Written by: Tiffany Alexy
The story of AirBnB is a well known one, so I won’t re-hash it here. With this incredibly lucrative niche available to not only real estate investors but also Jane & John Doe Homeowner, more people are considering purchasing properties for the sole purpose of renting them on AirBnB.
In fact, I’ve even considered it myself. One day I was randomly browsing Craigslist and saw a cute, 2-bedroom condo listed for sale by owner for $89,000. It was located a few minutes from two major highways, walking distance from Raleigh’s oldest hospital, and just a short drive from an art museum, the fairgrounds, and two major sporting venues.
The owner at the time was already using it as an AirBnB rental. How did I know? He had a whiteboard on the refrigerator with the WiFi password and emergency contact information on it! What a pro!
I ultimately decided not to purchase the condo. Here’s some of my thinking that went into the evaluation (I love a good pro/con list):
Meet cool people. Part of the reason I love travel so much is because of the interesting people I get to meet. In recent years, my travel has taken a back seat (yay adulthood) but that doesn’t mean I still can’t meet cool people.. score!
More money. Short term rental rates are usually higher since you are renting by the night. Even accounting for the higher costs, an AirBnB rental can come out ahead.
Extra space. This was definitely an emotional rationalization on my part, but the thought of having a dedicated “guest” house where family/friends coming into town could stay was appealing. I wanted to be that cool friend that had an extra condo for people to crash at. AirBnB’s calendar feature where you can block out certain days would make managing friend visits super easy.
Local laws. In many cities, operating an AirBnB (that is, extremely short term) rental without a license is a zoning violation, not to mention also a violation of homeowners association bylaws. You can do it anyway without a license, but run the risk of a fine or other penalty. This is extremely dependent on your local government as well, but I know that in my area it is being fiercely debated, and a verdict has yet to be reached.
Occupancy tax. Any income from AirBnB rentals is subject to occupancy tax, similar to what hotels have to pay. Though in some cities AirBnB offers to collect this tax from guests, that feature is not available in all areas.
High turnover costs. The whole reason returns can be so lucrative is because a shorter rental term can mean a higher rental rate. However, a lot of that can be eaten up by the turnover costs which are much higher than a normal rental. Between guests, you must pay for house cleaning, re-stocking of items (toiletries, non-perishables), etc. Plus, having multiple guests in one month means these items need to be taken care of between each guest.
Vacancy. The bulk of my expertise is in student housing, where I practically have to keep a waiting list. The thought of higher vacancies is daunting, though that risk is somewhat minimized by buying in a smart location (proximity to attractions).
An AirBnB rental can be potentially lucrative, but they also take much more time to manage. There are some hosts out there who have figured out how to set up their systems almost automatically so that they don’t have to meet the guests, and everything is streamlined from the get-go. While that is probably what I would have been aiming for, it would still take a while for me to work out the kinks in the process. Do I have that kind of time?
Though I’m glad I didn’t pull the trigger (life has pulled me in other directions), I still re-visit the topic often, and read articles where people hash out what went wrong in their AirBnB rental or how much money they made.
Above was just a list of things I considered personally, and it’s by no means exhaustive. But hopefully it helps in your evaluation!