How to Invest in Airbnb: The Pros and Cons
Not many people know how to invest in Airbnb. In fact, it’s not as easy as buying a rental property and creating an Airbnb account. There are laws and regulations to consider, depending on the state or city. Moreover, location is everything. Let’s take a closer look at the pros and cons of Airbnb properties, as well as the company’s success and outlook.
Learn How to Invest in Airbnb
Real estate investing is evolving. And a lot of this change is due to Airbnb’s innovative platform. Flipping homes is still a major strategy in the industry. However, rental properties have skyrocketed due to the success of Airbnb Inc. (Nasdaq: ABNB).
Specifically, there are more than four million hosts and six million listings on Airbnb, according to the company’s website. This also includes more than one billion guest arrivals in more than 220 countries and regions. In addition, hosts have made more than $150 billion since Airbnb was launched.
These numbers are astronomical. And that’s why many people are wondering how to invest in Airbnb right now. For starters, you will need a rental property. But there’s a lot more to it. Therefore, let’s dig a little deeper into the process.
Finding a Property
The first step to opening an Airbnb is buying a property. And this is obviously the most important step in the process. Location is critical to your ability to bring in steady passive income with Airbnb. You can always start in your hometown or current city, but depending on where you live, the demand may not exist.
Begin by researching real estate markets and short-term rentals. How many tourists visit the area each year? What is the tourism forecast over the years ahead? And how does seasonality affect the market? Are there up and down months or is it steady year-round?
There’s a ton of data that will help you narrow down your choices based on demand. Once you find your city, narrow your search to specific communities and neighborhoods. Start by considering costs, crime rates, regulations and proximity to tourist attractions. By learning how to invest in Airbnb, you will begin to better understand the in’s and out’s of specific cities and your potential return on investment (ROI).
Most cities have zoning laws, licenses and permits, occupancy limits, property codes and specific taxes that you will have to navigate. And in most cases, there will be one-time or recurring fees for Airbnb owners. In some places, such as popular destinations like Los Angeles or Las Vegas, you must be living on-site to rent out your home.
Analyzing Financial Outlook
Location will have a direct impact on the financial outlook of your Airbnb. And this is something you will need to constantly adjust to. In general, your rental rate will rely on demand in the area.
What are the occupancy rates in the city? Moreover, what’s the average daily Airbnb rate in the area? Also look at rental income data. All of this information will help you determine a reasonable rental rate for your property that is competitive based on the property’s size, amenities and location in comparison to other Airbnb’s.
To see the true value, compare these numbers to your down payment on the property, current mortgage, interest rate and loan term. If the numbers don’t add up, it’s not the right investment for you. This is why it’s so important to understand how to invest in Airbnb before jumping into a property. Even with the right location, your costs and overall risks may be too heavy in comparison to the potential income. And don’t forget that these costs continue to grow, such as cleaning services, maintenance and more.
How to Invest in Airbnb Stock
If you decide that rental properties are not the right avenue for you, there’s another way to invest in Airbnb. Did you know that Airbnb is publicly-traded? Airbnb stock trades on the Nasdaq for around $110 per share. And it’s a popular stock due to the company’s great financial results in recent years.
In fact, Airbnb’s annual revenue was close to $6 billion in 2021. That’s a 77% increase from 2020. And these numbers are only getting better in 2022. As of Q2, revenue is up close to 60% year-over-year (YOY) and net income is up more than 650%.
Investing in Airbnb
Rental properties are a popular way to generate passive income. Yet, investing in traditional stocks has a history of consistent success. The average annual stock market return is around 10% per year. And the S&P 500 is the benchmark for this data.
To learn more about trading stocks, passive income and retirement planning, consider signing up for one of the best investment newsletters. There are many experts who provide daily insights for absolutely free.
Investing in Airbnb properties can be a full-time job in itself. There’s also a growing list of risks to consider. However, the rewards can be life-changing. And that’s why so many people are learning how to invest in Airbnb due to the current market.