Buying Property for Airbnb

By: , Contributor

Published on: Jan 22, 2020

There are nuances to buying a property for Airbnb -- at least if you want solid profits. Want to make sure you're investing in the right home? This guide can help.

There's serious money to be made through Airbnb -- at least with the right location and property on your side.

In fact, according to a recent analysis of the top 15 U.S. cities, Airbnb hosts earn over $20,000 per year on average -- and that's just on two-bedroom properties. In cities like San Diego and Miami, you can even make upwards of $28,000.

Process-wise, buying property for Airbnb is pretty simple. You find a home, you make an offer, and you close on the property. The hard part? That's in finding the right property to begin with.

Sure, you can search potential properties on a local multiple listing service (MLS), Zillow, Trulia, Redfin, and more -- but what exactly are you looking for? What makes a good investment and an attractive short-term rental, and what makes a bad one?

Let's break it down.

5 key considerations when buying property for Airbnb

There are definitely nuances to finding and buying the right Airbnb property. From location and size to price and even local road access, it all plays a huge role in how successful your rental can be -- and how much money it can make you.

Want to get in on the short-term rental game and leverage Airbnb's earning potential? Here's what you should take into account:

Type of property

Before you can even begin your search, you need to determine what type of property you're going for. Is it a house, condo, or apartment? What size is it? A six-bedroom estate would probably command a fairly high rate, but will it get rented often? It will also mean more upkeep.

To determine the best type of property for your investment, put yourself in the shoes of an out-of-town visitor. What are they likely coming in for? Are they single, couples, or families with kids? Get into their mindset, and let that guide your property search.

Profit potential

The potential a property has for profits also needs to play a key role in your decision-making process. To start, head to Airbnb.com and use this tool to estimate any property's potential earnings. It's just a rough number, of course, but it can give you a good idea of whether a property is worth the investment and just how much you may be able to command for it.

Keep in mind that Airbnb also offers its built-in smart pricing tool, so your ultimate pricing strategy won't fall on you alone. The tool lets you take advantage of demand surges, upping your rates when searches are up and reducing them when visitors are low.

Location and accessibility

Real estate is all about location, and if you want your Airbnb to be a profit-making machine, then you need to think long and hard about where your property is situated. Specifically, you want to think about:

  • Location in the general scheme of things: Is it within driving distance of major cities? Is it a place people like to visit or have a reason to visit often? Does the area have plenty of events, amenities, and culture?
  • Location within the city: Does it offer easy access to amenities and hotspots? Is it near the airport or train station?
  • The neighborhood: Is it a safe community? Are the homes rising in value (in case you want to sell at some point)? Are short-term rentals allowed?
  • Accessibility of the location: How easy is it to get around? Is the traffic bad surrounding it? Does it require a gate code to get in? Do Uber and Lyft service the neighborhood?

Competition

What's the short-term rental market like in the area you're looking to buy? Do a quick search on Airbnb, VRBO, and others to get a feel for what's already out there. If the market is teeming with competitors, you'll need to find a property that really stands out and offers something special.

On the other hand, you might spot a market opportunity, too. Are there few three-bedroom homes? No studio apartments for business travelers? You may have just found your sweet spot.

Upkeep and expenses

Before buying a property for Airbnb, always consider what it will cost you in maintenance and other expenses. Aside from any initial fixing up you plan on doing, you'll also need to keep the home in good repair, cover taxes, insurance, and mortgage costs, tend to the lawn and housekeeping, and stock all the supplies in between guests.

On top of this, Airbnb generally charges hosts a flat 3% fee. Depending on how involved you want to be, you may also need to budget for a property manager and additional home insurance (as you may want to protect yourself beyond Airbnb's Host Protection Insurance).

Tools that can help

Short-term rental analytics firms can help you better research potential investments. Many offer data on Airbnb occupancy rates per city, while others have heatmaps to help you find the best spots for high-income properties.

Here are just a few of the tools you might want to leverage in your search:

As for where to look, the options are endless. Your local MLS or any listing site can help, as can a local real estate agent (they may have access to pocket listings!). If you're looking for a great deal, you might consider government foreclosures or REOs, too.

Try it out first

If you're on the fence about buying property for an Airbnb in your area, why not give it a try first? Start slow, and simply rent out a room in your home or apartment for a few months. If you're a landlord with a vacancy between long-term tenants, you could try it out then, too.

Is there consistent demand? How much upkeep and work is it? What are the expenses like? Use it as a time to evaluate the potential as well as the drawbacks you might experience as a long-term Airbnb host.

And don't forget: Airbnb isn't the only short-term rental platform out there. Be sure to check out these Airbnb alternatives, too. Some even include property management!

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