Making money with short term rentals has been the trend in real estate investing lately. When real estate investors are faced with the choice between a traditional long term rental strategy vs an Airbnb rental strategy, so many favor the latter. This is because an Airbnb rental property can generate more rental income per night helping you achieve a higher return on investment. In this blog, we go through how to make money with Airbnb to help you take advantage of this. We’ll talk about the process of finding a profitable Airbnb rental property using Airbnb analytics and give you some tips on how to boost the rental income of an Airbnb investment property. But first, some basics of this strategy.
Airbnb as a Profitable Real Estate Investment Strategy
One of the main advantages of investing in Airbnb rental properties is cash flow. An Airbnb property that is located in the right place and has a great listing with professional photography can generate significant rental income. In fact, a furnished Airbnb rental with good reviews and a grade-A host can generate two to three times the rental income of the same investment property rented out as a long term rental.
However, if you are looking for a passive real estate investment with minimum responsibilities, then an Airbnb rental strategy may not be for you. The success of Airbnb rental property management depends greatly on the communication and effort you put in to make your guests feel welcomed, which requires you to be present when the guests arrive and leave. On the other hand, Airbnb management services can relieve you from these tasks, but there is a price for everything!
Now that you know some of the basics of this real estate investment strategy, let’s get into how to make money with Airbnb.
How to Make Money with Airbnb
Location, Location, Location
When looking for an Airbnb investment property, the first thing you should keep in mind is the location of the rental property. How to make money with Airbnb? Invest in a well-located real estate property that provides easy access to the main attractions and points of interest in a given city. Travelers who use Airbnb want to be as close as possible to city centers, the beach, or even a university. Knowing your target audience is important in order to choose the location they desire.
So how do you measure location practically? The answer is real estate analytics.
Airbnb Analytics
Airbnb analytics is a branch of real estate analytics that analyzes and interprets Airbnb rental data. The main advantage of using Airbnb analytics to locate an Airbnb rental property is minimizing the risk of investment.
Learning how to make money with Airbnb analytics is easy thanks to Mashvisor. Mashvisor’s Airbnb rental calculator is your best friend when searching for an Airbnb investment property. Using artificial intelligence and predictive analysis, the tool uses a heatmap to help you locate the best neighborhoods for an Airbnb investment while providing you with rental comps to compare with.
Airbnb analytics is not only useful for finding the best place to buy vacation rental property. It also helps real estate investors find the perfect income-generating property. The Airbnb income calculator uses predictive analytics to calculate important figures such as the cash flow, cap rate, and occupancy rate. These figures are necessary to determine Airbnb return on investment, giving you the leverage of locating the best properties before anyone else.
How Does Airbnb Pricing Work?
To learn how to make money with Airbnb, it is important to understand how Airbnb pricing works. The pricing of an Airbnb rental is based on a few factors. Demand, being the most important factor, determines how high your rental rate can be.
When you list your investment property on Airbnb, you can choose your Nightly Price, which is the nightly rate for your Airbnb rental. You can also set a one-time fee to cover the costs of cleaning the Airbnb rental- Cleaning Fee. You have the option as well to add Extra Guests Fees. On top of that, Airbnb charges around 3% as a service fee to help the platform run smoothly.
Airbnb Smart Pricing is an option that lets the pricing of your Airbnb rental go up and down automatically, based on the type and location of your Airbnb listing in addition to season and demand. However, if you set Smart Pricing on, make sure to regularly check the pricing because sometimes the platform underestimates the demand, thus pricing your Airbnb rental property below the actual market value.
Tips to Boost Your Airbnb Occupancy Rate
Learning how to make money with Airbnb is not rocket science. Airbnb analytics can never let you down when it comes to locating the best income-generating properties. But what about occupancy rate? As an Airbnb investor, you aim for the highest occupancy rate possible. Here are some tips for Airbnb investors on how to boost your occupancy rate:
Instant booking
With instant booking, your guests can book your rental property without the need for approval. You can still reject the booking request. Using this feature helps you improve your ratings and increase your chances of becoming a Superhost!
Ask for reviews
Having a list of good reviews does not just increase the rating of your rental property, it also attracts other guests. Kindly ask for a written review and rating by writing a good review about your guest.
Invest in These Cities!
Now that you have a good idea of how to make money with Airbnb, it’s time to get started! You should start by investing in some of the most profitable Airbnb cities in the US housing market.
Sonoma, California
- Median Property Price: $530,557
- Airbnb Rental Income: $5,765
- Airbnb Occupancy Rate: 60%
- Cash on Cash Return: 7%
Traverse City, Michigan
- Median Property Price: $405,563
- Airbnb Rental Income: $4,336
- Airbnb Occupancy Rate: 70%
- Cash on Cash Return: 6%
Nashville, Tennessee
- Median Property Price: $414,462
- Airbnb Rental Income: $3,531
- Airbnb Occupancy Rate: 57%
- Cash on Cash Return: 5%
Oakland Park, Florida
- Median Property Price: $277,380
- Airbnb Rental Income: $3,503
- Airbnb Occupancy Rate: 56%
- Cash on Cash Return: 6%
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!