Airbnb is great. It lets homeowners make a little extra money and travelers get a great deal on a place to stay for the night.
But is buying a home to rent as an Airbnb full time a good idea? Here are a few things to think about.
Managing an Airbnb Rental Takes Precious Time
Renting out an Airbnb isn’t exactly “passive income.” It takes a lot of work to manage the property.
For example, here are some of the things you’ll have to do:
- Reply to any questions or comments about the property
- Ensure the visitor has everything they need to get into the home
- Clean the property every time a visitor leaves
- Manage the finances (mortgage payment, paying taxes, etc.)
Of course, some of those things can be outsourced. You can pay a company to come clean the property for you, saving you some precious time. The problem is it cuts into your overall profits on the property.
Do you have the kind of time to do these types of things? A lot of people don’t due to their existing commitments including full-time work, a family, church, hobbies, etc.
Do the Numbers Make Sense?
Buying a home to rent as an Airbnb is a big investment. Don’t just hope the deal is profitable – run the numbers and talk to Airbnb hosts to get an idea on how much you can expect to make.
For example, let’s say all of the bills on a property come out to $1,500 per month and you think you can net about $100 per night. In that case, you’ll need to rent it out at least 15 times per month to break even.
Of course you can hope that the property value goes up over time but that’s not guaranteed. Hope isn’t a good strategy when it comes to investing.
Can You Weather a Rainy Day?
Things don’t always go as planned – 2020 is perfect proof of that. When you own a rental – whether it’s long-term tenants or Airbnb visitors – little “surprises” will pop up:
- The HVAC system breaks and you need to pay $10,000 for a new one
- A natural disaster rolls through, preventing travel to the area
- The property has a long vacant period where cashflow doesn’t cover costs
Do you have the extra funds necessary to get through these hurdles? Ideally you already have the cash sitting aside in an emergency savings account. If not, maybe you have a side hustle you can use to make extra cash in case of an emergency.
It doesn’t really matter how you pay for it – just as long as you have a means to do it. Unfortunately events happen, and you want to make sure you can get through them.
Is it a good idea for you to buy a house to rent as an Airbnb? While there are challenges, we don’t want to dissuade you from doing it. After all, investing in real estate is Wealth 101. If you’ve run the numbers, have the time and are able to get through a rainy day, we encourage you to explore it further! For some guidance on buying your property, give us a call at (877) 699-0353 and we’ll help any way we can.