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Are You Suited for an Airbnb Investment?

27071084566_2933d8c540_bAirbnb has taken the world by storm by offering travelers the opportunity to stay somewhere besides a hotel. For many travelers this is a way to save money, while others do it to experience unique places and enjoy new experiences that wouldn’t be available in a typical hotel. For investors and/or property owners, Airbnb offers a chance to make money quickly, with the most popular destinations staying booked all 365 days of the year. And while this lure of steady income may sound appealing, it may not be the best type of real estate investment for everyone. Here’s what you can expect to encounter when starting an Airbnb:

Local City and County Regulations. Every city and county has different regulations that determine things like the length of stay per occupant, how it is taxed, and how many short-term rental properties are allowed per area of town. In addition you may find that homeowner’s associations, mortgage companies and insurance companies have additional rules about how you can use your property. Digging through these regulations can be cumbersome, time-consuming and even expensive at times.

Hidden Expenses. Know the expenses before you sign on! You’ll need to provide cleaning services after each stay and can expect to see increased utility bills and repair needs because of additional traffic on the property. Your insurance costs will also go up as you provide coverage for guest injuries and potential theft or damage on your property. In addition, Airbnb takes a 3% service fee for every reservation.

Slow or No Occupancy. You have to be prepared that your property may not be rented all the time so you can’t count on consistent occupancy to pay your bills. Be sure that you can afford to make payments and cover the expenses yourself for extended periods of time, especially at the beginning.

A Need to Stand Out. Airbnb is in 65,000 cities and features more than 3 million listings. In order to make your rental special and unique, you’ll most likely need to spend money on things like professional listing photos, welcome baskets, top quality bedding and bath accessories and additional luxury items.

If you’re ready to tackle all that comes with managing an Airbnb property, consider starting small. Perhaps you could rent a room of your home before you invest money on a separate short-term rental property. Or if you currently own a long-term rental property, you could experiment with Airbnb in between long-term tenants.

As with most investments, Airbnb can be a great way to make money but it’s critical that you do your research ahead of time and know what you’re getting into before you jump!

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