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Airbnb investment is more popular than ever. Although the company’s stock took a pretty significant hit in 2022, alongside many other high-performing businesses, Airbnb has seen record-breaking revenue reports as travelers have continued seeking out new destinations to rebound from their COVID-19 slumps. In the third quarter of 2022, travelers booked over 99.5 million nights through Airbnb—a 25% jump from the same period in 2021, which yielded a 29% increase in revenue.1
If you’re looking into investing in real estate, an Airbnb investment property is a great way to start. The company provides real estate data for each market, allows you to see what properties are doing well so that you might make your property more desirable, and walks you through the legal and logistical components as you first get started. Read on to learn everything you need to know about Airbnb investment and how you can start making this your project for 2023.
What is Airbnb investment?
Before we dive into the logistics of investing in real estate through Airbnb, it’s important to understand what exactly investing with Airbnb means. In short, an Airbnb investment is any property you own that is rented out fully or partially in the short term to travelers coming to your area. An important emphasis must be placed on your ownership of the property—renting out a property you yourself are renting in an effort to turn a profit is generally a breach of contract, so be sure you know your rights before getting started on the platform.
One benefit of Airbnb rentals is that you do not need to rent a full home—one room or section of your property is enough to get started. This means that if you’re struggling to break into the real estate rental space, you can quickly get started by inviting travelers into your home for short periods of time. Another popular approach is to rent homes out while you yourself are away or traveling.
Is Airbnb investing more profitable than traditional real estate investment properties? Not necessarily, but depending on where you live and the quality of your property, you could make far more this way. And because you’re renting your space in the short term, it’s easy to generate capital quickly to make home improvements that will directly increase the amount you’re able to rent the property for in the future.
What are the best ways to invest in Airbnb?
If this sounds like a good investment strategy for you, here are some of the best steps to take when you’re ready to get started.
Real estate data and market research
While it is possible to use your own home as your rental property, it’s easier to generate consistent income if your property has a secondary living area on it, or if you’re working with a property that is uninhabited for most of the year. When you’re shopping for a new investment property, use tools like MarketMinder to help you determine a good area to buy in based on demand, the price you can expect to rent for, and overall occupancy rates for the area. While you don’t want to buy in an area that’s thoroughly saturated, making sure the neighborhood is desirable will ensure you have an easier time renting it out.
Compare the information you find against what you see on Airbnb listings to get a sense of what people are saying about similar properties. This will help you determine how much you can expect to earn each month and estimate your investment income. Note the feedback travelers leave on similar properties listed in the area you’re shopping to determine how you can make your property more compelling than your competition.
Begin shopping for your investment property
Once you have done your foundational research, you should have a good sense of where you want to buy, how much you can expect to earn on the property, and what features you definitely want your investment property to have. With this information, you’re ready to shop.
Work with a real estate agent or use online tools like Zillow to find a property in your desired neighborhood that has the features you’re looking for. Or, choose a property that doesn’t meet all your needs up front, but could be renovated as you begin generating revenue to transform the space into the rental property you’re dreaming of.
List your property on Airbnb
Invest up front in decorating the space, stocking it with the essential amenities, and capturing the space with great photos and content. Carefully consider your rental rate—you want to be competitive for the area, but also realistic. Remember that people are more likely to choose properties that have established a good reputation, so set yourself up to succeed by setting rates lower initially.
Airbnb Crowdfunding
A second way to invest in Airbnb rental properties is by buying shares of Airbnb properties through an crowdfunding platform like Here. Here allows investors to buy $100 fractional shares or more of properties all over the United States. Investors can then collect percentages of rental income which are generated, equal to their shares.
Here manages day-to-day operations so you don’t have to deal with property management responsibilities or renters. This service may be an attractive alternative to investors who don’t want to deal with direct management of rental properties or simple want exposure to Airbnbs without buying rental properties outright.
Pros and cons of Airbnb investment
As with any investment, there are good and bad aspects to weigh before deciding you want to commit. Here are some perks to consider for Airbnb investment:
- If you set yourself up for success initially and improve your listing and property over time in response to market trends and traveler feedback, there’s great potential for generating high cash flow.
- Once your property is furnished and ready for rental, there’s very little cost associated with upkeep—and Airbnb helps navigate cleaning and damage charges for each reservation.
- You have great flexibility with your property. Choose who stays based on their Airbnb rating, decide when your property is available, and decide to switch to traditional leasing if you determine Airbnb isn’t for you at any point.
On the other hand, as with any real estate investment, the market and demand may change at any point. And while it’s generally pretty low maintenance, Airbnb does require you to be available to answer messages from potential and confirmed guests, and navigate any hurdles they may need assistance with. For investors looking for a hands-off, passive income stream, these may be huge red flags, while others may see them as occasional and minor inconveniences.
You won’t know for sure if Airbnb investment is for you until you try. The obvious highlight, however, is that you can change your mind at any time and either choose to switch to conventional, long-term renting or sell the property and wash your hands of real estate altogether. In either case, if you’re curious about real estate, Airbnb can be a great way to try things on for size.
Article Sources:
- The Motley Fool: Should You Invest in Airbnb in 2023?