One of the most potentially profitable real estate investing moves you can make is to buy an income property and list that home on a site like Airbnb. Doing so gives you more visibility and could be your ticket to securing a steady stream of short-term tenants.
But if you're going to run an Airbnb business (or use a comparable site for short-term listings), it's important to know what pitfalls to avoid. Here's how to prevent a scenario where your Airbnb home becomes nothing more than an expensive disaster.
1. Don't overspend on furniture and amenities
As an Airbnb host, it's natural to want to impress your guests. But if you go overboard on things like high-end furniture and amenities, you might bust your budget and struggle to recoup your costs.
Remember, short-term rentals see a lot of turnover, and as such, they can sometimes be subject to more abuse than longer-term rentals. That means you'll want to invest in a short-term rental judiciously.
You may want to focus on comfort more than anything else when choosing furniture, for example. That way, if a guest wrecks your sofa, its replacement cost won't be as hefty.
2. Make sure you have the right insurance
If you own property, you probably know that it's important to put the right insurance coverage in place. But that especially holds true with a short-term rental. Before you welcome guests, make sure you have the right insurance coverage in place so you're not left on the hook for costly damages.
3. Do as much hands-on work as you can
When you own a rental property, you have choices. You can outsource its upkeep to a property management company -- something many real estate investors opt to do -- or you can do more of the hands-on work yourself to minimize your costs.
The latter is an option worth considering if you're concerned that you're getting in over your head financially. That could mean managing your own bookings, restocking your own kitchen and bathrooms, and even doing your own cleaning instead of hiring a service.
4. Get a good accountant
Once you own a rental property, your tax situation changes. It's important to engage the help of a professional who can help make sure that you're paying the IRS as you're supposed to and claiming the right expenses to help offset those tax bills.
In addition to hiring a good accountant, you may want to engage the services of a legal professional who can help you draft a lease agreement for your short-term rental. That said, if you hire a property management company to oversee that rental for you, that's something they may be able to put into place for you so you don't have to do the legwork.
Owning a short-term rental could be a very lucrative endeavor -- if you play your cards right. These moves could help ensure that your Airbnb home remains profitable -- and that it doesn't become a money pit you regret purchasing.