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The Hidden Costs of Owning an Airbnb

By October 22, 2021 October 26th, 2021 No Comments

Here are a few things to consider before buying an Airbnb property.

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Should you buy an investment property to rent out as an Airbnb? It’s becoming more popular by the day, but if you do decide to buy a property with Airbnb in mind, there are a few things you should consider.

The first thing you should consider is if you can even rent the property out. Maybe you’ve found the perfect property to rent as an Airbnb, only to find that the homeowners association doesn’t allow it. It’s not just HOAs, either; zoning laws could keep you from renting out your property. No matter what property you decide to buy, make sure you have your agent check the area so that you comply with all laws and regulations.

Next, make sure you understand the difference between long-term and short-term rentals. As you may know, long-term rentals tend to cost less money over time. If you have a property you could rent for $1,500 per month on a yearly lease, it could go for up to $500 per night as an Airbnb. This is the main appeal of renting your property as a short-term rental: There’s potential for way more money.

 

No two properties are alike; talk with your agent to figure out what makes sense for you.

 

Let’s look at a real-life example. For a two-bedroom, two-bath condo in our area, you could rent it on a yearly basis for around $1,800 per month, which comes out to $21,600 per year. As an Airbnb, you could probably get $52,000 per year on the high end and $34,000 per month on the low end. Either way you slice it, it’s more money to do an Airbnb, right?

Unfortunately, it’s not as simple as “Airbnbs make more money.” We still need to factor in fees. A property manager will probably charge you around 10% for a long-term rental. Meanwhile, an Airbnb has people moving in and out all the time, so it’s much higher maintenance. This means a property management company will probably charge you 35% or even 50% for their fees. Based on these numbers, it doesn’t make sense to rent this condo as an Airbnb, but no two properties are alike. Talk with your agent to figure out what makes sense for you.

Finally, I have one last tip: Know your exit strategy. Zoning laws or HOA restrictions may change. Overnight, your rental property could be void, so make sure you have a plan to sell if things hit the fan.

If you are wondering if an Airbnb makes sense for you or if you have any other questions, please call or email me. I am always willing to help.

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