With ever-growing opportunities to earn money renting out property through platforms like HomeAway, Vacasa, VRBO, and Airbnb, a vacation home can become more than a home away from home. In the US, the typical Airbnb host earned an estimated $13,800 in 2021, and the industry is expected to grow from 82.6 Billion USD today to 119 Billion USD by 2030.
Despite recent rate increases by the Fed, mortgage rates are still pleasantly low when compared to decades past. The rate for a 30-year fixed-rate mortgage peaked around 18% in the 1980s, with average rates around 9% in the 1970s, 13% in the 1980s, 8% in the 1990s, and 6% in the first decade of the 2000s. Today’s rate sits at 5.57%*, most likely lower than when your parents bought their first station wagon. This means now is still a great time to buy.
Have you dreamed of owning a home in your favorite place and creating family memories, or escaping the daily hustle on a whim? What about building equity, diversifying your investments, and creating a stream of passive income? If you answered yes, it could be the right time to invest in a second home.
Get in touch with a loan officer to find a loan program that’s right for your vacation home. Cornerstone’s lending in most states.
ROI with Airbnb: 6 Realistic Ways to Make Money with Airbnb
It’s the Uber of vacation rentals, and business is booming. With all the buzz from Facebook, Twitter, Instagram, and word-of-mouth, you’ve no doubt heard of (and likely used) Airbnb by now. Airbnb started almost 15 years ago in San Francisco. Now it’s in over 100,000 cities, spanning 220 countries, and has hosted upwards of one billion guests.
Becoming a successful Airbnb host takes some prep work if you want to please your guests, avoid common rental mishaps, and protect your property. We took a moment to chat with Andrew McConnell, cofounder and CEO of Rented.com, the first online marketplace that helps Airbnb hosts find, compare, and choose professional property managers, to get the inside scoop.
Here’s what you need to know before you begin:
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1. Check out your earning potential.
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Airbnb provides a weekly estimate of how much you could earn as a host, based on your ZIP Code, before you sign up. McConnell says, “If you’re purchasing a home as an Airbnb investment property, location is everything. While you can have an Airbnb property just about anywhere in the world, you’ll want to invest in areas where it’s legal and where you’ll get the highest returns. Consider the costs of home insurance, maintenance, purchase price, local property taxes, etc., to find out where you’ll really be getting the highest return on investment.”
Another way to test for potential ROI is by following the 1% Rule. This says the monthly rental income should equal a minimum of 1% of the purchase price of the property, including fees and repairs, to be considered a strong investment.
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2. Get permission.
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As a homeowner, you should be in the free and clear. But it is still a good idea to review city regulations and HOA restrictions before you officially start to host. Throughout its early years, Airbnb has had its share of growing pains and pushback from local governments. We saw this play out in 2016 when Airbnb sued against the hefty fines placed on New York City hosts who break rental regulations.
Fortunately, Airbnb has a Responsible Hosting section on their website that can be filtered by city. To minimize adverse effects on the housing market, San Francisco, the birthplace of Airbnb, also published their short-term residential rental guidelines. While San Francisco’s Airbnb restrictions provide a helpful reference point, specific housing and rental regulations will still vary by city.
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3. Make your profile.
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More pictures and detailed information about the home and neighborhood mean less confusion for your guests. McConnell reminds us, “First impressions matter, so put time into creating a complete and convincing listing. Include at least 24 photos of your home and use a professional photographer if possible as it can result in 39 percent more in additional bookings and revenue!”
Once you get some interest in your listing, the fun doesn’t stop. “Response times also matter,” McConnell says, “so respond to every inquiry within 24 hours. Finally, optimize your copy to allow your guest to envision himself in your home.”
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4. Look at the competition.
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With a little sleuthing, you can find out what your neighbors are doing on Airbnb (and how you can do it better). As a baseline, McConnell explains that most guests are looking for hotel-like, nearly instant service when it comes to amenities, booking, and making requests. “Provide a fully-stocked kitchen and bathroom, a private pool or hot tub if appropriate, a washer and dryer, Wi-Fi, and TVs for the bedrooms. You’ll want to make your guests feel welcome and at home,” he explains.
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5. Put on the finishing touches.
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Homes with super-clean spaces, updated decor, and a free welcome basket or bottle of wine in the fridge often get the best reviews. As cute as they are, these freebies really do matter. Considering as many as 30 percent of Airbnb rentals come from repeat customers, McConnell says, “You’ll want to delight your guests every step of the way.”
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6. Consider outside help.
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Depending how often you rent your home on Airbnb, you may need to call in reinforcements. McConnell says HomeAway’s marketing materials say the average host will need 8.4 hours per week to manage his or her marketing, bookings, and cleaning. For homeowners with limited time, McConnell suggests working with the pros. His site, Rented.com, has over 800 management companies listed. “It’s easy to find and compare your options,” he says.
Investing in a second home or vacation home opens the doors to many exciting personal and financial possibilities. Reach out to your loan officer to find out if now could be the right time to buy.
If you’re ready to buy give us a call, or try our quick-and-easy online prequalification process.
*Rate effective: August 12, 2022
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.