Should You Buy an Airbnb Investment Property?

Written by Ashely Sutphin Posted On Friday, 27 January 2023 00:00

Since 2008, Airbnb has been an exciting innovator. Airbnb has changed how we vacation throughout the world, but it’s also created diversified opportunities to invest in real estate. With the online marketplace, property owners became able to rent out their spare rooms or entire homes, and now millions of people stay in an Airbnb on any given night.

Some real estate investors have entirely moved away from traditional leasing in favor of Airbnb, but there are risks, and it’s not right for everyone as with any investment.

While you can certainly rent out a home you already own, what if you want to buy a property for that specific purpose?

How It Compares to Traditional Property Investment

Previously, the only way you could make a reliable income stream off a residential investment property was to own it and then find long-term tenants. Those tenants needed to be trustworthy and dependable.

There are some serious downsides to long-term tenants. One is the fact that you have to find them. You run the risk of your property being vacant for long periods, during which you’re losing money daily.

You can pay a property management company or realtor to help you, but that’s going to chip away at your profit.

You’re also responsible for maintaining the property, and there’s always the potential of dealing with a  client who doesn’t pay their rent for any number of reasons.

Some of the frustrations of traditional property investment are alleviated with Airbnb.

It can be much easier to find a renter for a few days or sometimes even a few months as compared to someone who’s going to sign a lease for a year or more.

You also have a unique way to market your property and get right in front of your targeted audience.

Airbnb takes care of some of the toughest parts of renting to long-term tenants. They vet the renters, accept payments for you, and on both sides of the transaction, the experience can be rated.

You can let renters know about additional charges and communicate with them solely through the platform.

If someone trashes your property or damages it, the host guarantee offers up to $1 million in property damage protection for property owners.

If you invest in a property that’s in an in-demand location, you’re not likely to have a hard time renting it out.

That’s a big if, though. Not every area is going to hold appeal for Airbnb renters. Traditional renters want somewhere quiet and safe in many cases. Airbnb renters want somewhere centrally located and close to the action of whatever the city is. If you’re thinking about buying a property exclusively for Airbnb, you’re likely going to pay a premium to secure a location that people on Airbnb will find appealing.

The Other Risks of Buying a Home for Airbnb

If your goal is to invest in a home and list it on Airbnb, along with location being paramount, there are other possible risks.

You or someone you hire needs to be available on-demand. If someone is on vacation and a pipe bursts in your home that they’re paying to stay in, it has to be fixed immediately.

There are also legal restrictions, particularly in certain locations. In some regions, you can’t list a property at all as an Airbnb rental. In others, you might need licenses and permits to do so.

You’re also at the mercy of your guests’ reviews. One bad review which could occur because of something totally out of control can make it extremely hard to book new guests, particularly if there’s a lot of other competition in your area.

Airbnb does have what’s known as a double-blind system so that both guests and hosts have to leave their reviews before they can see what the other said about them. If there is a dispute, the parties can communicate before reviews go public.

If you aren’t sure whether buying a property for Airbnb is right for you, think about trying things out with something you already own. For example, if you have a spare room and you’re comfortable doing so, maybe you rent it out for a while to get a feel for what it’s like.

One more note—since the start of the pandemic, people have been working remotely more than ever, and that may not change any time soon. That has led to an uptick in people wanting longer-term Airbnb stays for several weeks or even months, creating a new opportunity for investors that’s worth considering.

Rate this item
(1 Vote)

Agent Resource

How to capture your next prospect - click here

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.