There are tons of ways to make a sizeable profit in the world of real estate investing. People have been flipping and renting out real estate for a very long time and have been making a lot of money doing so.
But a newer, different approach to the real estate investment world is the concept of running an airbnb property. Somewhat like a combination of running a hotel and renting out a home or apartment, hosting an airbnb can certainly earn you a decent profit and help you build long-term wealth, but like any other type of investment, it requires some careful considerations beforehand.
1. Airbnb Takes a Cut of Your Earnings
You won’t be taking 100% of the proceeds of the rent you collect from your airbnb property, unfortunately. Airbnb itself will take a 3% cut of your earnings, which is understandable considering the platform you are being given to advertise your property and the processing fees associated with having your listing up. If you charge $200 per night, for instance, airbnb will take $6, leaving you with $194.
2. You Will Be Taxed
That $194 that you end up taking home after airbnb takes their cut is then taxed by the government. However, it should be noted that you might be able to write off certain expenses related to the airbnb, which will help you recover some of the taxes that you might be charged.
3. You Need to Arrange For Key Drop-Offs
After your guests vacate the premises when the term of their lease expires, they’ll need to hand off the keys to you somehow. If you’re nearby the unit at the time that they leave, you might be able to simply meet up with them at the unit. If not, they’ll need to drop off the keys somewhere. It’s up to you to choose how and where your guests can leave the keys safely and securely.
4. You’re Responsible For Cleaning
This isn’t a hotel where there is housekeeping staff available around the clock to change the sheets, vacuum the carpets, and clean the toilets. The cleaning is your responsibility. Whether you decide to tackle the chores yourself or hire a cleaning service, however, is another question. The point is, this job is on your plate to take care of, no matter how you choose to deal with it.
5. You’re on the Hook For Issues
If anything goes wrong, you can’t just call the front desk. Whether there’s a leaky pipe, the hot water shuts off, or the washing machine breaks down, these are issues that you will have to deal with, and your guests will directly be calling you. Take measures to ensure the unit is in proper condition and all items are in good working order to help minimize the odds of calls in the middle of the night that something’s wrong.
6. Pricing Right is Critical
Just like pricing a home for sale is crucial, so is pricing your airbnb unit. Not only that, you may have to make frequent adjustments to the initial price in order to remain competitive with the rest of the airbnb market.
7. Determine How the Property Will Be Managed
You can always manage the property yourself, but you might also decide to hire someone else to do all the managing for you. Whether you pay a friend to help you out or hire a professional property management company, there are ways to go about dealing with the physical management of the property, as long as your budget permits and it doesn’t eat too much of your profits.
8. Decide Between Long-Term Vs. Short-Term Leases
Will you be offering short-term rental periods or more long-term leases? If you rent the unit out to a couple of guests a week or month, you may be able to charge more per night, but you’ll have to either pay for a cleaner or spend a lot of time cleaning every week. Longer-term leases, on the other hand, may not come with the same price per night, but you’ll have a steadier stream of income without having to constantly look for someone to fill the space, nor will you have to spend as much time or money cleaning the place up after each guest.
9. Running an Airbnb Takes Time
Listing and operating a successful airbnb unit might take a lot more time than you might actually realize or be willing or able to dedicate. Even if you’ve got your operations down and aren’t spending a ton of time dealing with all the bookings yourself, you’ll still have to be available at all hours in case of emergency.
10. You’ll Need to Keep on Top of the Market
In order to be successful renting out a unit with airbnb, you’ll have to keep your finger on the pulse of the current market and adjust your listing accordingly. Different seasons, events, and even local by-laws will dictate how much you can get away with charging for your unit.
The Bottom Line
Running an airbnb can certainly generate a lot of revenue for you. Having said that, it’s still important to take a number of considerations into account before you dive into this type of unique real estate investment.
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