Mar, 2022 - By CMI
We all know that by this time, Airbnb is without a doubt, a successful startup that disrupted the hospitality and travel industry. It provided value to its patrons and customers by giving them more options on top of the usual.
If you tried staying in one in the past, being a host may have come across your mind. Besides the property you must acquire, there are several factors that you must consider including the housing type, profitability, expenses, regulatory compliance, and the like.
It is good to know though, that a realistic has been conceptualized by companies to help novice and seasoned investors get the best out of their hard-earned money.
So, the question is, is Airbnb the best investment choice for 2022? Look at some of the pros and cons we have gathered to help you make a better decision.
Pro: Airbnb is more profitable compared with long-term renting
While it is true that having a long-term single tenant will give you a stable income source, the prospect of hitting your Return on Investment (ROI) within a shorter time is larger when you invest in Airbnb.
One reason is that guests are naturally willing to pay more for an overnight stay in any property than a tenant who is there to stay for a lengthy period.
In one Company study about renting situation in Seattle, the researchers found out that going the Airbnb route can provide you with up to 40% more in annual revenue compared to long-term renting.
Pro: Airbnb has positioned itself to become an investment instrument on its own
Ever heard of the famous investment principle of not putting your eggs in one basket? Well, Airbnb is a good representation of it.
Imagine you are a landlord and let us say you have a tenant who signed a one-year lease on your property and both of you agreed to a monthly payment term. Think about the financial impact on you when that tenant ran off without finishing the lease.
For the case of Airbnb however, you are collecting rentals from several different renters regularly so if one of them cancels on short notice, the loss is just a small percentage of your revenue, so it is easy to shoulder financially.
PRO: A reliable online platform makes advertising easier for hosts
Because of the reputable image that Airbnb has created among the consumers, it requires less effort to find guests who are looking for a place to stay in your area.
In addition, the flexibility, and several options that Airbnb offers its host are up to date with the latest changes and trends in the digital world. In effect, renters become more inclined to book their stay through Airbnb.
CON: Owning an Airbnb property can cost more upfront
There is little involvement required when you are a landlord of a long-term single tenant. You just need to make sure that you are ready to step in when emergency repairs need to be done occasionally.
You are lucky enough if you come across a disciplined tenant who pays their rent regularly and keeps your property tidy.
But if you tread the path of an Airbnb host, everything falls on you. You must keep the house immaculately clean and ensure all appliances are working so that guests will have a wonderful stay.
You also would need to fork out money from your pocket and decorate your property with good-quality furniture, decorations, and appliances. Add up to that the cost of utilities like water, electricity, Wi-Fi (which is everyone’s right nowadays), cable, etc. All of these costs must be shouldered by the host.
CON: Intermittent income due to short-term rentals
The greatest advantage of renting the property to a long-term tenant may be Airbnb’s greatest weakness. Renting your property to a single tenant for a year ensures you of a stable income source.
Perhaps this is one of the biggest factors you must think about before entering the Airbnb arena. Ask yourself, do I have the endurance to receive income that is unstable at the start?
Besides the short-term rentals, you will need to provide a vacant slot to your property after a guest uses it to give time for some cleaning before the next one arrives. And that means one day less of an income for your property.
CON: Passivity comes gradually
Most of us get interested in becoming Airbnb hosts with the thinking that doing short-term rentals can provide you with a passive income source.
Realistically speaking though, the possibility of making your property produce passive income takes time because it is earned by following the Company Service Level Agreement (SLA) for you to become a reputable host which in turn will make your listing more visible to prospective guests.
And in the middle of it all is the amount of effort you are willing to exert to make this cycle work for you.
The Crucial Point
As with any other endeavor, it is best to study and learn the ropes of short-term rental properties before going all in. There are a lot of knowledge you can acquire beforehand and a lot more wisdom to gain when you are in it.
Also, take into consideration the effects of COVID-19 as to how we conduct our daily lives. Nowadays, guests have a particularly keen eye when it comes to the cleanliness and availability of items intended for the prevention of the disease.
COVID-19 must not be a hindrance in your investment decision this 2022 though, because, like many other companies, Airbnb experienced a decline brought about by the pandemic. It became apparent, however, that guests came back with a different taste with a preference to more secluded destinations outside of the cities.
If you are thinking about buying a property and signing it up for Airbnb, you must take into consideration all the benefits and disadvantages you will encounter in this endeavor. The potential of passivity and the added time required to your schedule in making sure everything is in tip-top shape.