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How to Buy an Airbnb Investment Property


Investing in Airbnb is one of the most practical things you can do today. It’s just a matter of knowing how to buy an Airbnb investment property.

Table of Contents

  1. Is Airbnb Investment a Good Idea in 2022?
  2. How to Buy an Airbnb Investment Property: 3 Tips for Guaranteed Success
  3. 5 Tips for Your Airbnb Rental to Be Successful

Buying rental properties is a good way for a real estate investor to make a decent profit. Compared to other investment strategies, it gives you a more stable income. You can earn good money from house flipping, micro flipping, REITs, and other similar investment vehicles. But having a rental property investment, especially an Airbnb property, gives you a better return on your investment for the long haul. 

However, there are a few things you need to take into account before setting out to buy an Airbnb property. In this article, we hope to give you the information you need to get started on your Airbnb journey.

We will talk about its advantages and disadvantages and give you tips on how to buy an Airbnb investment property. Also, we will show you how to find the best Airbnb investment properties using real estate website Mashvisor. 

Is Airbnb Investment a Good Idea in 2022?

There are several great investment ideas when it comes to real estate investing. Many investors buy investment properties to fix and flip, which is more capital-intensive but provides good investment returns. Others get into micro flipping and buy undervalued properties to sell quickly at a small profit. 

Some venture into alternative real estate investments such as REITs and real estate crowdfunding for passive income. And then there are rental property investments that are categorized into two: traditional or long-term rentals and vacation or short-term rentals

Traditional rental properties are conventional rentals that are rented out for at least six months. Many investors prefer renting out their properties as traditional rentals for regular monthly income. Landlords get the benefit of knowing exactly how much they’re getting for rental income at the end of the month. However, while they do get a regular fixed rental income, it’s not as much as what you can make from an Airbnb investment property. 

Related: How to Find Airbnb for Sale: The Complete Guide

What Are the Pros and Cons of an Airbnb Investment?

When we talk about Airbnb investments, you need to understand they have advantages and disadvantages. Let’s go over some of them to see if investing in an Airbnb property in 2022 is still worth it.

The Upsides of Having an Airbnb Investment

As an investment property, a vacation rental listed on Airbnb offers a few benefits that traditional rentals can’t give you. They are: 

  • Potentially larger income. An Airbnb investment property can bring you up to three times what landlords make in a month. According to Mashvisor’s latest data, the state-level median for monthly Airbnb rental income in Oregon is $3,533, while the median for a monthly traditional rental income is $1,861 in the same state. 
  • Less risk of dealing with bad tenants. Unlike traditional rentals, owning an Airbnb property minimizes the headaches of dealing with bad tenants who make late payments and are negligent with the property. The frequent transition of guests makes maintenance and repairs easier as it allows you to regularly inspect the property. 
  • Greater flexibility. Becoming an Airbnb host gives you greater flexibility. You can decide when to have your property rented out and work around your own personal calendar. You can take a vacation anytime or block out certain dates so you can use your property to host your family and friends. 
  • Greater reach compared to other platforms. Having your vacation rental listed on Airbnb gives you a wider reach than other similar vacation rental platforms. In July 2022, the platform registered over 133 million visits in the US alone. In comparison, its main competitor, Vrbo, recorded nearly 60 million. The difference alone shows how much coverage you can get when you list on Airbnb. 

Related: The Complete Guide to Making Your Listing on Airbnb Stand Out

The Downsides of Having an Airbnb Investment

  • Higher upfront costs Starting an Airbnb business will not only require you to comply with local building and health codes but also with Airbnb’s high standards. To get an Airbnb business started, you will need to make extra investments in certain things that will boost your chances of getting noticed by visitors on the Airbnb platform. It includes certain home improvements, better furnishings, and efficient marketing strategies. 
  • Potentially higher operating costs Because there is a greater frequency of transitions, hosting an Airbnb rental entails higher operational and maintenance costs. 
  • Less income stability As mentioned earlier, landlords know how much money they can expect in rent monthly. An Airbnb business does not guarantee how much you can make in a month. It will still depend on seasonality and location. 
  • Inflation One of the main blockers to investing in an Airbnb property today is the economy. You might have found the best possible deal on the planet. However, if the inflation rate keeps rising, it will lessen the number of travelers and visitors, consequently decreasing the number of your potential guests. 

Airbnb vs. Traditional Rental Property Investment: Which Is More Profitable

That being said, is investing in an Airbnb property more profitable than investing in a traditional rental? The answer is both yes and no. 

Investing in a rental property requires looking into numbers other than monthly rental income. As an investor, you would want to get a good return on investment and make a decent profit off it. 

The main metrics most investors use are the cap rate and cash on cash return. The two metrics will give you a good idea of how to calculate the profitability of an investment property. 

The cap rate basically just takes the property’s net operating income (NOI) and divides it by its purchase price or value. Using the metric assumes that the property is bought in an all-cash transaction. 

On the other hand, cash on cash return takes into account financing methods. The formula for cash on cash return simply takes its NOI and divides it by how much cash was used to buy the property. It gives you the dollar-for-dollar value of your investment. 

Since not everyone is capable of buying in cash, we recommend using cash on cash return when computing an investment property’s profitability. 

Considering Options

To answer the question of which one is more profitable, it will depend on how much you actually put into your investment. 

For instance, an Airbnb property in Hawaii can bring you a monthly income of $5,288 on a 3.68% cash on cash return. On the other hand, a traditional rental in the same state will make you $2,662 on a 2.04% cash on cash return. However, buying real estate in the Aloha State will cost you around $1,184,295. 

In contrast, an Airbnb property in North Dakota will only get you about $2,302 in rental income on a 4.76% cash on cash return. A typical traditional rental in ND will make around $1,198 monthly on a 2.52% cash on cash return. The median property price in ND is only $295,400. Given ND’s numbers, your income may be significantly smaller than what you can make in Hawaii, but the cash on cash return and cap rate are slightly higher.

That said, Hawaii may seem like the best location for investors in terms of monthly rental income. However, given the high median property price, as well as the lower cash on cash return rates, you can get more bang for your buck from an ND investment property. 

While generally, an Airbnb investment property provides a higher cash on cash return compared to a traditional property, you still need to consider the location’s economy, job market, tourism industry, and seasonality. 

Choosing between the two will significantly depend on your location, investment goals, priorities, and preferences. Both can be very profitable, but it will depend on your situation and investment strategies.

Related: Airbnb vs Traditional Renting: Which Strategy Yields Higher Rental Income?

How to Buy an Airbnb Investment Property: 3 Tips for Guaranteed Success

Investing in an Airbnb property is profitable, but you can do more to increase your chances of success even before you buy an Airbnb property. Here are some practical and easy tips on how to buy an Airbnb investment property: 

1. Make Sure Your Finances Are in Order

You can’t buy an investment property without some financial capability. Before you go house hunting, you must first evaluate where you stand financially. 

Buying a property can be done either through an all-cash transaction or by getting a loan. If you have enough money to buy a property in cash without compromising your other priorities and financial affairs, then go ahead and do it. It will save you tons from mortgage rates.

For most people, however, buying a property entails taking out a loan. Typically, when you go with the financing option, you need to have enough cash to make a 20% down payment on the property and have the rest financed.

In such a case, you need to be wise when choosing a financing option. Mortgage rates are on a pretty wild ride nowadays. So, you need to keep yourself updated with how mortgage rates are performing in your area. 

You should take some time to look at the different options available to you. Talk to lenders and mortgage companies and see what they have to offer. Make sure to ask hard questions and always read the fine print. Keep in mind that when you take out a mortgage, you will be stuck with it for years.

2. Determine the Right Location

Before you purchase an income property, you need to find the right location first. Any real estate investor knows that location matters in this game. When finding a location, you need to consider the following: 

  • Neighborhood – A pleasant neighborhood is more likely to attract more guests than a seedy one. 
  • Seasonality – You need to consider the peak and off-peak seasons for tourism. 
  • Crime Rate – Nobody takes pleasure in staying in a crime-infested and unsafe environment. 
  • Public Amenities – Are restaurants, tourist attractions, groceries, shopping districts, and other similar amenities nearby?
  • Accessibility – What is the transportation system like in your area? Guests and tourists shouldn’t have a problem getting access to buses, cabs, and other means of commuting from your property.
  • Economy – Guests are more likely to prefer staying in a neighborhood with growing and thriving businesses.
  • Short-Term Rentals Laws and Regulations – Not all states and counties are friendly to Airbnb and other vacation rental properties. 

One other concern you need to consider before deciding on a location is its performance in the rental market. For this, you can use a real estate website like Mashvisor for better neighborhood data analysis. 

Related: How to Find the Best Area for Airbnb Investment

Using Mashvisor to Find the Right Location for You

As a real estate website, Mashvisor provides investors with access to a huge database that covers almost every market in the country. It also lets you use investing tools like its Property Search tool and investment property calculator

The Property Search tool lets you search for profitable investment properties and make a quick neighborhood analysis. It comes with a real estate heatmap that gives you an overview of how a particular neighborhood is performing in terms of: 

  • Traditional Rental Income
  • Airbnb Rental Income
  • Airbnb Cash on Cash Return
  • Traditional Cash on Cash Return
  • Listing Price
  • Airbnb Occupancy Rate

The heatmap works just like a weather map, where it color-codes areas to indicate whether they’re performing well (green areas) or poorly (red areas). All you need to do is enter the location (address, neighborhood, city, or zip code) in the search bar on the home page. It will take you to the heatmap, where you can choose which filter to use from the dropdown menu in the upper left corner.

From there, you can hover on each pin to see a summary of a particular property. Click on it to see the property’s details and how it fares against other similar properties. Using these real estate comps will let you know if a property is a worthy buy or not. 

How to Buy an Airbnb Investment Property - Mashvisor's Real Estate Heat Map

Mashvisor’s Real Estate Heatmap provides investors with an overview of a particular neighborhood’s performance based on several metrics, such as rental income, cash on cash return, listing price, and occupancy rate.

3. Perform a Rental Property Analysis

Part of performing due diligence in real estate investing is performing a rental property analysis. You should not skip over this step as it will give you a more accurate cash flow projection. 

Your goal as an investor is to generate enough positive cash flow that the property takes care of itself and gives you enough money to take to the bank. Determining a property’s profitability will depend on its price, initial cash investment, prevailing Airbnb occupancy rates, and other related rental market data. 

So, before you purchase a property, make sure that you perform a thorough analysis of the neighborhood and the property and that everything checks out. 

5 Tips for Your Airbnb Rental to Be Successful

Now let’s say that you already bought a very promising Airbnb property; the next thing you need to be concerned about is how to get more inquiries and bookings. Here are five simple things you can do:

1. Spruce It Up

The first step to improving your Airbnb income is to make the necessary updates and upgrades to your property. In most cases, investors buy undervalued properties that require some fixing and improving before they can be deemed Airbnb-worthy. So make sure that before you purchase a property, it’s not too much of a fixer-upper that will take you a long time to get an investment return. 

To spruce up your property and make it at par with Airbnb’s standards, you will need to make certain improvements and additions. They can include a new paint job, replacing fixtures, landscaping, adding furniture and appliances, and other similar things to up your property’s value.

2. First Impressions Last

Once you’ve made the necessary improvements, the next step is to take high-quality, professional-grade photos of your property. No matter how awesome your property is, a low-resolution pic taken from a phone camera will not do it any justice once posted online. 

You also need to come up with a well-written description of the property that gives as much information as it can.

At the end of the day, it’s all about overall packaging and branding. How you present your property on Airbnb will matter. Airbnb guests are more likely to click on listings with high-quality pictures and all the information they need. 

On top of that, you need to ensure your customer service skills are on point. The very first point of contact a potential guest will have with you is through an inquiry. Make sure you respond promptly to the inquiries and avoid keeping guests waiting. 

If you’re able to give a good first impression with your listing presentation and response time, you are most likely to attract more guests and get more bookings. 

3. The Price Is Right

Setting Airbnb prices can be a bit tricky. You want to get a good monthly income, but you don’t want to charge unreasonably high rates that will take you out of the game. You need to be wise with your pricing, so you remain relevant and competitive in the market. 

Guests are willing to pay top dollar for properties they believe are worth paying for. Getting the right balance between earning a profit and staying competitive is an art in itself. 

Computing Airbnb prices can be made easier with Mashvisor’s Airbnb calculator. It allows you to use actual rental comps and other important data needed to calculate reasonable nightly rates for your Airbnb rental. 

It is why performing an investment property analysis is important before you buy any property. With investment property analysis, you can get more accurate ROI projections, leaving you with very little room for buyer’s remorse.

To start searching for and analyzing the best investment properties in your city and neighborhood of choice, click here.

4. Experience Matters

Most successful and highly-rated Airbnb hosts receive good feedback because they are able to give outstanding Airbnb experiences to their guests. The trick is really simple.

All you need to do is highlight the features of your location, such as nearby destinations and activities or what types of experiences your guests can look forward to. Adding such features will get you more inquiries and bookings than simply writing down your property details.

5. It’s All in the Details

Speaking of details, some of the most successful Airbnb owners are all about the details. On top of sprucing up the property and stacking it up with all the necessities, consider buying some reading materials, family board games, and other similar entertainment options. Provide Wi-Fi access and set up a few workstations where your guests can check their email or get some work done. 

Additionally, stock the kitchen up with coffee, tea, and condiments. You can have a bottle of wine or a welcome gift for your guests when they arrive. It’s all just a matter of placing yourself in your guest’s shoes. 

Wrapping It Up

To end, investing in Airbnb can be quite rewarding. The risk becomes greater if you fail to do your due diligence. However, your chances of success increase when you know how to buy an Airbnb investment property. Look for a suitable location and analyze the neighborhood like your life depended on it. Don’t leave any stone unturned. Use rental comps to your advantage and do your best to make your listing stand out. 

To ensure you find the right Airbnb property that will help you achieve your investment goals, use Mashvisor as your primary investment tool. Finding a good location and crunching the numbers become a lot easier with Mashvisor by your side.

To start using Mashvisor’s real estate investment tools, sign up for a 7-day free trial today, followed by 15% off for life.

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