Investment property with Airbnb – time to boost your returns

investment property with airbnb

Investment property with Airbnb is profitable, but it’s not always a success story.

If you haven’t stayed in one yourself, you’ve almost certainly heard of AirBnB, the global internet platform that links owners looking to rent out rooms (or entire properties) and travellers and short-term renters who are looking for a more affordable and personal alternative to hotels.

That’s all well and good, but, why should you open your door to strangers? Meeting new people? Kindness of heart? Pride in showing tourists around your neighbourhood? Well, maybe. But most of all – you guessed it – money.

With over 1.5 million listings in 190 countries, AirBnB is now the biggest global ‘hotel’ company.

AirBnB travellers pay rates that are 2-4 times as high as those of normal 1-year lease tenants.
So AirBnB offers a high volume of high-rate tenants – a great way to boost your investment property returns. Let’s consider the pros and cons of starting your own AirBnB business.

Investment property with Airbnb – Why should you?

Convenience
Finding good tenants can be a hassle, so much so that renting private property for short stays was until recently not worth the effort. Have you ever listed a room or property on numerous boards and answered several calls, only for the property to sit vacant? Because of AirBnB’s size, if your property is attractive and reasonably priced and located, it is almost certain that tenants will come to you.

Payments
Managing and following up on payments can be a hassle. AirBnB allows tenants to pay with a credit card over the internet. No more worrying whether the deposit was made.

Reliability and Insurance
Renting always involves some risk. With AirBnB, rather than relying on prying questions about the tenants’ backgrounds, you can see what previous landlords have said about them, and you are free to turn away those that don’t seem to be a good fit. And if even so something goes wrong, AirBnB insures your property up to $1 million.

High rates
Because travellers are comparing the rates they pay to the cost of hotels or hostels rather than long-term residential property leases, they are willing to pay much higher prices – 2 to 4 times higher than long-term rents!

Flexibility
Have a holiday home that you don’t want to rent out because you use it once in a while, but that in fact sits idle a lot of the time? You can rent it on AirBnB when it’s vacant and still use it when you like. Have a single room vacant in a property that is mostly occupied? You can rent that too. Thinking about renting a room or property but still not 100% sure? You can rent it out on AirBnB for a few nights at a time to try it out rather than take on a year-long tenant.

Investment property with Airbnb – why shouldn’t you?

Time and effort
Although AirBnB has dramatically reduced the effort of renting property for short-term stays, it still requires some time and effort: you must reply to inquiries, arrange for the keys to be picked up and given back and provide cleaning and maintenance. Bedclothes and towels, breakfast and a friendly chat with the visitors are not strictly required but are common. With average stays measured in days rather than years, renting on AirBnB certainly requires more work than a long-term lease in which interactions are often limited to contract renewals and the odd maintenance issue.

Vacancy
While per-day rates on AirBnB are higher than long-term leases, there is also no guarantee that your property will be rented every single day of the year. In fact, unless you own a very desirable property in a major tourist destination, that is unlikely. Be realistic about how much of the time your property is likely to be vacant.

Not for all kinds of markets
Not all property markets are ideally suited to AirBnB. Well located property in major cities such as London and Paris and tourist destinations such as Spanish beach resorts are ideally suited to AirBnB. On the other hand, a house in a non-descript commuter town in Southeast England is probably better suited to long-term leases.

Rents may decrease over time
As property owners flood into AirBnB, the supply of rooms and houses is increasing, possibly at a higher rate than the demand from travellers. At the same time, hotels, hostels and traditional B&Bs are being forced to lower their prices or increase the service to stay competitive. So it is possible for daily rates to fall over time. Take that into account if you are looking to invest in a property specifically with AirBnB rental in mind.

In summary, if you are looking to maximise your return on investment and have some time to spare, AirBnB is a great way to make your property investment dollars go as far as they can. Buying a property to rent on AirBnB is certainly possible, but if that’s what you have in mind, remember to choose your market carefully and be realistic about the time required for management, vacancy rates and long-term rents. Good luck!


CHRIS LAND, FINANCIAL ADVISOR

Chris has 9 years’ experience as a UK pension specialist and licensed financial advisor. He specialises in helping clients make balanced financial decisions to grow their personal wealth.

Chris is licensed with Globaleye, an award-winning international financial advisory firm established in 1999, with 10 offices and 15,000 clients worldwide.


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