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Buying a second home as an investment has been an excellent strategy for real estate investors for decades. Of course, the next question quickly becomes, “How will you use that investment property?” The possibilities are quite limitless and include things like the following:

  • Rental property.
  • Fix and flip property.
  • Event location rentals.
  • Actual bed and breakfast.

Modern technology is opening new doors for people interested in investing in real estate – in the form of Air BnB properties. This is a particularly attractive investment option for people who want to purchase potential retirement homes in coveted vacation or travel hot spots at today’s prices. You can use the income from the Air BnB investment to pay for the home while securing your little retirement getaway today.

What Is Air BnB Home?

Like various ride-sharing apps, Air BnB is built on the concept of sharing. While you may be considering buying a second home to share with others, for a price, of course, others may share rooms in their homes, additions to their homes, mother-in-law suites, apartments, houseboats, cabins, etc. The idea is simple. Property owners make their homes available to others who are traveling for business, vacation, conferences, etc. but do not wish to stay in hotels.

The accommodations vary in size and amenities to accommodate the interests of many different travelers and can accommodate one guest or many guests. Air BnB offers the platform through which you offer your accommodations to others who are interested in “renting” your space for a specific amount of time.

The key is to find a home you believe is a good investment, will grow in value over time, and is a cost-effective investment – as far as second homes go, to serve as your Air BnB home. You also need to check with local zoning ordinances to make sure the property you are considering to use as an Air BnB rental is permissible at all and if you need to purchase a specific permit or license to do so.

Why Would You Invest in an Air BnB Home?

People are always looking for ways to get greater miles from their investment properties. One thing many people do is buy a home in an attractive retirement location and offer it as an Air BnB rental until they are ready for retirement. That helps you pay for your retirement home today so you can enjoy a mortgage-free lifestyle during your actual retirement.

Another consideration is that many people who purchase second homes for Air BnB properties go on to purchase many more. You can generate as much income from one week of Air BnB rentals as you can from an entire month with a traditional rental property.

Of course, you may wonder why you would go with the Air BnB platform, one that takes its share of your rental fees each month before sharing the love with homeowners. The truth is that Air BnB offers certain benefits to homeowners that are well worth considering, such as:

  • Free listings to a huge audience.
  • The ability to set your own prices.
  • Financial protections for hosts and guests.
  • Host protection, through their Host Guarantee program, for up to one million dollars in damage caused by guests.
  • Opportunity for guests to leave feedback about their experiences (providing social proof that they had a positive experience in your home).

In other words, homeowners have plenty of reasons to consider investing in a property they use as an Air BnB property. Even if you’re not looking for a vacation or retirement home, you can earn a steady flow of additional income throughout the year, while reserving the right to use your home, as you wish, for your personal travel pleasure.

Tips for Making a Solid Air BnB Investment?

There are certain things Air BnB expects from hosts. Hosts who meet these basic “requirements” often have more favorable ratings and earn a higher income. This list includes:

  • Respond to inquiries quickly – within 24 hours when possible.
  • Be hospitable and welcoming by accepting requests whenever you have availability to do so.
  • Avoid cancellations unless absolutely necessary. No one wants to leave travelers stranded without accommodations.
  • Work to maintain high guest ratings.

They also suggest that in addition to advertising the property the way it truly is that hosts provide a few basics to make your guests’ stay more comfortable, such as providing toilet paper, paper towels, hand soap, basic kitchen tools, toiletries, and freshly laundered bedding, towels, and pillows. You may even wish to include board games, water toys, and other items if you’re going for a family-friendly home for your Air BnB investment.

1. Choose your location wisely.

Location is everything when you’re working with an Air BnB rental. The closer the rental unit is to your home, the better you can respond to problems that may arise in the rental process or specific guest needs. Of course, you want to make sure that you’re located in a high-traffic area where rentals are in high demand and competition is limited.

It’s even better if your Air BnB rental has a beautiful view, access to restaurants and entertainment, or area attractions. If the main attraction in your community is a lake or ocean, you want to be as close to the action as possible. Views of the water or water access on the property may score you even higher demand.

2. Choose the size of the home that works for you.

Depending on your goals for your Air BnB investment property, one size may work better for you than others. If you want to bring in large groups for family gatherings and large profit potential, a larger home may be the right fit. However, you must work to maintain, clean, and service each room between guests – so bear that in mind as well.

If you want to invite quite couples, retirees, or small families, then a smaller one-bedroom home might be a better fit.  It is perfectly acceptable to place limits on the number of people who can stay in your Air BnB property and the amount of money you want to charge for these accommodations. But you also want to remain competitive and both of these things require some degree of strategizing to consider.

3. Examine the profit potential of the home as an Air BnB rental.

The other thing you have to consider is the cost of similar homes in the area compared to the cost you will need to charge to manage your expenses in operating an Air BnB rental. It’s not just the mortgage. Many things go into the total price to you, of your Air BnB rental.

You’ll need to furnish and decorate the home, stock essential items for the kitchen, and keep the utilities on whether you have guests or not. That’s before you even factor in things like cleaning expenses and lawn care (if you pay others to do those things), routine maintenance costs, insurance, and Air BnB fees.

These are all expenses that add up. Yet you will need to remain competitive. That is why profit potential is one of the most important considerations to keep in mind when investing in a possible second home for an Air BnB rental.

4. Pay close attention to the condition of the home – start with a thorough home inspection.

A thorough inspection is a must when you invest in an Air BnB property. It must be a safe property that isn’t going to require you to immediately come in and do foundation work, replace a roof, or rip out old wiring so you can update the home to meet modern code requirements. An inspection can help you determine what kind of changes you’ll need to make to the home and how quickly you’ll need to make them. It also gives you an idea of additional money you’ll need to invest in the property before you make your final offer – and may give you serious negotiating room with the sellers.

5. Be prepared to furnish and decorate the home to make it more inviting for your guests.

You must also be ready to furnish and decorate the home to make it an inviting space for your guests. The more tasteful the décor, the more appealing the home will be to potential guests – especially if your home is in a high-demand location.

Fortunately, you can shop thrift stores, online auctions, and other places to find amazing bargains for buying furniture, appliances, and decorations for your Air BnB property. For some people, this is the most entertaining and enjoyable aspect of purchasing a second home for an Air BnB property.

6. Understand that there is a time commitment involved so that you can keep guests happy and get good reviews and ratings.

Before you bring the first guest into your Air BnB property, you need to understand that there is a commitment of time, energy, and effort that goes into making your home the perfect spot for your guests to enjoy an amazing experience. It’s all about getting solid ratings with Air BnB to ensure that you get future guests. The more steps you take to ensure great experiences, the better your ratings are likely to be.

However, don’t get discouraged from a single bad rating. Use it as a learning experience and move forward with the understanding that you can’t please all of the people all of the time. Continue working hard to try to provide exceptional experiences and you’re sure to do well with your Air BnB property.

Things to Consider about Investing in Air BnB Properties

Air BnB provides the platform through which you can reach out to potential renters, handles the finances of the transactions for you, and provides you with essential protection against damages renters may cause to your property. Unfortunately, there have been instances in the past where renters trashed Air BnB properties making this protection essential. Fortunately, the bad apples are rare. What this means for you is that you may not want to include priceless heirlooms or items that have sentimental value for you in homes you’re renting out as Air BnB rentals.

Other considerations to keep in mind when investing in Air BnB properties are the long-term benefits to you. Current mortgage interest rates are at record lows. While most people won’t be able to enjoy the same historic lows that first time home buyers can enjoy, second home loan interest rates are still low enough to make you want to strike while the iron is hot. Now is a great time to make real estate investments.

Another benefit Air BnB brings to the table is that you don’t have to go through the same learning curve you would if you were renting your home full-time. Air BnB is there to be your partner in the rental process and even offers 24/7 support should problems arise. You won’t be alone either. There are currently more than two million hosts on Air BnB. You can read reviews and comments from guests to find out which features and amenities are most appreciated (Hint: for most, it is a coffee maker and a complimentary assortment of coffee for guests to use). Study other listings to see how much they are charging, what amenities they offer, and how well their guests respond to these things to help shape how you operate your Air BnB rental.

The biggest consideration, though, is the enjoyment you’ll get from your business. It will require work, maintenance, the occasional repair, and making certain accommodations to make your guests’ experiences amazing.