select the applicable filters to your search. That could include miles and cities, budget and rental strategy, bedroom, and bathrooms. 

• Once you’re done with the selection, the property tool uses AI technology to scour the market and provide you with property suggestions that meet your criteria.

The result provided will contain information (like property address, listing price, estimated value, traditional cash-on-cash return, and the Airbnb cash-on-cash return) that helps you make an informed decision.

Getting Started as an Airbnb Investor

So far, we’ve talked about the pros and cons of Airbnb, and the factors you should consider before investing your sweat and equity in the strategy. In this section, you’d learn about the steps you need to take to succeed as a new investor. So without wasting much time, let’s get to it.

Listing Your Property

For your property to be visible to potential renters, it must be listed in the online marketplace. That means poor listing can mar your work. After all, if no one wants your property because it’s poorly listed, there is no way it could be as lucrative as we said in previous sections. Here are some things you should consider for your property to be visible to potential tenants.

• Clearly define the type of property
• Post a clear picture
• Be realistic with pricing
• Don’t Sweet talk
• Set your availability

Preparing and Organizing Your Property

Congratulations! You’ve successfully listed your property! But now that you’ve successfully listed your property and requests are trickling in from potential renters, what’s the next thing to do? As an Airbnb investor, you should know that your work doesn’t end at listing. You need to satisfy the client and get excellent reviews to increase your odds of getting more requests.

If you don’t know what your next step is, here is a list for you.

• Keep your belongings safe in a locked room
• Set your availability
• Be ready to check them in and out
• Provide necessary things they’d need (like toothbrushes, soaps, etc.)

So, What’s Next?

As you can see, Airbnb is a profitable investment strategy. Apart from being very lucrative, it makes you more active and helps build your experience as a rental property investor. However, this strategy requires more work and equity to be as lucrative as we’ve discussed.

So, if you want to invest in Airbnb, follow this guide, connect with experienced real estate investors, and ask for help whenever you’re unsure of something