As a real estate investor, there are several income streams you can set up for yourself: You can add real estate investment trusts (REITs) to your portfolio, buy an income property and collect rent from longer-term tenants, or buy a vacation property you list on sites like Airbnb (NASDAQ: ABNB).
The latter route seems to be growing increasingly popular. In fact, in the past five years, Airbnb bookings have more than quadrupled, which means clearly, the site is becoming a go-to, trusted source for short-term rentals. But is listing on Airbnb the right move for you?
Listing on Airbnb: The upside
Airbnb’s growing popularity makes it worth considering from an investing standpoint. And there’s much to be gained by listing your property on Airbnb. For one thing, the platform is extremely easy to use, and since so many people know about it, it’s a simple way to market your property and find guests. Also, because guests pay for a stay ahead of time, there’s a degree of income security you wouldn’t necessarily get if you were to enter into private short-term rental arrangements yourself.
Furthermore, with Airbnb, you have the potential to make more money than with a longer-term rental. Generally, you can charge a higher daily, weekly, or weekend rate than what you’d collect from someone who signs a multimonth lease.
But there’s a downside, too
Airbnb may be a popular platform, but buying a home you plan to rent through the site could backfire on you. For one thing, you may have less rental income stability than with a long-term rental, despite being able to charge higher daily rates. Also, with any vacation or short-term rental situation, there’s the potential for more damage to your property. With a constant flow of guests, some may not treat your home as well as they should.
Another thing you should know about Airbnb is that reviews and reputation are everything. To succeed on Airbnb, you’ll need to build a reputation as a great landlord/host who responds quickly, and often, properties that don’t go the extra mile with regard to amenities get dinged. That puts a lot of pressure on you if you’re managing your rental property yourself.
Finally, Airbnb charges fees. Though there’s no listing fee for putting your property up on the site, there is a booking fee — a commission the site will take when guests sign up to stay at your home. Right now, it’s 3%, but it could change.
Should you get in on the Airbnb action?
Renting out a home through Airbnb could prove quite lucrative in the long run. But consider the drawbacks before you go that route.
What about investing in Airbnb directly?
With Airbnb now public, you now have an opportunity as a real estate investor to buy shares of the company itself in addition to using it as a listing service. But is that a good bet?
It could be. The fact that Airbnb bookings have grown consistently is an encouraging sign, and post-pandemic, we could see an even greater surge in travel as bored travelers seek to get out and explore. Airbnb is also unique in that it encourages hosts to offer not just homes to stay in, but experiences. In this regard, it differentiates itself from other online vacation listing services.
The remote work trend could also help Airbnb thrive. There’s a good chance many employees will stay remote once the pandemic wraps up, giving them the flexibility to pick up and work from a beach area one week, a ski area another week, and the woods a third.
The Millionacres bottom line
Whether you’re interested in buying a rental property to list on Airbnb or the company’s stock itself, keep Airbnb on your radar. Either way, it could have a very promising future ahead.