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Home and apartment rentals are becoming more popular thanks to sites such as Airbnb, but that raises the question: are Airbnb properties good investments? Before investing in any property, there are many pros and cons, especially if it will become an Airbnb or rental property.

Airbnb is a way for real estate investors to make passive income through less traditional methods. One can rent out the whole property, or part of a property, giving them more control than most rental options. This is one reason why it has become so popular as of late. Now that the basics are understood let’s delve into whether or not it is a good investment.

Profit vs. Cost

It is somewhat difficult to say whether Airbnb rentals would earn more than a standard rental. This is because there is a lot of variety in Airbnb options. This flexibility is a boon for many, making it the right choice for them.

On average, investors are likely to find that their Airbnb rental would return a higher profit than the alternative. However, there are other costs that one must keep in mind when doing these calculations. For example, Airbnbs must be fully furnished, maintained, and come with utilities provided. These utilities include cable and internet, alongside other basics (think of the luxury items a hotel might be expected to provide). While these additional amenities are not technically required, their presence or absence impacts an Airbnb rating, which in turn affects profitability.

Diversification

Investments are at their best when they are diversified. This protects the investor should something happen to the market. The same is true for investment properties and potential tenants. An Airbnb has a broader diversification of potential renters. In other words, by utilizing this method, investors are less likely to stumble across a renter that won’t pay the bills, among other potential issues.

Legal Concerns

Before deciding on investing in an Airbnb rental property, one must take the time to research local laws and regulations. Not all states allow for Airbnb rentals or have certain restrictions in place. For example, San Francisco only allows owners to rent part of their property when it is their primary residence. In other words, one couldn’t buy a property and rent out pieces – unless they intended to live there. 

Additionally, many states have restrictions on how long an Airbnb guest can stay in a property. If they exceed this time limit, they will fall under tenant laws, creating different legal concerns for rental owners. This is why Airbnb investors need to understand local laws and regulations.

Increasing Chances of Success

An investor can take steps to increase the odds of success for their new Airbnb property. For example, understanding the neighborhood of the property is a must. This will help inform investors about the potential renters a property will attract. It might also provide insight into potential problems, such as parking issues.

Don’t be afraid to allow the rental price to shift with the seasons. Beachfront properties are only valuable in the summer, so reducing the cost in the winter might tempt other renters to visit. Tricks like this will help make the property more lucrative in the long run.