Property owners across the country (including Ali Safavi Real Estate) are facing a new decision: long-term rentals or Airbnb. With a few years of data now in the books, statistic do show that Airbnb can be more profitable than traditional long-term renting. However, there is much more risk and volatility involved. So before making such a big decision, let’s take a look at a few of the biggest factors to consider.
This may cause many of you to rule out Airbnb all together. Cities like New York and LA can fetch a big per night fee – sometimes double that of traditional rent. Yet smaller cities, or towns with a seasonal flair, may fetch a much lower per night rate. It simply may not be financially feasible to depend on short-term rentals. Do some research and see what rooms and apartments are going for in your area. This is definitely not a venture you want to jump into blindfolded.
Make sure to check out what the local laws are concerning Airbnb in your area – as they can vary from city to city. You may decide you ignore the law, and that’s your prerogative (we’re not recommending that here). However, if the city or a building owner finds out it could lead to an eviction or fine.
So let’s say you find out the local laws allow Airbnb and you live in a large metropolitan city. You’ve done the math (as we recommended above) and see a way to profitability. Now it’s time to factor in risk. You may not be able to rent out the apartment every day or even every week. There may be factors out of your control that cause a slowdown. Are you prepared for this? You may find it beneficial to do some remodeling before putting your unit on the market. The nicer the place the higher per night rent people are willing to pay.
Are You Ready To Work?
One of the biggest differences between renting and Airbnb is the amount of work for the landlord. With rentals you prepare the apartment once and then respond to problems as they occur. You’ve also vetted the potential tenant and chosen your best option. With Airbnb there is almost daily turnover. You’re constantly communicating with new guests and preparing the apartment. While a cleaning fee is probably included, who knows what may break or stain during a given stay. Worst case scenario, something may happen where you have to delay renting it out again. This may not be common, but again it’s important to prepare for the worst.
In conclusion, renting is more often than not the easier tactic to take. For many landlords looking for passive income it’s best to just stick with what works. Yet, for those of you feeling adventurous and prepared to take the risk, Airbnb has the potential to double your money – or suck it down the drain.
Get more real estate tips and advice by visiting Ali Safavi’s blog.