The Airbnb rental business is set to continue growing at high speed in 2020, following the rapid expansion since 2008. If you haven’t joined the millions of real estate investors and homeowners making money from short term rentals yet, now is the time to do so. Wondering how to start an Airbnb business in 2020? You’ve come to the right place! Just follow the 7 steps below, and you’ll be on your way to riches before you know it.
Step 1: Find the Best Location for Airbnb Real Estate Investing
Location location location… After all, buying an Airbnb property is a form of real estate investing, which means that the location of your short term rental is a crucial determinant of its profitability.
The top locations for a vacation rental business are popular tourist and business destinations which attract millions of visitors each and every year. The number of visitors to a city or town determines the demand for Airbnb rentals, which on the other hand sets the Airbnb occupancy rate – one of the most important factors for high return on investment.
The best places to invest in real estate to rent out on short term basis also have above-average cap rates by city. The cap rate is a popular real estate metric which measures the rate of return on rental properties – whether traditional or Airbnb. If you are a new real estate investor and have no idea where to start your real estate market analysis, have a look at 2020 Cap Rates by City: What Real Estate Investors Should Expect.
The most profitable locations for starting an Airbnb business in 2020 benefit from high Airbnb occupancy rate. The Airbnb occupancy rate is the ratio of the number of booked nights over the number of available nights. When a vacation home is booked for most of the time, this pushes the Airbnb monthly rental income for the host, increasing the return on investment.
Not sure what Airbnb occupancy rate to aim at? Check out What Airbnb Occupancy Rate Can You Expect in 2020?
Keep in mind that choosing the top place for investing in an Airbnb rental property does not entail selecting only a city but also a neighborhood. The performance of an Airbnb business varies significantly from one area to another within the same real estate market. Thus, you have to conduct neighborhood analysis in real estate to decide where to buy rental property.
How to do that in 2020? With Mashvisor’s real estate investment tools!
Once you’ve picked up a city, use Mashvisor’s heatmap tool to analyze the best neighborhood for investing in an Airbnb property based on:
- Property listing price
- Airbnb rental income
- Airbnb occupancy rate
- Airbnb cash on cash return
After you’ve selected the most profitable area for vacation rental investments within your budget, you can use Mashvisor’s investment property calculator to analyze the neighborhood in more detail. Our tool will provide future Airbnb hosts with the average neighborhood-wide:
- Property price
- Price per square foot
- Airbnb cash on cash return
- Airbnb rental income
- Number of real estate listings
- Number of Airbnb listings
- Airbnb occupancy rate
- Optimal rental strategy (to confirm that investing in Airbnb rentals makes more sense than investing in traditional rental properties in this neighborhood)
- Real estate comps
- Airbnb rental comps
- Optimal property type (single family home, multi family home, townhouse, condo, etc.)
- Optimal number of bedrooms
Below you can see a screenshot of some of the Central City neighborhood analysis in the Phoenix real estate market. The good news for real estate investors is that Airbnb Phoenix will be fully legal in 2020.
Mashvisor’s Airbnb Calculator: Neighborhood Analysis
So, after you’ve chosen the best neighborhood to invest in an Airbnb property in 2020 in your preferred market, you’ve completed step 1 of how to start an Airbnb business. Now to step 2…
Step 2: Study the Airbnb Laws and Regulations
Since you are thinking how to build an Airbnb business in 2020, you must’ve done some research and reading on the matter. Then you’ve definitely noticed the tightening of short term rentals rules and regulations in the US housing market. Many previously most profitable locations for Airbnb rentals have imposed major restrictions on Airbnb investments. For example, you can’t have Airbnb Las Vegas rentals for less than 30 days. This means that only Airbnb long term rentals are a possibility in the Las Vegas real estate market now. Similarly, Airbnb Los Angeles works only for primary residences and not for full-time investment properties. Nevertheless, house hacking is still a viable option in the Los Angeles real estate market.
What do all these Airbnb laws and rules mean for those willing to start an Airbnb business in the coming year? That they should study carefully the local legislation on the matter of short term rentals. The best real estate investor websites to visit in this regard include the official websites of the city, the county, and the state. Airbnb.com will give you a quick idea of some of the rules, but it does not have comprehensive information, so you’ll need to dig deeper. Speaking to an established Airbnb host in the area is also a good idea. He/she will be able to tell you not only about the short term rental regulations and fees but also about what Airbnb guests expect, the must-have furniture items, etc. After all, each Airbnb location has its own peculiarities.
After you’ve familiarized yourself with the nitty-gritty of the local Airbnb laws, you can move on to the next step in the process of building an Airbnb business in 2020.
Step 3: Choose the Most Profitable Investment Property for Sale
At this point, you know where to invest in real estate for maximum Airbnb revenue and you know the short term rentals regulations there. What’s next?
Now it’s time to do property search and investment property analysis to make sure that you are buying the most profitable vacation rental property in the local housing market, within your budget of course.
Where do you start? The best place to search an Airbnb investment property for sale with readily available rental property analysis is Mashvisor.
On our Airbnb analytics platform, you can enter your criteria such as:
- Airbnb location: city and neighborhood
- Budget range
- Expected Airbnb cash on cash return
- Expected Airbnb cap rate
- Financing method: cash or mortgage
- Minimum number of bedrooms
- Minimum number of bathrooms
- Construction year
- Size in square feet
- Airbnb rental income
- Property type: single family home, townhouse, multi family home, condo, or other
- Property status: for sale, pending, sold, or foreclosure
Once you’ve entered at least a few of these search criteria into Mashvisor’s Airbnb profitability calculator, our real estate investing tool will provide you with a list of available real estate listings with the highest return on investment for the Airbnb rental strategy. For each property, you can see:
- Listing price
- Property description
- Property characteristics: property type, year built, lot size, MLS ID number, number of bedrooms and bathrooms, heating and cooling, etc.
- One-time startup costs: home inspection, real estate appraisal, closing costs, repairs, furniture, etc.
- Monthly expenses: property tax, property insurance, property management, HOA dues (if a condo), rental income taxes, utilities, Airbnb cleaning fee, property maintenance, etc.
- Comparable rental income
- Cash flow
- Airbnb cash on cash return
- Airbnb cap rate
- Airbnb occupancy rate
- Payback period
- Real estate agents in the local housing market whom you can contact if you are interested in buying an investment property
In the image below you can see some of the Airbnb investment analysis of a rental property for sale in Central City in Phoenix.
Mashvisor’s Airbnb Calculator: Investment Property Analysis
In 2020 you will not need to conduct manual investment property analysis to start a successful Airbnb business. All the data and analytics you need are provided by Mashvisor with the click of a mouse. Our predictive analytics-based machine-learning algorithms have made possible finding a profitable Airbnb property within a few short minutes.
Step 4: Buy a Rental Property
To start an Airbnb business, of course you have to buy a rental property. Once you’ve chosen an investment property for sale within your budget and made sure that it fits your profitability expectations, the best step forward is to hire a top-performing real estate agent. Beginner real estate investors usually find it overwhelming to deal with all the aspects of buying a house on their own. There are so many fees, requirements, legalities, and details that you have to obey by. If you are a new investor, you are better off working with an agent. Moreover, you don’t have to worry about the agent fees as those are paid by the property seller.
Wondering where to find the best real estate agents in your US housing market in 2020? Have a look here.
When choosing an agent, it is recommended to look for one who specializes in working with investors. It’s even better if you can locate someone with specific experience in Airbnb rentals as he/she will be able to help you with the short term rentals regulations and everything else.
Step 5: Prepare the Airbnb Property for Renting Out
Now that you’re the proud owner of your first investment property, what’s the next step in how to start an Airbnb business?
Next you have to get your income property into a rentable state. If there are any pending fixes and repairs, make sure to take care of them right away. Otherwise, you risk them turning into a bigger and more expensive problem.
Check out local listings on Airbnb.com and other homesharing platforms such as HomeAway and VRBO. Look at the property descriptions and the photos to figure out what features and furniture are most popular in your Airbnb location. Furnish your Airbnb rental property with durable, cost-effective, modern-looking furniture pieces. Most Airbnb guests don’t expect luxury but do require a certain level of comfort.
Step 6: Learn the Airbnb.com Rules
The next step in building an Airbnb business in 2020 is getting on the Airbnb.com website and exploring the rules and regulations for hosts. Airbnb hosting comes with certain requirements, and you have to make sure that you comply by all of them to avoid problems with the platform and with the local authorities. Check out the Airbnb service fee as well as the Airbnb taxes you have to pay in your market and whether Airbnb collects them and remits them on your behalf.
Once you’re aware of everything that’s expected from you as an Airbnb host, you can move to the final step.
Step 7: Create an Optimal Airbnb Listing
So, here’s the final thing you have to do in order to start an Airbnb business in the coming year. You have to register on Airbnb.com (or any other short term rental platform that you choose) and create a listing for your property.
The best Airbnb listing has the following features:
- Catchy, informative title
- Professional photographs which highlight all key property characteristics
- Attractive but accurate description
Having an optimal listing is crucially important for getting your first Airbnb guests. After all, new hosts still don’t have Airbnb reviews and ratings to attract visitors in this manner. Marketing your new Airbnb rental right is key.
Before your listing is complete, you should work on an Airbnb pricing strategy. Set up a nightly rate which is competitive in the local rental market. Don’t try to make a big profit right away. Start out with a rate that’s a bit below the neighborhood average for your property type in order to be able to attract your first guests. Once you start getting positive reviews and ratings, you can increase the rate little by little. Moreover, set up special prices for the high season in your local area and the major holidays. That’s how Airbnb hosts make money.
Make sure to have a look at our comprehensive guide on becoming an Airbnb host in 2020.
Now you know the 7 steps of how to start an Airbnb business in 2020. All that’s left is to sign up for Mashvisor to find the best Airbnb location and a top-performing rental property there.