A property is considered an Airbnb investment when either part or all of the property is rented out on Airbnb after purchase.
These rentals are typically short-term, which allows you to host many guests throughout the span of the year, as opposed to traditional investment properties that are commonly rented to long-term tenants.
Airbnb is a commendable business with great returns on investment and profits as it brings in steady flow of income daily, weekly and often times on a yearly basis.
Starting Airbnb Property Business
You can make a lot of money being a host on Airbnb. Who knows, in a couple of years, you might even become a super host, getting lots of inquiries. But just like any other venture – real estate or otherwise – success isn’t guaranteed.
However, if you treat your Airbnb venture as a business, provide excellent experience for guests, and buy property in a favourable location, your Airbnb property will deliver a steady stream of income. You can even use Airbnb income to expand your real estate portfolio.
The first step though is making an assessment of your current financial standing. How much can you afford to spend on an investment property? Airbnb requires more than just budgeting for the property price and closing costs; you have to factor in the cost of furnishing the property and making it attractive to guests as well.
Requirements
There are basic requirements that must be fulfilled to succeed in the business. They include;
- Secure your financing
Before we talk about alternative financing options for investors looking to venture into Airbnb hosting, there are a number of financing options to know about. Qualifying will depend on your credit score. You can opt for conforming loans, portfolio loans, multifamily loans or short term loans. Some Airbnb investors take multiple loans. A primary loan to finance the property and another one to furnish it and cover emergencies.
- Assess Location
Two factors are critical to your Return On Investment(ROI) on Airbnb investing, which include occupancy rate and the average daily rate in your neighbourhood. These two metrics will show you how profitable a particular location is for short term renting.
So if the location isn’t heavily affected by seasonality and your property doesn’t stay vacant for too many days in a month, you’ll make more money from your Airbnb rental.
- Check local Airbnb rules and regulations
New regulations come up in cities and locations restricting and sometimes even prohibiting Airbnb rentals in some places. This is not just exclusive to the US. It’s global.
It’s your job as a real estate investor to stay abreast of the facts as it pertains to your desired neighborhood.
- Choose the right property type
There is no ‘right property type for Airbnb rental investing. You should keep your ears to the ground and get to know the type of people who demand short term rentals in that neighbourhood. In a place like a city center, you’d probably want to invest in a small apartment. That’s because in this case, your Airbnb rental would likely attract business travelers.
In a resort location, you might want a property type that offers more privacy such as a single family home. That’s because this location will probably attract young couples and small families or groups.
- Analyse the property and its potential ROI
You ought to understand that analyzing Airbnb property can be a bit tricky. That’s because rates are usually adjusted based on seasonality, special events and travel trends. This means you might get more returns in one month than the others as opposed to long term rentals that deliver relatively fixed cash flow.
House hacking
There are a lot of reasons to buy a property, live in one part of it, and rent out the rest. You can make some extra money, have an investment that can increase in value over time, and even make your home feel like a more welcoming place for guests.
The competition on Airbnb is tough, though. If you want to succeed as a house hacker on Airbnb, then make sure your listing will appeal to renters: keep the space tidy and clean; provide comfortable amenities like towels and toiletries; use professional photos that highlight any special features (like an awesome view); and make sure you add enough information about the area.
Rental Arbitrage
The practice of renting properties and subletting them on Airbnb is called ‘rental arbitrage.’ If you rent a property for N300,000 a month, and you sublet it on Airbnb for N15,000 per day, at 100% occupancy, you’ll pay your rent and still make N150,000 profit every month from your rental proceeds.
We’ve got the edge. Get real-time reports, breaking scoops, and exclusive angles delivered straight to your phone. Don’t settle for stale news. Join LEADERSHIP NEWS on WhatsApp for 24/7 updates →
Join Our WhatsApp Channel
