First and foremost, where are you buying the property? When you’re thinking about purchasing a property with the purpose of renting it out on a short-term nightly basis there are a few things to consider when choosing the location for the property.
First and foremost is the demand from tourists to stay in that location. If the apartment is located in the suburbs, away from shops, tourist sites or other desired locations you aren’t going to be getting many bookings. If you can offer attractive features such as a sea view, near a convention center, a sports stadium or a location on a main boulevard of a few of the larger cities you can expect demand to increase dramatically.
You should also give a thought to seasons, and how they will impact the price of your property. While a ski chalet may do great in the winter, you will probably find yourself struggling outside of Ski season.
So what are the most lucrative places to purchase rental property? Forbes lists Austin, Texas; Provo, Utah; Houston, Texas; Orlando, Florida; and Dallas, Texas as the top five places to invest in property in 2015.
Where you’ll get the maximum value in your property renting it out on Airbnb is different. We’ve identified that New York City, San Francisco, San Diego, Miami and Austin are the top five areas to invest in if you’re thinking about renting out your investment using Airbnb.
Nonetheless, there are many more locations across the US that are high return areas. Keep in mind, there are legal regulations that can change and impact the investment opportunity.
How are you going to manage the property? Do you have enough time and resources?
Once you have purchased the property, and found your first tenants, you can just let the property basically run itself? Nope, not at all. Even if you are renting out the property on a long term (monthly) basis, your tenants may still have issues and asks that you’ll be expected to answer. Even if you are in a different state or country, tenants are likely to anticipate that there will be someone they can contact immediately in an emergency.
If you are going to rent the property on a short-term basis, you have to expect to invest a significant amount of your time managing reservations, and ensuring that items are prepared for your guest’s arrival. This includes having towels washed, the property cleaned, someone present to open the door and a welcome basket ready.
If your property is not in the same town as where you live full-time, or if you plan to travel a whole lot, consider hiring someone to check in on the property, and manage it while you’re away.
There are a number of companies that encourage Airbnb hosts in managing the property, such as Pillow; an online service that helps you manage several Airbnb properties, by assisting with bookings, cleaning and guest support. However, with careful planning, a few gadgets, and some nice neighbors, that much additional help may not be necessary.
Lockitron, was designed after the founder wanted a way to let his Airbnb guests without having to physically be at his house. The lock is controlled by an app, and allows you to open and close the door whenever you like, through your smart phone. You can also add and delete friends allowing them entry into your home for a limited period of time.
If you’re not interested in managing the home, another online platform that can help is Rented.com. This services helps property owners find the best property manager. In addition, property owners can also get bookings by selling weeks to a property management company. This is a great way to secure income and reduce vacancies.
Making certain that your neighbors are aware of the fact that different people will be coming in and out of your house is a good idea — they may start to ask questions otherwise! It is also a good idea to let them know when people are expected to arrive, as the more you inform them the more likely they would be to contact you if they saw something unusual.
Long-term or short-term lease?
The decision on whether to rent your house on a short-term lease or a long-term lease may not always be a case of how much return on your investment you’ll get. As a starting point,
If you are renting your house out to a couple of guests per week or month, you are going to have to either pay for a cleaner or spend a significant amount of time cleaning each week.
At around $20-30 per hour depending on where you live, the cleaning fees will soon add up. Add to that a welcome basket at a price of around $20, and any repairs for damaged or broken goods, and you are looking at around $50 spent on each guest.
This is not a passive ‘job’, and it is a job. Is the extra income worthwhile?
There will be lots of costs that you did not necessarily foresee coming. Taxes for example — that vary state by state — are gathered when you offer a short-term rental. In one city, there was 8% sales tax and an additional 8% occupancy tax.
Renting out your apartment on Airbnb may not be a full-time business, but it does require a whole lot of effort, at least initially to get it up and running. You will need to make certain you’re getting great reviews, and that requires being attentive and on call for your guests needs.
Consider the time spent managing your program, and ensuring you are getting bookings; this includes taking photos of your property (Airbnb offers a free professional photo service within the US), ensuring you have all the necessary items for guests, including towels, closet space, basic toiletries and at the very least tea and coffee.
Renting out an entire business can be a lucrative and rewarding experience, but just be aware that you can’t simply sign up to Airbnb and anticipate the bookings to come flooding in!