One of the benefits of investing in real estate is that property investors can choose several rental property types.
Options range from single-family homes, condos, townhouses, multi-family homes, apartments and other residential real estate properties. All these properties can be used for Airbnb and are a lucrative market of choice.
For beginners, investing in multi-family properties can be tricky because it is the first time. It is challenging to deal with five tenants compared to dealing with one. Multi-family investing is time-consuming because you have to deal with more people. However, the rewards are much great because instead of getting paid for one tenant lease, you get 5. So, I would prefer to have this option. Just think you will become more successful even sooner than expected. You can hire professional property management services if you feel that it’s overwhelming.
You will be able to afford property management as you generate more profit and cash flow. Besides, you can opt for DIY (Do it yourself) management. The rental income received every month can help in sorting out expenses for the services rendered by a property management company. Multi-family investing is a good choice of investment for those who what to grow their rental portfolios faster.
Home-sharing industry is growing at a fast rate. Several services have come up to serve the Airbnb community to enhance their property and organize their time, resulting from improving service and increased income.
The Airbnb market has resulted in various innovations that serve the clients. The ability of the host to be creative and unique to the market competitor determines the Airbnb income. Therefore, innovation in Airbnb rental property will enable an investor to market the property to guests distinctly. Airbnb is a direct replacement of hotels and has lower prices. The substitution does not imply that the guest will not get comfort at the rented property. Several positive reviews on Airbnb are done by guests who saw something new that gave them a memorable experience. Positive reviews attract more Airbnb income because of the working mechanism of the platform.
It can be intimidating to venture in the real estate market without proper preparation. However, investing in Airbnb real estate is a strategy that is becoming more popular among investors who are just venturing in the real estate market. Airbnb is an excellent way to get started and offers investors an opportunity to generate income.
Despite this, proper Airbnb market research is essential. Airbnb market research enhances the understanding of the short-term rental market and helps determine the right investment property depending on your financial goals.
How to conduct Airbnb Market Research
- Identify a location
Finding a good city for Airbnb investment is the first step when conducting market research. Location determines how much return you will receive from your investment. Cities that are popular travel destination are the best. Besides, a good city for Airbnb investment should be characterized by a strong economy, good transport system, shopping centres, and other essential amenities.
Airbnb trends are a key consideration because some cities receive tourists seasonally. Meaning, there would be vacancies during off-seasons. Besides, the growth in the city’s tourism sector indicates future Airbnb growth.
Lastly, AirDNA.com provides essential information such as average daily rate, Airbnb rental incomes, and occupational rates for various activities within your city of choice.
Legal Airbnb Hosting
Before venturing into Airbnb, make sure the city of choice allows you to be an Airbnb host legally. Cities have different zoning and registration laws. You should also consider the city’s local legal restriction on short-term rentals. You will need to meet other things before renting your property if the property is not yours, or you own a condo or member of an HOA.
Some cities have a homeowners association from which you can find more information on short-term rentals. However, calling homeowners association will put you on their locating system. If the city allows Airbnb within the community, the association or neighbors may try to stop the business from running. Keep a copy of governing documents for future use and review. The city planning and zoning departments will give you information on the laws and the repercussions of breaking the laws. Some of the questions to ask them to include;
- Can you do VRBO’s, Airbnb, or HomeAway?
- Are there any issues related to short-term rentals?
Airbnb is a great source of extra income. But, knowing the best location to invest is critical. Recently, major cities in the US have been enacting Airbnb laws and regulations. The regulations restrict property investors from renting out their homes or limiting the number of days an investor can rent a property. It is important to conduct due diligence to avoid venturing in the wrong locations.
Ensure you research other requirements such as restrictions on the number of nights and permits that cities may impose. It may be insignificant, but it will determine your rental income potential. Some areas prohibit short-term leases which may eliminate your Airbnb Vs renting option.
Cities with Airbnb Legal Issues
Kirkland, WA
Kirkland, a city in King County in Washington, is one of the cities that face numerous legal issues and regulations against Airbnb. In 2018, the Airbnb took an alarming turn on the market as the Kirkland City Council passed a law that restricts the use and operation of Airbnb.
Some of the new rules include:
- The property owner must live in the property for at least 245 days in a year.
- A business license should be obtained from the Stet of Washington.
- The property owner must fill and sign a declaration.
- If the property owner does not exist, the services of a property manager should be sought. The manager should be within 15 miles of the property.
The requirement above is in addition to licensing fees and short-term rental lodging paid by the tenants. Therefore, understanding the state laws is essential if you want to rent out your property in Airbnb.
Austin, TX
Austin City Council regulated Airbnb and other short-term rental businesses. After the City Council passed significant changes in short-term rental regulations, the city has become less preferable to investors due to several Airbnb legal issues. These changes include occupancy limits, advertising requirements, and Airbnb business license. At the same time, there is a new process for refusing, suspending, and revoking a license and the option to appeal.
Austin has new requirements before receiving a license. They include;
- Septic system inspection
- The property owner or manager’s contact information.
- Proof of a Certificate of Occupancy issued in 2006 or later. Third-party life-safety inspection is an alternative.
- Limitations and restriction of the number of short-term rentals within commercial and residential areas.
Despite having a great prospect for Airbnb growth because it one of the top tourist destinations, the Airbnb market in Austin is still regulated. Understanding and studying these regulations is critical because it can affect your investment opportunity.
Since there has been a rise in legal issues, several regulations have been enacted across different cities and states to restrict Airbnb operations. Austin and Kirkland are just an example of some of the cities with most legal issues in regards to Airbnb rentals. You will make big gains when you study the regulations of your city of choice and comply with them.
- Understand the City Airbnb Regulations
Several regions around the US have tightened their Airbnb regulations. After selecting a city of choice, the second step is studying the short-term rental regulations of that city. This is very important because there are regions where Airbnb business is illegal.
Airbnb regulations differ from city to city. Therefore, you need to determine if you will be able to achieve your investment goals in the chosen city. For example, determine if the city allows the operation of non-occupied Airbnb rental, the policies that determine the number of guests, and the tax regulations. Understanding local Airbnb regulation will help you understand how they will affect you. It also helps you avoid getting into trouble with the law.
Some cities have very strict regulations against the use of Airbnb and may not be good for investment. It is more desirable to invest in a location that has flexible Airbnb regulations. You can also learn more about the city’s Airbnb regulations by visiting your local city council.
Carry out a neighboring Analysis
Finding the best neighborhood in the city of choice is the next step. Neighborhoods have varying investment potentials. For instance, one neighborhood may be a popular tourist destination while another may fail to receive even one tourist in a year. You have to assess the neighborhoods and find the best opportunity.
Airbnb real estate investing should be done in a neighborhood with lots of tourists. Tourist always prefers staying close to attractive sites and other places like game parks, beach, and city centers.
AirDNA provides you with essential information of various neighborhoods to analyze to determine the most profitable one. You can also assess the neighborhood’s profitability by using filters such as Airbnb cash return, Airbnb rental income, listing price, and average Airbnb occupancy rate.
Market Analysis
Market analysis will enable you to determine the value of a rental property by looking at some Airbnb rental properties within the area similar to that of your interest, commonly known as real estate comps.
Real estate comps are significant to your research because you will avoid bad real estate deals such as overpriced properties. You will also have a better understanding of the performance of similar properties in the local real estate market. Besides, they can help you understand local rental rates, for instance, before you make a purchase. You must compare rental rates of similar Airbnb properties within the area to help you in price setting. However, the search for real estate comps is time-consuming.
The first step to finding a good investment property is Airbnb market research. Acquiring an Airbnb rental property and purchasing traditional investment property needs the same amount of comprehensive market research. Reach estate investors can access critical data essential when selecting a profitable property, set competitive rates, and identify the best marketing approach. There are numerous options that you need to choose one that will meet your goals.
Increasing your Airbnb Income
“Smart Pricing”
Smart pricing is a popular method to maximize Airbnb income since it gives the property owner the best pricing based on three factors; season, demand, and competition. These are the three factors that Airbnb market analysis considers to give the property owner the best price that will conform to market prices and increase income.
Smart pricing is also beneficial as it checks daily market pricing. It means that the host may not have to conduct further research. The tool allows the hosts a 30 to 40% increase on income.
The www.airDNA.com website will provide you with essential details about the market of other Airbnb host occupancy rates to enable you to evaluate your activities within areas of interest. However, you can opt to test the market by using a price that somehow higher to see the market reaction then adjust. Booking activities and guest inquiries are also useful to determine where you need to adjust.