If you have been thinking about buying an investment property and using it also as an Airbnb, there are several things you need to research before you decide to take that leap into becoming an investment Airbnb property owner.
1. Widen Your Search
Staying in your area to invest is not always the most lucrative. Sometimes if you widen your search, you can find a great property outside your city or state.
2. Target Where People Want to Visit in Your City
Determine what kind of tourism market you can expect and what time of year. What makes your city a place to visit? What about seasons? If you choose an area great for seasonal activities, you may find that you’ll have a low to zero occupancy rates during certain times of the year, can you afford that? Places near stadiums, shopping areas, museums, public transportation and other tourist destinations are ideal locations to consider for an Airbnb property.
3. See What Others Pay & Charge
If you want to buy an Airbnb property, look at nearby home prices to compare. When you’re calculating your initial costs, include the down payment, closing costs, inspection costs, rehab costs as well as Airbnb expenses. These include the cleaning fees, property management fees, host service fee, damage fees, adding amenities, occupancy tax, etc.
You will want to research hotel prices during high season and low season as well as rent prices in the area. Then compare hotel prices to determine if you can create a positive cash flow and if you can set your nightly rate higher than what your daily rent would be if your property was leased full-time.
Breakdown of Investment Costs: Property Down Payment (20%) + Closing Costs + Inspection Costs + Rehab Costs
4. Protect yourself
Before you purchase the property, you should have an appraiser look at it and give you an appraisal report. You will also want to get an inspection done on the property to determine if there are any needed repairs that need to be done to the apartment. You might want to also take photos of the property documenting the apartment condition prior to listing the property for rent or as an Airbnb.
5. Get help
Whether you choose to invest far away or close to home, keep in mind that you will need to stay on call while having Airbnb guests. If you don’t have the time for that, then definitely consider getting a property management service.
Planning your costs and educating yourself about investing is important when considering purchasing an investment property. Prior to looking at an investment property in person, you will want to confirm with the listing agent if the condo building allows short-term rentals. Many condo buildings in Chicago do not allow short-term rentals under 6 months per their condo by-laws. Finding the right investment property can be stressful but worth it if you are prepared to handle all the details that come with an investment property.
Real Estate Broker
Baird & Warner – Gold Coast