Pros and Cons of Buying an Investment Property for Airbnb
In recent years, the platform of Airbnb has skyrocketed, and today, over 2 million people are staying at a property listed on Airbnb on any given night. For real estate investors, this shift in the market has caused them to switch to prioritizing short-term rentals instead of hosting long-term tenants. If you’re looking to invest in rental properties and are considering listing on Airbnb, here are some pros and cons to weigh before you make a decision.
Let’s start with the benefits of buying property as an Airbnb rental investment:
1. Flexibility With Availability
One great benefit about renting with Airbnb is that you have full control over the availability of your property. For example, if you have family coming into town, you’d be able to block out dates on the rental calendar to allow your family to stay at your property. As an Airbnb renter, you have full control over rental availability and price.
2. Airbnb Offers Host Protection
Airbnb offers “AirCover” for hosts, which provides protection on a list of categories such as guest liability insurance, property damage, stolen property, pet damage, deep cleaning costs, and income loss. There is also a 14-day filing period to report damage to your property and hosts are typically reimbursed for damage within 2 weeks.
3. Listing a Property is Free!
Listing a property on Airbnb is at no cost to the host, so there is no need to calculate that into your monthly costs for the property. No fees mean more ROI for your property!
4. Possibility for High ROI
Listing on Airbnb has a high possibility of a high return on investment. Depending on the region your property is in, of course, the higher the tourism level in the area, the better. The money you make from renting on Airbnb can cover mortgage costs, taxes, and fees, service bills for the property, and still, leave money leftover to turn a profit!
5. Bad Tenants Won’t Stay for Long
Hosting bad tenants is bound to happen, but unlike long-term renting, on Airbnb, the average stay lasts less than a week. So even if the guests throw a party when they aren’t supposed to, or cause damage to the property, you won’t have to worry about late rent or other issues that would come to the surface with long-term renters.
Now, let’s take a closer look at the cons of renting property on Airbnb:
1. It’s Risky
Buying property for investment is always risky, but even more so when you’re opening that up to complete strangers to stay at. Airbnb has many security features in place to ensure both your and your guest's safety, but not every guest will be perfect. Damages can occur, theft may happen, and more. Plan accordingly the best you can in case situations like this occur and make sure you have the will to handle them.
2. Double The Expenses
If you are buying a second property to rent out to Airbnb, that means you’ll have double the expenses, especially when the property is first purchased. Unlike long-term rental properties, guests on Airbnb expect their stays to be stocked with the typical amenities a hotel would have (and then some!). You’ll have to supply towels, toiletries, kitchen supplies, cleaning supplies, and more for every guest. The property will also need working utilities such as air conditioning, heating, water, and wi-fi, and where most property owners could charge a long-term tenant for those expenses, Airbnb short-term renters do not expect to pay for any services. As you’re paying for those things at your home, you’ll be paying for them on your rental property as well. The most you can do is tack on small fees for a cleaning service or other amenities onto the Airbnb rental price breakdown.
3. You are the Landlord and Maintenance Crew
Airbnb guests don’t expect 24/7 service, but close enough to it. And unlike at a hotel, there isn’t a full staff to support them, it’s just you. So before investing in a rental property, make sure you have the time to commit to being a landlord, maintenance crew, and cleaning crew. If something goes wrong at 3:00 AM, you are responsible to assist your guest in a timely manner, and if you don’t, it could lead to a bad review.
4. There are some Legal Restrictions
Before you invest in property for rent, make sure you double-check the legal allowances on renting in the area. Some neighborhoods may not allow properties to be rented out short-term, and other regions may require special licenses and permits to do so.
5. Bad Reviews Have a lot of Sway
In any industry, word of mouth can make or break a business, and this is also true with Airbnb renting. Many guests check out past reviews before deciding to book a stay. On the website, guests are allowed to leave reviews of their stay and point out any pros or cons of the property they deem important to acknowledge. If you do receive a bad review, make sure to reach out to the poster and discuss the issue before the review goes public. There is a 2 week time period before reviews are posted.