More and more property owners are turning to short term renting, such as renting out their properties and/or rooms on websites like Airbnb. Using Airbnb’s platform to rent out your property can be a very lucrative method of real estate. Nowadays, there are ways that you can get into the business without even owning your property. However, it is not a walk in the park. There are many challenges that come with renting out your space on Airbnb, and for some people, it may even be better for them to go the traditional rental route instead. Here are several pros and cons to consider when thinking about short term rentals as an investment strategy.
You’ll Get Tenants from All Over
When it comes to traditional renting, your tenant is your sole source of income. If something were to happen with your tenant’s income, then your income suffers as well. With Airbnb rentals, you have tenants from all over the world and they are of all different backgrounds and have many different income sources. Doing it this way, you’re not putting all of your eggs in one basket. Each person who rents with you makes up just a small portion of your total income. If you don’t have anyone booking with you for the night, it’s not going to affect your income as much as it would if your property was completely vacant with traditional renting.
Possibly More Lucrative than Traditional Renting
If you have an Airbnb that is constantly booked up, that could turn out to be way more profitable than a traditional rental property. For example, if you have a three bedroom home that rents out for $1,200 per month, and your tenant signs a 12-month lease, that’s roughly $14,400 a year. Now, let’s say you took that same home and rented it out on Airbnb for about $150 per night, and you rented it out just 250 days out of a whole year. That’s over $37,000 in one year, and that’s without being booked up every single day of the year. When you look at it this way, you’re seriously missing out on a ton of money with going the traditional route.
Income Not Guaranteed
When it comes to Airbnb’s, you’re not guaranteed to always have guests. If you live in a warmer area, then the summer months may be more lucrative for you than the winter months, and vice versa. You always want to take into account the time needed to clean up the space after each tenant, so you want to at least have one or two days in between each guest to get the place in order. Those are days that you won’t be making money with your rental. On the other hand, when you do traditional renting out to a single tenant, your income is steady and you know that you’re going to get your rent each and every month. This will provide you with steady, passive income, and that is more appealing to some.
More Monthly Expenses
When you rent out your property to a single family or tenant, your monthly expenses may be lower. A responsible tenant will keep the grass mowed, keep the place clean, and have minimal maintenance issues, causing you to only have to step in on occasion. However, when you choose to go the Airbnb route, you could be mowing the lawn every two weeks and having the space cleaned after every single guest. Since you have to keep your place in tiptop shape, these expenses can really add up. Not to mention, the monthly bills that you acquire with keeping your rental guest-friendly. With traditional tenants, they are usually responsible for cable, WIFI, electricity, etc., but when you are renting out your space on Airbnb, it is your responsibility to provide these things for your guests. You’ll need to pay a cable bill so that your guests can watch cable TV if you’re not going to provide them with access to Netflix or Hulu. You also need to pay for WIFI, so that people traveling for business can check important emails. Guests also love to get their entertainment online, from playing games on sites like Skyvegas to shopping online via Zalando. All of these reasons and more is why your monthly expenses are a little higher compared to traditional rentals.
Short term rentals like Airbnb are very tempting due to how lucrative the business can be. However, your overhead costs tend to be much higher than operating a long-term rental business. If your concern is high costs, you may want to focus on renting out to tenants long-term. If you’re more worried about stacking your money, quickly, then investing in Airbnb rentals may be the route for you.
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