Before 2008, vacation prep began with hotel and flight research. When Airbnb stepped onto the platform, the rules took a drastic turn. It now presents an opportunity for guests to save money and hosts to earn a quick buck. With total revenue of $5.99 billion as per Statista, Airbnb has taken the hospitality industry by storm by taking the bed and breakfast idea worldwide. With the conventional B&B setup, Airbnb founders Joe Gebbia, Brian Chesky, and Nathan Blecharczyk introduced another income path for locals. Most hosts are looking at adding more than one listing under their banner and are constantly on the lookout for the best cities for Airbnb investment.
Airbnb stands for Air mattress Bed and Breakfast. People (Hosts) can use the channel to rent out the extra space in their housing for travelers. Typically lodgings found on Airbnb are cheaper than hotel lodgings because Airbnb owners do not have the same overhead costs as hotels do.
Some of the overhead expenses that Airbnb owners have are:
- Service fees
- Cleaning expenses
- Maintenance costs
- Restocking supplies
- Maintaining amenities
While there might be cushier amenities in a hotel, the experience of an Airbnb is much more personal. The host might, at times, stay in the same place as the rental. Airbnb does not own any of the properties listed on its platform. Instead, it is piggybacking on the popularity of the sharing economy. With peer-to-peer transactions, it is bridging the gap in affordable tourism.
Why invest in an Airbnb property?
Great source of passive income
Short-term rentals can be more lucrative than long-term real-estate investments. Owing to the multiple property managers and channel managers, there are abundant opportunities for growth for vacation rental property owners. It can prove to be a great source of passive income. It might not be easy to visualize profit early on. However, with the right Airbnb pricing strategy, you will be able to optimize your Airbnb property for profit.
The principle of Airbnb rental is not only simple and easy to implement, but also a much better way of making money. Making money on Airbnb need not mean that you need to have an Airbnb property, there are many other ways to earn on Airbnb without being a homeowner. Airbnb business owners can make up to $100,000 per year. Right from co-hosting to becoming a vacation rental consultant, there are various different ways to make money on Airbnb.
Save money while you earn
As strange as it sounds, the taxes you incur from running a business can be deducted. These can be federal, state, local, income, and real estate taxes. If you run your business from home or stay at the Airbnb property that you’ve rented out, you might be able to deduct home business expenses as well! Types of deductible home business expenses include:
- Mortgage interest
Marketing, accounting, insurance, maintenance, and other expenses can be tax-deductible. This allows you to write off some overhead costs to maximize your profit margins. As laws vary in different regions, it is important to check with a local tax professional before investing in an Airbnb property.
You are protected!
The major concern associated with owning any real estate is the attached risk. These include:
- Property damage by guests
- Wear and tear of the property
- Natural disasters
- Appreciation or depreciation of the property
- Market value
We can list out many more risks. Yet, only a few are controllable by you. On the off chance that any of your guests cause damage to your property, you are protected by the bylaws of the channel managers or property management systems that you have chosen. All you have to do to be compensated is provide photographic evidence of the damage to your Airbnb property.
You can use the Airbnb property in more than one way!
The major benefit of investing in an Airbnb property is that you can always use the property in many ways. A while back, I had stayed in a cute, little apartment in Goa, India. The owner of the property was staying right there with us.
The benefit of this goes both ways – for the host and the guest. Staying with your guest at the property can reduce your expenses and increase the quality of the guest experience. Having the owner of the property in Goa stay with us gave us private insights into the property, home-cooked food, and best of all we had a local experience of the state. After a quick conversation with the host, I realize they were saving money on personal utilities & food majorly and were gaining culture diversion as well.
You can use it as your own vacation rental home. If you need your short-term rental property for personal use, simply block the dates on Airbnb. Most vacation rental owners list their properties on various channel managers or PMSs. It is important that you make sure that the dates are blocked on all of the platforms. Using PriceLabs, you can map the multiple listings that you have to make sure that dates are automatically synced across platforms.
Best Cities for Airbnb Investment
While making an investment, it is important to do your own research. We have put together a list of the best cities for Airbnb investment.
- Nashville, Tennessee
6,123 – Active short-term rental listings revenue potential of $126,331
$126,331 – Revenue Potential
- Lahaina, Hawaii
5,053 – Active short-term rental listings
$78,273 – Revenue potential
- Koloa, Hawaii
1,674 – Active short-term rental listings
$66,518 – Revenue potential
- Yosemite National Park, California
391 – Active short-term rental listings
$130,346 – Revenue potential
- St. John, U.S. Virgin Islands
811 – Active short-term rental listings
$95,030 – Revenue potential
- Saco, Maine
124 – Active short-term rental listings
$71,131 – Revenue potential
- Hana, Hawaii
93 – Active short-term rental listings
$88,869 – Revenue potential
- Indian Hills, Colorado
14 – Active short-term rental listings
$85,418 – Revenue potential
- Elizaville, New York
16 – Active short-term rental listings
$83,126 – Revenue potential
- 5959 Active short-term rental listings
- $38,268 – Revenue potential
- 3736 – Active short-term rental listings
- $36,492 – Revenue potential
- 3070 – Active short term rental listings
- $33,156 – Revenue potential
- 12374 – Active short-term rental listings
- $18,672 – Revenue potential
- 3603 – Active short-term rental listings
- $16,020 – Revenue potential
Factors to consider before investing in an Airbnb property
Investing in real estate can be overwhelming. There is too much information online (more or less like this article itself). We have gathered the major things that you need to consider before investing in any of the best cities for Airbnb investment
Local laws and regulations
Each country might have different laws and regulations regarding Airbnb hosting. It is vital to understand the rules to plan according to the restrictions in your area.
Read all related documents carefully
Right from your insurance papers to the Airbnb terms and conditions, make sure you read them thoroughly to avoid any conflicts or misunderstandings in the future. Airbnb also has tons of information in its help center. Make sure you go over them as well carefully.
Consider all overhead costs
Most homeowners quickly find out that there is a whole laundry list of expenses associated with their Airbnb. In order to reduce your expenses and increase your overall income, you need to factor in these expenses and chalk out different scenarios to attain your goal. You need to analyze the various KPIs of your property to properly come up with a pricing strategy. You need to factor in costs like:
A clean property is one of the basic requirements of any guest. Maintaining a clean property might not be cheap! You need to maintain a balance between your expenses and the Airbnb cleaning fees that you charge your guests to provide the most pristine accommodation.
A clean property is just the tip of the iceberg. You need to consider things like electricity, constant water supply, laundry; and more. You must be aware of how much you charge for these services to be able to take full financial advantage of your property.
You will have to constantly also restock supplies like food supplies, toiletries, bed accessories, etc. You need to understand that while a few of these might be free of cost to the guest, they are not for you. You will have to factor in the cost somewhere to make sure you do not incur a loss.
You might have various amenities to ensure that your guests have the best experience. Maintaining those amenities such as a basketball court, badminton court, swimming pool, indoor sports complex, or anything else will bear heavily on your pocket. You will have to maintain the quality of these amenities to make sure that the guest experience is always at its peak.
How to find the right Airbnb to invest in?
The world of real estate is rapidly growing. There are various methods and properties for you to invest in. The million-dollar question here is to understand which one to bet your money on. Read on to understand how you can shortlist your golden egg from the best cities for Airbnb investment.
Do your research
It is important to understand what you are getting to. You need to know how hot or cold the water is before you deep dive into the depths of it! It is always a good idea to begin with good market research. There is more to research than just the best cities for Airbnb investment, you have to consider the various day-to-day management requirements.
The first step can be to understand what is happening on Airbnb. Browse through the marketplace, and analyze the other properties there. Look at the amenities offered in other Airbnb properties, their rates, etc. Looking through this data can help you understand the best cities for Airbnb investment.
A few things to consider:
- What are they charging per night?
- How does the rate compare to the market?
- How many reviews do they get? What do they say?
- What are the amenities they offer?
The next step in your research has to be to understand the market. While looking at properties, you do need to know which city to invest in as well! You need to know the best cities for Airbnb investment.
You can use PriceLabs Market Dashboard’ market data to pinpoint the profitable properties for you to invest in. You can use the dashboard to judge which listings are a good investment. Market dashboards are fully automated personalized dashboards that help you to track vacation rental data anywhere in the world. You can analyze the various KPIs of your potential property type to be able to make informed investment and pricing decisions to maximize profit. It also helps you have a better look at the other markets, whenever you decide to expand or create your portfolio.
Compare and shortlist
After you’ve done your research, you would have narrowed down a few cities from the best cities for Airbnb investment, a few properties, or the amenities that a collection of properties offer to their guests. The next ideal step has to be to understand which one to finally invest in. You need to compare the various properties or cities from the best cities for Airbnb investment that you have in mind. Understand the Pros and Cons of an Airbnb investment to make an informed decision.
Consider your preference
It is also important to listen to your heart! You need to understand if you really do like the city that you want to invest in. Your heart needs to be in it to be able to make it work properly.
You have finally made your choice. You have decided which city from the best cities for Airbnb investment is yours! Now, all that’s left is to prepare yourself for success.
How to make your Airbnb profitable?
Whether you are looking for a full-time investment plan or just a way for some passive income, Airbnb has opportunities galore. Airbnb hosting tips and tricks from peers and industry experts might also help.
Successful hosting experience is only achieved by trial and error. Try out various methods that might work for you. A good place to find and connect with the people in the industry would be the various vacation rental industry events. Talk to the experts, implement the ideas and learnings to grow your business, and slowly discover the best hosting approach.
While there are various things to consider when you host on Airbnb, it is important to also optimize your pricing strategy. It is also important to track the performance of your vacation rental business. Vacation rental property KPIs are measurable aspects of your property. It is essential to track these vacation rental KPIs to help you calculate your return on investment (ROI) to optimize your operations to maximize profit.
PriceLabs Portfolio Analytics can help you have a real-time reporting system that tracks high-level metrics for your property. With this software, you can get a quick snapshot of your property’s financial health. We dive further in and provide insights on listing level performance and metrics. You can use our data to make informed decisions while setting up your revenue management strategy.
Investing in an Airbnb property should not be a decision made lightly. When there are too many factors to consider, you need to take it step by step. You can choose your own steps, however, we have put together steps and points to consider. Include us in your Short-term rental journey right from your investment to day-to-day management.