Airbnb – dipping your toes into property investing

Airbnb might be both the best and easiest way to dip your toes into the world of property investing! In this post I will go through how easy Airbnb has made it for all of us to wanting to try out this world of investing as well as getting some additional income. If you are interested in learning how you can increase your cash-flow or want to try out property investing, the Airbnb route might be the perfect way to get started!

If you do this, it’s actually very likely you could be living for free or even have someone paying off your mortgage for you!

As always, I would only write (recommend) this as it’s a service I am using myself, both as a host (renting out) and as a traveler (when on vacations)!

Airbnb?

I hope you have heard about Airbnb already and who knows, you might even have used the site when travelling. Airbnb is a website where anyone can book accommodation when travelling and the variety is huge. It started with mainly small players and people who were willing to share a room in their home or a summer house. The company has grown super fast and as anyone can become a host (and let a property they own or rent) it is extremely popular.

People now travel more and more and many of us are tired of staying in hotels as most of them are very similar. You know what you get but that’s about it. When booking a stay via the Airbnb website, you can also see reviews of other guests and often you will be getting amazing hospitality.

Airbnb is a competitor to the traditional hotel booking websites like booking.com or hotels.com. Not only do they cater for private rentals but also for businesses. This means even hotels are now on their platform. A few of the good things with Airbnb are a great variety, often a unique experience and places to rent all over the world.

Basically anyone who has a property can rent out part of it or all of it and setting up an account is super easy! This might for sure be one of the absolute easiest ways to see if investing and letting a property might be a good idea for you. If not, you just close the account and use your property the way you have always used it, full flexibility.

Personally I started using them when travelling and I really enjoyed the experiences I had as they are often much more genuine due to the fact that one is more likely to interact with the locals. Often the service is superb as the host wants you to enjoy your stay (and they know you will rate them afterwards!).

I then decided to let our holiday home via their platform. It has worked extremely well and the platform is very user friendly. At the end of this post there are links to a series of post I did on the whole process around our holiday home, from finding it to purchasing, renovating and then renting it out on Airbnb.

If you haven’t yet had a look at their website, check out airbnb.com.

Why Airbnb?

There are numerous reasons why I think Airbnb is a great way to start but let me focus on some of the key aspects:

You already have a place to use!

This is the cool part, you don’t even have to find a place to let. The easiest thing is just to start with your own place. Either you let a room, a garage or the whole place! It’s completely up to you and as long as you are creative and flexible, I’m sure there is a way to make something happen. I even know people who let their whole place and then go and stay with friends! Maybe not the best long term plan but for starters it might work and you for sure will get more money if you rent out the whole place rather than part of it.

The only thing you really need to do is to check out the competition (just use Airbnb and see who else is listing in your area and at what prices), take some nice pictures and then set up your account as a host! You of course have to make sure that it’s all legal as some places are putting restrictions in place. But if not, this is often a great way to get started as the taxes you have to pay on this type of income is often low (unless you have a massive portfolio).

It’s local!

It’s your place and you know your area! This means you know exactly how to market it. Just think about what people tend to do when they come visit you. You know how everything works and how to get things done if someone needs something. This is the perfect foundation of becoming a great host! Great hosts get more bookings and can charge more money!

You can also offer other experiences as Airbnb “recently” expanded within that space. Cooking, excursions etc… You think about it and most likely you can offer it via their site, either to your booked customers or broadly. Your home is where your heart is and if that’s how you feel about your place, I’m sure it will shine through to your guests as well. Local knowledge and brilliant hospitality means great reviews and that means more bookings which is great for you!

Once you are on a roll, it probably won’t take long till you start looking after your second property and soon it will outweigh you traditional salary and guess what, then you are financially free!

It’s completely free to get started

Where else can you dip your toes into becoming a property investor at no cost?! I don’t know any other way, at least not as good as this. Setting up your account with Airbnb is completely free. They will only charge you a fee when you get your bookings, so no bookings means no fees!

That’s a model I really like as it means they are in the same boat as me. Our interests are aligned. They want the customer experience to be as smooth as possible and regardless of whether we are hosts or traveling guest we are customers of Airbnb! That’s why they are constantly trying to improve on their platform and adding services to make sure their hosts gets as many bookings as possible!

Super simple platform to use

I am by no means tech savvy but even I find the platform easy to use. As we are letting our holiday home and it happens to be in the area where my parents live, I have added my mother as a co-host. That means she can see everything via the app and she is 70+ and still finds it rather straight forward to use!

Again, if you have never used it for traveling, nor hosting. Check it out and see for yourself. It really is easy to use and free of charge until you start making some money!

One of the easiest ways to dip your toes into property investing

Often when you think about making money on properties (if you are like me, or how I used to be..!), you think about purchasing a property. That requires either all cash or partial cash plus mortgage. Prior to investing in properties you also need to do quite a bit of research, do you numbers, make sure you have the financing etc. Using your own home via Airbnb means you can skip all of that!

Of course you first want to understand if you will make any money, how much and so forth. By just checking the ads in your area, what they charge and their occupancy rate, you will soon know. The more time you spend on their site and the more frequent you let your place out, the more accustomed you will become with the numbers involved.

You will realize there are additional costs every now and then (maintenance) but you will hopefully also realize that this “hosting” might actually help to pay for your accommodation. Who knows, it might pay for all of it and even your amortization!

If or when that happens, I’m sure will have gotten the property bug and started to look for another property to let. You will soon understand the demand, the pricing etc. and no one knows your neighborhoods better than you! This is why it’s so good to start locally. You know everything and you know the people one needs to know if something happens or you can be there in a few minutes if need be (as opposed to investing abroad).

There might even be potential for additional income and not only the nightly rate. As I mentioned earlier on, you can offer more or less any experience. Some hosts also charge extra for cleaning, towels and bedding’s etc. Maybe you can even offer to fill up the fridge with food for them, the only limitation on how to make more money from your guests is your imagination…

“Holiday rates” versus long term rents

Nightly holiday rates are much higher than longer term rents and Airbnb is best used for that specific purpose, although you can let long term via them as well. If you are contemplating renting out your home or if you have a second home, let’s just look at a comparison with numbers. Short term holiday rates versus long term rents.

I’ll just use our holiday home as an example:

Long term monthly rent: 700-800 USD which equates to 8,400-9,600 USD per year.

Short term average nightly rate: 110 USD

BUT!

On a short term rental, it’s likely to involve much more work and I have to cover all costs of running the place (heat, water, electricity, internet etc.). On a long term lease, some or possibly all of those costs would be with the tenant.

The other very important aspect is the potential occupancy rate, i.e. how many nights as a percentage out of the total nights are actually going to be booked. This might be hard to know in advance but by just browsing Airbnb in your area, you will get a feeling for how booked the properties are.

Running a good, focused holiday let should be running at +70% occupancy on average over the year. That is if you are in business doing only that. If you are just starting out and it’s the place where you live, it’s very different as all costs would still be born by you and you currently have no income being generated from your home.

Still, just comparing the two alternatives; a good holiday let would hence generate an annual income of: 110 USD *365*0,7 = 28,105 USD so around three times more than a long term let!

Remember there are local rules and regulations one would have to consider before becoming a host with Airbnb, so make sure it’s done in a legal and correct manner.

What I’m saying is that holiday let with 20-30% occupancy is likely to pay for all of your costs of accommodation. If you do this and run your numbers, you could be living for free or even have someone paying off your mortgage for you!

What about lock-down (like Covid-19)?!

It’s of course very likely that you would get fewer bookings (if any) for a period but that’s not a big thing for you. Why? It’s your property and you already own (or rent) it! You still have the same costs you had before starting to rent it out.

I have personally taken a hit as well as we had quite a few cancellations and fewer bookings compared to last year. Still, I have been quite lucky as Sweden never went into full lock-down and people are still traveling to some extent. Though lack of foreigners still mean the occupancy rate is lower than last year. In July last year we only had one night which was not booked and now we have around 1/4 of the month still available.

Below is a screenshot of the level of our bookings for July 2020:

One still has to think about what the situation would have been had you invested in other properties and possibly only holiday lets and now you have no customers but still loads of cost…

It’s a great learning experience to host and things can happen and will happen also in the future. Having gone through this period will just mean you will be even more agile in the future.

Because of this situation, you could be in a brilliant position to take advantage of what is happening by focusing on a niche market or possibly look at buying properties at lower prices… The other thing to bear in mind is that when building a portfolio, diversification is always appealing to have in case of something unexpected happening which usually is the case.

How to get going?

If you think living for free might be something for you, then why not start by setting up an account with Airbnb. Scroll around as a potential traveler and get a feeling for the nightly rates in your area, what you are competing with, how fully booked they seem to be etc.

Check your competitors’ advertisements; what are they offering, how are they describing their properties, what do the photos look like. Read the reviews from travelers as it will give you an insight as to what they liked or didn’t like about those properties.

If you feel this is something you would want to do, check out the legal requirements or restrictions in your area (just a google search should be enough to find that information).

If it still looks appealing and you want to go for it, then start taking pictures of the property you intend to rent (make sure they are great ones!) and start writing your description. Before going live, make sure you have had a couple of friends looking at it and given you feedback. It’s always good to get someone else’s opinion as well.

Then, fingers crossed it’s just a matter of time before you start getting your first bookings!

I would love to hear from you once you are up and running to see what your experience is and how things are going. Best of luck!