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Top 5 Tips For Your First Airbnb Investment Property

Buying a home can be an extremely stressful process. However, if you find the right home at the right price it can be well worth the headache. This is especially true if you get your hands on the right Airbnb investment property. Short term rentals (STR's) can often provide a much higher ROI than a standard long term rental investment, but are a little more complicated. Here are Simplify STR, we help homeowners and investors find and make the most of of their short term rental investments.

Below are our top 5 tips for any new investor to ensure their Airbnb is a smashing success:

1. Understand the local STR regulations

Airbnb investment property regulations

Short term rentals often have a different set of regulations than standard rentals. Generally a short term rental is defined as a dwelling designed for occupancy of 30 days or less, which is the case with the vast majority of Airbnb properties. Understanding the regulations is a critical step to ensuring the long term success of your Airbnb investment property. Within the regulations you'll want to look out and develop an understanding for some of the following topics:

  • Licensing and permitting requirements. You want to make sure you are compliant with the local laws and regulations

  • Applicable fees and taxes. Understanding what you'll owe in taxes will help make sure you price your property appropriately. If you only have a 15% margin, and find out at the end of the year you need to pay 15% in taxes that doesn't make for a great investment. Depending on your city, Airbnb will often collect and remit taxes on the owners behalf. However, that's not always the case.

  • Location or zoning based limitations. Many cities have started banning short term rentals in areas intended strictly for residential use. Make sure your property is in a location where STR's are compliant

  • And more...STR regulations are city specific. Before you dive in with your new investment, just take the time to carefully read through your local regulations. If you fully furnish you place and get it listed only to be hit with a fine and have your property shut down it can end up costing you a lot of money. Take the proper steps to make sure that doesn't happen.

2. Make sure you have the right insurance policy in place

Airbnb investment property insurance

Having an Airbnb investment property means having random guests coming in and out of your home all of the time. If anything were to happen to any of those guests, it's possible you end up getting sued. Because of that, you need to make sure you have the right coverage in place.

Many homeowners insurance policies have a clause excludes short term rentals. If this is the case with your policy, you'll want to get it updated to allow short term rentals before you host any guests. While its likely that your insurance policy gets a little more expensive, it's well worth it in the event that you ever get sued. If anything happens in the home and you have the wrong type of policy in place it's very possible that you get left holding the bag, which can cost you a lot of money, your property, or possibly more than that.

Also, some cities require that you have a certain amount of coverage specific to short term rentals. If your homeowners policy doesn't have the required level of protection, you can also look into an umbrella policy as a means of added security. Again, this comes at a cost, but depending on your individual circumstances it might be needed.

3. Keep a spreadsheet of all expenses

Any expenses directly associated with your Airbnb investment property can be written off at the end of the year. Make sure you keep detailed records so you can maximize your ROI. You might want to even consider getting a separate credit card specific to your investment. By having a separate account it makes it easier to ensure you capture all of the relevant expenses at the end of the year. In addition to operational expenses, make sure you also capture all of the following for your tax return at the end of the year (specific to your investment property):

  • Mortgage interest

  • Insurance

  • Utilities

  • Furnishings

  • Home depreciation: You can write off 1/20th of the homes value every year

  • Repairs and improvements

  • Software and automation tools

  • Any management expenses

  • And more - consult with your CPA to make sure you don't overlook anything

4. Provide as many amenities as possible

Airbnb investment property amenities

More amenities means more opportunities. You want your Airbnb investment property to show up in as many search results as possible, maximizing your amenities will help. Some people filter their search results by specific amenities, so providing as many of these as possible can quickly result in more booking opportunities. While adding things like a pool or beach access might never be possible, it's easy and cheap to add most of the amenities listed on Airbnb's site. Things like a hair dryer, shampoo, portable fans, coffee maker, toaster, etc... can all be purchased for a minimal amount. They not only increase opportunities, but improve the experience guests have in your home. A better experience = better reviews = more bookings = more profitability.

Automate as many processes as you can

Put your investment on autopilot as much as you can. You can certainly hire a management company to do this for you, but be ready to shell out 20 - 30% of your properties income. By utilizing the right tools, you can avoid the hefty expense of a management company while also minimizing the amount of work. Some of the pieces of your Airbnb investment property which can easily be put on autopilot:

  • Pricing: this is one of the more critical elements to automate. With the right tools this can not only save you a ton of time, but it can maximize your occupancy rate and revenue

  • Communication: Set up message templates to walk the guest through a seamless experience. Thank the guest for booking, provide door codes, check in on them throughout their stay, provide check in and check out instructions, and ask for a review. All of this can be done automatically. You should have it set up so that the only time you need to actually message any of the guests are to answer specific questions or to reply to booking inquiries.

  • Bookings: Getting listed on both Airbnb and VRBO is an easy way to increase your booking opportunities. You can utilize property management software which will show you reservations for both platforms on one site, making communication and visibility easier for everyone. Most of these platforms also sync availability. So when someone books the property on Airbnb, it will automatically block the calendar for VRBO. And vice versa.

  • Cleaning: Find a quality cleaning and turnover crew to prepare the house for the next guests. Automate their scheduling so they have visibility to everyone that's checking in and out. Finding a reliable and trustworthy crew can be difficult, but it's well worth it in the long run.

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