Is Airbnb a Good Investment? Pros and Cons of Owning an Airbnb
Investing in an Airbnb is one of the newest ways to invest in Real Estate. If you haven’t already heard of Airbnb, it is a hosting service that allows anyone to list their home to individuals looking for a place to stay, from all over the world. Airbnb does come with some risk, however, which is why we wanted to go through the pros and cons of investing in an Airbnb.
To start, the pros of owning an Airbnb are as follows:
- You set the price. Airbnb allows you to set the price you wish to rent it, which can be beneficial as it allows you to gain a passive income. It is important to ensure the price you rent out at is appropriate for your area, for example, Downtown Toronto will have a higher price per night compared to Barrie. You can also charge more during high demand seasons, such as summer.
- Build a network. Airbnb allows you to connect with people from around the world which in turn allows you to network and build new connections. It can be a great tool, especially for anyone in real estate investing.
- Airbnb Provides Insurance. Airbnb provides the host with an insurance guarantee so you have protection against claims up to $1,000,000.
- You are an active host. As an Airbnb host, you are actively meeting new people, potential every day or every week (depending on how you set up your property). It is completely different than renting your unit to tenants, you are constantly providing your guests with the best experience possible. This can be a con for those who do not want to be constantly dealing with new guests and would prefer a more passive rental. However, there are many companies who offer Airbnb management who can look after your property for you.
- Guests leave ratings. When a guest stays at your Airbnb they have the opportunity to leave a review and this can become an issue if the property is not being properly managed. If there are issues you could face poor reviews and in turn lose potential guests who look for 5-star hosts.
- Buying the perfect property. One of the biggest problems is finding a property that will be successful as the location is very important for Airbnb’s. To ensure you are able to generate cash flow and have high occupancy rates you must find a location that is safe, close to amenities and somewhere that people would be drawn to stay.
Overall, you have to make sure your investment makes sense financially and works for you. If you are able to find a property that has the potential to generate cash flow then Airbnb may be a good investment for you. But it is important to be aware of what is required for an Airbnb host and how that could affect the success of your investment.
Note: Be sure to also check any laws and regulations surrounding Airbnb in your area. There may be taxes, guest restrictions or you may be required to have a permit (depending on location).