Are you coming up with more and more reasons to invest in a property to start hosting on Airbnb?
I guess you want to be sure to make the right choice when buying this property. The goal is not to break even but to make money even after paying the mortgage and other monthly bills.
Those questions are probably crossing your mind: where it’s best to buy? how can I know how many nights per month it will be booked? how much profit can I expect per month? is it really worth it? should I buy a flat or a big house? etc…
Looking for properties to invest in for our Airbnb venture is one of our favorite things to do with my partner! We just love checking the prices in our city, check the occupancy rate of other in the area, thinking about the possibilities for such a place!
I want to share with you what we consider before investing in a property and what experts in the real estate industry look at.
Let’s look at the different steps to consider when you invest in a property for your Airbnb business!
1- Check the Short Term Rentals Laws in the area you want to invest in
Some areas are forbidding Short Term Rentals, some have a restriction on the number of nights per year you could rent, some request that you are doing it only in your own house.
Some places, especially condos, are restricting the rental to only stays longer than 6 months.
Be sure to check those laws when looking for investment. You would not want to discover that you can’t do Airbnb in your property once you have already invested in it!
You need also to check the taxes you need to pay when doing vacation rentals.
A quick way to do this is to write in your search engine: “short term rentals laws in [name of your area]” or
“short term rentals taxes in [name of your area]”.
Check also what the discussion for the future in the area is. You don’t want to invest in a property where there will be forbidding in a very near future short term rentals!
You can also download the city ordinance and look carefully at the zoning to make sure.
You can also ask in the Facebook groups specialized in Airbnb hosting to get others’ opinion.
Ultimately, check out with a local lawyer to be sure!
2- How to know the possible occupancy rate of a property?
You can easily check the occupancy trend in the area you want to invest by looking at your direct competition around.
I show you how to do that in the following video.
3- See how much could you charge for that new property on Airbnb?
Those are the things to consider:
- how much are people with a similar property charging in your area
- could you offer something more that the most expensive places in the area to attract the right guests
You don’t have to think that having a lower price is the best way to get your first guests. In people mind having a cheap price can mean that there is something wrong in your listing or in your area…
Of course, in this exact moment, looking at figures for your business plan, you should not get too unrealistic neither.
So, in this stage, you should look at the lowest price in your area for similar listing and base your worst case scenario figures on that.
COURTESY OF HOMES.COM
4- Be sure to see how fierce is the competition in that area? how would you stand out?
Are there a lot of other vacation rentals in the area? what are their prices?
Do you see a way to stand out ? How is your competition in the area? do they have high standards?
Would you compete on the prices or on what you offer?
Is the market already saturated or is there still room for you?
In my opinion, the most important is to create a listing which stands out so that you can get enough guests even in a competitive area.
5- Is the area seasonal or all year round?
Knowing this will help you have a good idea of how much money you could make each month.
To know this, you could check on your Search Engine to get the data of tourism “tourism statistics per month + [name of your area]”.
For instance, in the graph above, you can see what’s the trend for tourism in Belize. They have high season in March and December, low season Aug-Oct. In this country, you can expect to rent well almost all year round expect in the summer time and beginning of autumn.
If the area is seasonal, then you have to be sure that you will be making enough during high season to cover the costs of the whole year.
If the area is all-year-round, then it’s better!
6- Which kind of guests come to this area?
This is something very important to consider because it will give you a good insight on the percentage of good VS bad guests you will have.
a. Will there be parties at my Airbnb ?
For instance, if you are trying to invest close to the beach in Mexico where you know that students on spring break are coming, then you know that you might expect some guests who like to party.
On the other hand, if you want to invest near a business district or near an airport, then the type of guests will be completely different.
b. How many nights my target client will stay in average?
This will also influence the number of nights the people will stay. For instance, if you invest near an airport, you might have shorter stays than if you invest in a property in the countryside where people want to come for weekends or week long holidays.
c. What the nationality of my ideal client?
Knowing the nationality of the tourists in the area is very important as well, as it will also influence the duration of stays and thus the turnover rate you would have.
If the area is famous for English, French, Spanish or German tourists, who have more than 5 weeks of holidays per year, then you will have longer stays.
On the other hand, if you will be mainly targeting the national US market, then you will have shorter stays.
7- Is it close to an airport?
One lovely lady I was coaching on Pinterest for her Airbnb recently was telling me that she loves choosing places near the airport as an investment. For instance, one of her place is near Manila airport and is just gorgeous!!
8- How many booked days would you need to cover your mortgage?
What would be your mortgage rate?
Be sure to negotiate with the banks and brokers in your area to get the lowest rate possible. Don’t accept the first one you are offered.
How Many Day You Would Need To Rent Your Property To Cover Your Mortgage
COURTESY OF HOMES.COM
9- How much money would you need to invest before being able to rent it out?
You have to see if the place needs to be renovated or not.
Here is a list of questions to ask yourself:
- Does it need to do a big renovation? how much time and money would be needed?
- Is the kitchen modern or do you need to do some works in it?
- Is the bathroom modern ?
- How much would it cost to furnish the place?
- Would you spend a lot on the decoration of the place?
- How long will it take before you cover up the costs of the furnishing investment?
- Could I pay for the furniture with a monthly credit?
10- How secure is the area?
If you are investing in an area/country which might be unsecure, then be sure to make what’s needed to make it secure (video camera).
11- How much would it cost for house maintenance?
Having a big villa might be nice to attract more guests and thus more money.
However, be sure to count as well the cost of maintenance: gardening, security, cleaning, minor maintenance of electricty,…
Being sure to upkeep your place well might be a money pit!
That’s it, I hope this helped you see what you need to think about before investing in a property.
What’s next? Get your free training to list your first property on Airbnb.
Over to you, what is the most important thing to think about when you invest in a property to list it on Airbnb according to you?
Please remember to pin it!
I’m Natacha, a French vegan Airbnb host who has been working online for the past 4 years. I help hosts stand out and make more money online so they can have a good work-life balance!
Trackbacks/Pingbacks