Airbnb has significantly changed the travel industry. Have you ever stayed in an Airbnb and wondered what it’s like on the other side? It’s certainly appealing to be able to diversify your income without being a real estate expert. Airbnb can be a potentially solid investment, but it doesn’t necessarily mean it’ll work for every situation. Continue reading to find out more about Airbnb investment properties.
How Do Airbnb Investments Work?
A property is considered an Airbnb investment if either part or all of the property is rented out on Airbnb after its purchase. Airbnb investments are usually short-term, so it allows you to host many guests in a year. This differs from traditional investment properties since most are typically long-term rentals.
Airbnb Investment and Coronavirus
When purchasing an investment property of any kind, it’s essential to consider the market and any outside factors affecting it. One example is the global Covid-19 pandemic and the drastic effect it had on Airbnb since it struck. However, as pandemic restrictions ease, Airbnb rentals are seeing a significant rise as more people feel comfortable traveling.
Are Airbnb Properties More Profitable than Traditional Rental Properties?
Every investment is unique, which means that there’s no short answer to this question. However, when you look at high-demand areas, the short answer is yes. The nightly cost of an Airbnb in high-demand areas can result in higher profits than traditional rentals.
Let’s take Los Angeles, for example. As of March 2021, the average monthly cost to rent a one-bedroom apartment in LA is $2,250. This means that an investor can expect to make about $27,000 if a tenant signs a 12-month lease. However, short-term rentals will allow the investor to charge more per night, leading to higher profits. The average daily rate for an Airbnb in LA is slightly over $160. Units in Los Angeles are typically occupied 61% of the year. According to these numbers, this means that an investor can make about $35,000 off that same property in a year. That’s $8,500 more than a traditional rental. Airbnb also charges renters what’s called a maintenance fee so that investors can save money on repairs.
When you consider the potential for making higher profits through Airbnb rentals, you should also consider the differences between these types of rental properties and how those differences might impact your wallet.
Unique Expenses of an Airbnb Investment Property
Managing an Airbnb rental property has some unique expenses you should consider. These include:
- Furnishing and decorating the property
- Maintenance costs
- Utility bills
- Amenities, like Internet and television subscriptions
- Possibly different and more expensive home insurance
The Bottom Line
Depending on your unique investment situation, the grass might not always be greener. However, there’s also a potential to make a lot more money investing in short-term rentals. There’s more that goes into Airbnb rentals than traditional rentals, so hiring a company that manages those rentals could take a lot off your plate and make things much more straightforward. At Majestic Vacation Management, we handle your vacation rentals, so you don’t have to. Majestic Vacation Management offers many services such as location consulting, cleanings, home staging, landscaping, linen services, security, pool services, and more. Contact us for more information.