Investing in Airbnb Property in 2023

I was always a fan of the Airbnb concept. Ever since 2013 when I drove across the country from New England to Los Angeles. With all my belongings in my car, I was setting out to start a new life in the City of Angels. When I got to LA, I didn’t know anyone and didn’t have a clue where I would stay. A hotel would have caused me to burn through my budget much too fast. Airbnb was gaining popularity and I found it in a Google search and decided to try it out. I found a private room in Hollywood where I could stay while I worked out a more permanent living situation. It was really affordable, and staying in a private room allowed me to get advice from the host, a lifelong native of Los Angeles. While I totally believed in the concept, buying Airbnb property hadn’t even occurred to me!

Four years later, we were investing in Airbnb property!

I decided to take my girlfriend out of town on a weekend getaway, a few hours from where we lived. We had a great experience staying in an Airbnb. This trip would be a defining moment in our lives as we went from guests, and ordinary people working 9-to-5 jobs, to vacation rental business owners. All it took was one house and being willing to take the leap! At just 27 years old we became real estate investors and started our journey towards financial independence, buying Airbnb property four times in a single year.

You can start investing in Airbnb property, too!

A lot of people are deterred from real estate by the requirements of a large down payment. Investment properties typically require 25% down or more. There are a bunch of ways to get around this, but the most legitimate way to do so is to split a property with one or more friends. At AirHost Academy we strongly recommend splitting your first property with another investor. A lot of people might be hesitant to work with a partner because they’ll only get half of the profit. But what they don’t realize is it’s also half the risk, half the expenses, but the same ROI for you! We offer a spreadsheet that is set up for two investors to track their expenses, and you can get access to it for free by subscribing to our mailing list on the sidebar (bottom of the page on mobile).

Make your agreements beforehand

If you do decide to start investing in Airbnb properties with friends, be sure to put all the details in writing beforehand. The downside to this plan is that getting into business with friends can lead to arguments or even the end of a friendship.

To avoid getting into this kind of mess, you’ll want to make sure you’ve laid out the plan and that everyone has managed their expectations of what will happen in the future.

It might be worth shelling out money for a lawyer to draw up an agreement that is in everyones’ best interests. Even if you are dealing with friends or family, you should still protect yourself from the endless possibilities of something completely unexpected. Your friend could default on a loan, or worse, pass away unexpectedly and you could be left in a tricky situation trying to fight with their estate!

Why short term rentals?

Short term rentals generally make a much higher profit than a long term rental. Our first property grossed over $50,000 in its first year and, amazingly, paid back our entire down payment. That’s an incredible investment!

If we had leased it to a single long term tenant, we likely would have only grossed less than $20,000 and not turned a profit on it. Buying an Airbnb property was the right choice for us

It’s important to note that running your own short term rental is a lot more work, but it is very lucrative, especially if you pick the right market!

Real estate is a great investment for lots of reasons, the biggest one being that tax laws are very friendly to real estate investors. After I started investing in real estate, my tax refunds got way bigger despite making much more money annually.

Understanding the work involved

Before you dive head first into short-term rentals, it’s important that you understand that there are pros and cons. There can be a lot more work involved than in a single family home or long-term rental. Some of the cons are the same, such as dealing with squatters or revoking security deposits. You’ll need to constantly be communicating with guests and vendors. Also, you’ll need to make sure the property is maintained and that you are pricing your listing adequately and competitively.  Fortunately, there are ways to automate a lot of these tasks, but that will take work to set up.

What’s the next step to buying Airbnb property?

You’ll need to have a few markets in mind initially in order to have a good idea of how much money you’ll need for a down payment. Once you’ve come up with enough of a down payment, or found someone who is willing to partner with you, the next step is to start looking for a lender to give you the mortgage for the property. This part can seem very intimidating, but don’t let it deter you from starting your journey to Superhost!