Buying a short-term rental property

Investing in an incredible property at the right location is key to building a successful short-term rental business. However, purchasing a short-term rental can feel like a daunting task. Though there are more risks than rental arbitrage, the rewards can be even greater. This article will help you understand the basics of how to buy airbnb properties Follow the below steps to begin your purchasing journey!

Host Tools provides an automated, unified calendar for short-term rental hosts, allowing you to seamlessly list on all major channels. Start your free trial today! 

How to Buy Airbnb Properties

Investing in short-term rental properties can be a lucrative venture if done correctly. This section will provide key steps and considerations to help you navigate how to buy Airbnb properties.

Choose a top location

As the famous real estate saying goes: Location. Location. Location. 

Hosts want to keep their booking calendars as full as possible. Therefore, it is important that you look at buying properties to use as a short-term rental in a highly-visited area. It is okay if the site has a down season, as long as you can expect a full calendar in the standard season. 

In addition to location, when choosing where to purchase a property, a host should consider: the return on expenses, potential occupancy rate, standard daily pricing and rules & regulations for the city.  Based on that criteria, the following cities are some of the most desirable locations for short-term rental hosts:

  • Manhattan, CA
  • Malibu, CA
  • Key West, FL
  • Northport, NY
  • Wailuku, Hawaii
  • Long Beach, NY
  • Southlake, TX
  • Princeton, NJ
  • Plymouth, MA
  • Arlington Heights, IL

The above cities are excellent options for short-term rental hosts. First, these city's laws and regulations are short-term rental friendly. This means that obtaining the proper permits to host is more accessible than other cities and that the laws are friendly toward a host's potential income. Secondly, daily rate prices are higher in these cities. As a result, hosts can make a more significant profit from their mortgage vs. potential income than other cities.

On the other hand, these cities are considered some of the most unfriendly to purchase a home for a short-term rental due to their strict regulations on short-term rentals:

  • New York, NY
  • San Francisco, CA
  • Las Vegas, NV
  • Calabasas, CA
  • Denver, CO
  • Atlanta, GA
  • Oklahoma City, OK
  • Oakland, CA
  • New Orleans, LA
  • Honolulu, HI

Be Aware of Local Laws and Regulations

The short-term rental industry has exploded over the past decade. As a result, the industry is becoming more regulated by local authorities.

Some cities like Honolulu have begun imposing strict requirements and regulations on short-term rentals, while other areas like the New Orleans French Quarter and Garden District have banned short-term rentals entirely. Therefore, it is best to research a city's local laws on short-term rentals before purchasing or risk not being allowed to rent out your property. 

Choose the right property type for the area

Choosing the right property type is essential for marketing to the kind of traveler you want to host. For example, if you are running a short-term rental business in a major metropolis, you are likely marketing to long-term business travelers.

Therefore, owning an intimate apartment or condominium with an office space makes sense. On the other hand, a single-family home is ideal for attracting families on vacation if you buy in a beach-front town. Think about your target audience and what type of home they would ideally search for online.   

Commit to a budget

Remember that the price of buying a property is not where the expenses end. Hosts must account for property taxes, short-term rental insurance, inspections, appraisals, closing fees, and everything else that comes with buying any home. Plus, you will need to furnish the space and ensure it is equipped with all the essential items and appliances.

Consider all your sources of income and how much you can truly afford without defaulting on a mortgage payment. Choose a budget and stick to it. 

Do your research

Never fall for a property that you can’t afford. When searching for the right property for your business, keep looking until you find the right one. You can look at properties beyond the traditional MLS services, such as foreclosures, bank-owned, and off-market properties.

Properties like these are more likely to give you a higher return on investment. Other common places to browse for homes include online listings, local newspapers' real estate section, and leads from friends. 

Real Estate Agent working with a short-term rental host

Work with an agent

It is highly advisable to work with a real estate agent. Remember: the seller pays the agent's fees, not you. Therefore you can rest comfortably knowing they have your best interests in mind. Plus, real estate agents already have the knowledge and skills to find the ideal property for their clients.

In addition, real estate agents are trained in negotiation skills, so you don't have to do the messy sparring match of settling on an agreeable price. A real estate agent will handle much of the stress and confusing logistics of purchasing any property. 

Conduct Market Analysis

Once you have narrowed down some top choices, conduct your own market analysis. Performing your own market analysis means researching similar properties in the area that sold within the last few months.

Then, consider the differences between those properties and your potential one. From there, you will be able to understand the fair market value of your home and ensure that you are not overpaying. 

After that, a host will want to begin the short-term rental market analysis in the neighborhood the house is located in. From here, you will gather information regarding the area's standard occupancy rate and daily rate.

This information will allow you to predict your likely monthly income, consider expenses, and calculate your net income. You can easily do this by looking at properties listed on Airbnb, VRBO, and in the area.

 See what prices are like, and how many reviews each property has. The number of reviews will give you a good idea of how many guests each property has hosted. You can also view the "location" scores guests have left to see what your future feedback may be.

Use real estate investment tools

The advancement of machine learning and AI has made conducting market and investment analysis significantly more accessible. Before, by the time a host manually calculated their net income, the property may have already been sold. Today, these questions can be answered in minutes. Resources like Mashvisor are a robust tool for answering these questions. 

Automate your short-term rental

Buying properties to use as a short-term rental can bring you many rewards. However, no matter how beautiful the home and location are, a host needs to provide an incredible experience from booking to check-out and beyond.

When you integrate your property with Host Tools, you will have access to a plethora of automation tools, including self-check-in, guest and cleaner communications, syncing calendars across platforms and much more. 

Final Thoughts

Buying properties to use as a short-term rental is an incredible way to build a business. When looking for your first home, remember to plan to automate it with Host Tools and consider the following before choosing a property:

  • Location
  • Local laws and regulations
  • The right property type for your audience
  • Committing to a budget
  • Research other local properties
  • Work with a real estate agent
  • Conduct market analysis

When you follow these basic guidelines we know you’ll be set up for success!

Host Tools provides an automated, unified calendar for short-term rental hosts, allowing you to seamlessly list on all major channels. Start your free trial today! 

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