Kyle says “Airbnb was not being affected that much, but, as an investor, as someone who’s looking to buy a house, it became this big question of like, ‘Man, is Airbnb really worth it?’ I was actually just looking on a website the other day and they said that the nationwide rent went up nine-point-six percent in the last year. And as I dove even deeper, I found out that real estate prices nationwide have gone up sixteen-point-two percent since 2020.”
Based on popular property analysis tools, it can be seen that Airbnb rates have gone up across the board. So there’s no doubt that there’s still money to be made in this business. However, according to Kyle he has a list of 5 things that you need to check out before dabbling in the Airbnb business.
The first thing you need to do is make sure it is legal where you live. Believe it or not, you can’t do this everywhere. Limitations on short-term rentals are constantly changing, so you’ll want to keep an eye on this to make sure you wouldn’t be breaking any laws.
Next, get into the weeds with market analysis. This isn’t something you just want to roll the dice on. There is a lot that goes into the cost of an Airbnb. Expenses, desirable location, max occupancy, and so on. What can you get away with charging per night? Would it be worth it? Perhaps another location would make more sense?
Thirdly, you need to assess the risks. Kyle says that “For me, you wanna have a three-to-one short-term to long-term gross revenue. So, keeping it really simple, if you had a place that you could rent out as a long-term rental for a thousand bucks a month, then as a short-term rental, you wanna be as close to three thousand dollars as an estimate for your monthly rent. That three-X number helps you pay off all the furniture and initial expenses, but it’s also gonna reduce your risk by making that much more money.”
“The other part of the risk factor is are you making thirty-three percent margins? That’s my number that I like to look at, and it tells me whether or not this is a risky deal or not. So you’re netting a thousand dollars off of a gross of three thousand. Why that’s important, why you wanna be at thirty-three percent or higher is, that just means you’re breaking even earlier in the month. What if another Covid happens? What if you have a slow season? What if you have to shut it down for a week for maintenance, right? It’s just too risky if your margins are any thinner than that” he concludes.
Fourth is having an alternate plan. Worst case, what can you fall back on? Let’s say you get suspended from Airbnb or it just doesn’t work out, then what will you do? Can you do your own marketing to find tenants?
Lastly, how can you further monetize the property? What can you do to add value? Are there any renovations that can be done to earn you more money? Any other ways you can create more space for more occupants?Take a look at your answers to the above questions. Based on how you answered them, you’ll know if it’s worth it for you to dive into the Airbnb business in 2022.
