Are you trying to decide whether to rent out space as an Airbnb or long term rental? Here’s everything we considered for our first rental income property when we asked ourselves the same question.
We originally listed our property as a long term rental. After receiving over 100 applications over a two-day period and allowing exactly one couple to come and do a walk through, it was clear to us that we wanted to list as an Airbnb versus a long term rental. That said, after reviewing these factors you may come to the total opposite conclusion based on your own circumstances. Let’s get to it.
Should I list my property as an Airbnb or long term rental?
Let’s kick off our discussion on whether you should list your property as an Airbnb or long term rental by thinking through a list of questions.
First, what kind of property is it?
Is your property a guest house to your main house? Is it an airstream located on the California coast? A condo with amenities like a pool? A studio downtown? A spare bedroom in your house? A single family home in the suburbs? A duplex? Based solely on what kind of property you have alone, it may help you make your decision. For example, if you are renting a spare bedroom in your home, you may consider trying out an Airbnb guest over a long term tenant to make sure you are comfortable with strangers staying in your home.
Do you live in a vacation destination?
Another thing you may consider is where you live. Do you live in a vacation destination? Is the cost of rent less than what you’d earn hosting guests because of that fact? Are there certain times of year where no one will travel to your area, and certain times of year where it’s bustling? If the former, you may prefer a long term rental with steady rental income.
Do you live near a college campus, hospital, or large city where people travel?
Another thing to consider is whether there is a college campus, hospital, or large city where people are coming in for travel often? This may help you make your decision. If you’re in a travel destination (ex: your apartment is close to a hospital where lots of visitors, doctors, etc will want a comfortable place to stay) it may make more sense to host guests.
Airbnb or long term rental — what are the pros of Airbnb?
You can screen your guests through Airbnb instead of having to run back ground checks.
One thing I love about Airbnb is that you can screen guests through Airbnb instead of running expensive time consuming background checks. Airbnb helps vet out guests by having them provide proof of identification (social security numbers, drivers licenses) and also allows other hosts to rate and review guests. You can approve or disapprove of any guest’s request to stay on your property (obviously you can’t discriminate based on factors like race, religion, sexual orientation etc.) but I really like having the control to say no if I see someone’s profile that doesn’t have good reviews (or even no reviews).
You don’t have to evict tenants for failing to pay.
Another thing I like is that Airbnb collects guests payments upfront. So I’m never going to have to kick someone out of the house for their failure to pay.
Airbnb usually pays you within a day or so of your guests’ stay.
Speaking of payment, Airbnb usually releases your payment to you within a day or so of your guest checking in.
If you don’t like your guest, they’ll be gone soon.
Unlike long term rentals, if you ended up not jiving with a guest, you won’t have to stick out a long lease. Just a few nights usually. I really like that flexibility.
You can block off dates when you don’t want guests to stay in your property.
Probably the most important factor that swayed us into Airbnb over a long term rental was the fact that we could block off dates when we didn’t want to host. There are just some weekends where we want more privacy or where we might have a party or family in town and want our guest house for other things, it’s nice to have the option to not host if you don’t want to.
You’ll probably earn more money.
Another huge factor is that you’ll likely earn more money as an Airbnb as opposed to a long term rental landlord.
It’s fun to meet travelers.
I guess this depends on your personality, but for me, I love meeting people from across the country (and even world) who come to stay in our Airbnb. It’s fun hearing their stories about why they are coming into town and I genuinely feel joyful seeing them out enjoying the things we love about the area we live in.
Cons of Airbnb?
You have to clean. A lot.
Or you have to pay someone to clean, a lot. One of my least favorite parts about renting out our Airbnb is the fact that we’ve become basically part time house cleaners. Youo have to deep clean your rental between each guest. If you’re doing this on your own (i.e., not paying someone to do it) it can eat up more time than you realize. That said, thus far, we haven’t had any guests that were notably messy. The nice thing about Airbnb is that it allows you to review and rate your guest and one of the factors is how clean they were. So that encourages guests to be clean which is obviously great for hosts. Regardless, even between clean guests you’ll find yourself sanitizing, washing sheets, and scrubbing up your rental quite a bit depending on how fast your turning over guests.
Vacationers might not take as good of care of your property as a long term tenant would.
Another thing to consider is that a guest on vacation might not take as good care of your property as a long term tenant would, for the simple reason that they won’t be staying there long.
You’ll have to deal with people a lot.
Another thing to consider is that (unless you pay someone to do this for you) you’ll be messaging with guests and prospective guests a lot. You’ll effectively be a hotel guest services desk, where you are answering questions about your property or helping guests figure out fun things to do in town or responding to their complaints if they have any. This can also be a fun aspect of hosting but do consider that this can take up time.
It can be nerve racking.
Hosting on Airbnb can be a little nerve racking because of the amount of guests you’ll turn over. It’s a little scary at first allowing people into your property and hoping they don’t totally destroy it. Also, if your Airbnb is on the property where you also live, it can be a little daunting allowing strangers to come in close proximity to you and your family. We rent out our guest house which is on our property. And while we have clear rules, a large lot, and a fence delineating areas where guests are not allowed, it’s still a little nerve racking to share space with strangers, even if they have been vetted out by Airbnb.
It can be expensive and time consuming to furnish.
One thing to consider if you decide to go the Airbnb route is that you’ll have to furnish the entire place, which can be both time consuming and expensive. There are a lot of small details to consider, especially if you have a larger place. In addition to standard furniture like beds, night stands, tv’s, etc, you’ll also need to make sure you have kitchen essentials like a toaster, coffee maker, pots, pans, silverware, etc. It can be a bit cumbersome getting started. We explored Facebook market place for some of our big purchases like bed frames, and used Amazon for inexpensive but good quality mattresses. If you’ve got the time, you can find great deals for kitchenware like plates and cups at amazing deals.
Last but not the least of what you should consider is the fact that you’ll be opening yourself up to more potential for liability as an Airbnb host than a long term rental for the simple fact that you will be dealing with more people which means more scenarios in which an accident could happen. Airbnb does boast $1mm in coverage for your guests if an accident occurs on your property but you’ll also need to take into account damage that could occur and just the headache/emotional ware of dealing with these kinds of issues.
Is Airbnb more profitable than renting?
Depending on where you live, an Airbnb can be more profitable than renting. Here’s our real life example. We could have rented our property out as a long term rental, using comparable properties in our area, for around $1600-$1800 per month. Instead, we chose to Airbnb our property and in it’s first week of opening, earned $1200. $1200 x 4 weeks in a month = $4800 a month. That’s substantially more than what we would have earned in our long term rental. Of course you’ll have to take into account occupancy rates (you likely won’t have 100% occupancy each month in your Airbnb). But if occupancy rates in your area are high, you’ll likely earn more this way.
Is owning an Airbnb worth it?
Wondering “is owning an Airbnb is worth it?” I can say for us it has been! Our Airbnb is actually a double wide manufactured home that passed to us as personal property when we purchased our home. In other words, it just came with our property when we bought our house and didn’t get counted towards the cost of our home when our home was appraised since it’s technically not a permanent fixture. So for us, it was a no brainer because we weren’t paying anything extra for it. It simply helps us pay off the mortgage of our main home each month. You’ll need to take into account the cost of your mortgage or loan if you purchase an Airbnb separate from your property. I think explaining if owning an Airbnb is worth it is best illustrated through an example.
Say you buy a 2 bed 2 bath condo to Airbnb out. It costs $150,000. Your mortgage is roughly $800 per month including insurance and taxes. Internet is $50 a month and tenants will use $200 of utilities (electric, sewer, trash, water, insurance). So every month your spending $1050. You’re able to charge guests $200 per night based on where your property is. And occupancy in your area is 66%. So roughly 20 nights a month you are rented out. Let’s do the math:
Total expenses per month: $1050
Total earnings: $4000.
EARNINGS – EXPENSES = PROFIT ($4000 – $1050 = $2950)
You are coming out ahead almost $3000 each month. You’ll have to take into account income taxes (Airbnb collects other local taxes for you) and other expenses like furnishing and replacing problems (ex: HVAC goes out) or the cost of hiring out cleaning if you choose to do that. But overall? Totally worth it in this scenario. Not only are you getting positive cash flow each month but you’re also getting your mortgage covered. You just have to run your own numbers– does in the income you’ll earn outweigh the expenses each month (mortgage, utilities, repairs, etc).
Even factoring in all the cons of the Airbnb, like the cleaning, handling guest messages around the clock, etc., it’s been worth it to us to host on Airbnb not just financially, but we’re also having fun doing it!
It’s a lot easier to start with an Airbnb and convert to a long term rental than the other way around. If you start with a long term rental you’ll have to wait until your tenant’s lease is up to change your mind. That’s ultimately what pushed us over the edge and why we decided to give Airbnb a try. And we’ve had a great experience so far.
You can get started hosting on Airbnb by setting up your listing’s profile here. And you’ll earn an extra $40 on the first guest you host. If you have questions about what to put in your listing, feel free to drop a comment below or send me a dm!
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