Exploring the 3 Biggest Pros and Cons of Owning and Operating an Airbnb
Post By: Kyle Weindel | February 17, 2023 | 5 Minute Read
Tell Your Friends:
Airbnb – the fun, easy, and trendy way to make loads of cash every month? Possibly, but not quite. After around one year of operating an Airbnb unit, I’ve learned the ins and outs of short-term rentals. There are certainly many positive things that come along with operating an Airbnb, but there are also a few things that make it less desirable. Here are some of the pros and cons of owning and operating an Airbnb.
Pros
1. POTENTIAL FOR INCOME
The potential for income with owning an airbnb is astronomical. I have read about people who have replaced the salary of their full-time job with owning 1-2 of these. The potential for income varies based on the market and using a software like AirDNA to help research what that potential is prior to starting your business is crucial.
2. AVERAGE GUEST STAY IS SHORT-TERM
Having the guest only staying for a short time comes along with many perks. First, it gives you flexibility in your scheduling. Do you have family coming in town and you want to allow them to stay at your unit? Perfect! You can just block it off. Or maybe your unit is located in a vacation destination city, you can just block it off for the times you want to visit. Other perks include yourself or your cleaning team being able to check on the condition of the unit frequently and the chances of someone being able to do significant damage to the property is slim. Finally, if you have a difficult guest, then you only have to deal with them for a short time before their stay is over and you can move on.
3. GREAT TOOLS
Airbnb gives you access to a variety of free tools that help make your life AL OT easier in terms of the day-to-day management and communication of the unit. There is software that performs market research for you and pricing your unit competitively to ensure minimal vacancy. There is also software that automates the communication for you. I set mine up to messages guests immediately upon booking with a nice welcome / thank you message, confirm dates reserved, house rules, directions to the property, and recommended local spots to visit. Then the guest would receive communication two days prior to their arrival, and at check out asking for a review. These tools along with a lot of other third party tools help to automate the whole process.
Cons
1. UNCERTAIN INCOME & ONGOING COSTS
A short-term rental does not give you the same rent check every month you’d get with a long-term renter. With a short-term renter, your next booking is never guaranteed and there are a lot of fees and expenses to consider. Expenses to consider are furnishing the unit, professional photography and marketing, cleaning professionals, cleaning supplies, replacing broken / worn down items, Airbnb fees, municipal / government fees, TV subscriptions, utilities, lawn care, snow removal, taxes, insurance, and the mortgage payment. Doing in-depth research as to what the income vs. expenses will be for your unit is extremely important before getting started.
2. NOT AS PASSIVE AS YOU MIGHT THINK
People always put real estate investing into the passive investment category, but that is simply not true. What you’ll need to consider is how much profit you are looking to take from the business venture. Yes, you can hire marketing companies, property management companies, and cleaning companies to take care of the entire process, but you have to remember these come at a cost as well. Unless you have exceptional margins, you’ll most likely take on some or all of these responsibilities.
So, this comes with answering a phone call in the middle of dinner or even the middle of the night because your guest didn’t read the check-in instructions and can’t find the property. It comes along with not being able to meet up with friends for lunch because you are cleaning the unit for the next guest. It also comes along with the emotional energy of receiving a bad review from an unrealistic guest who has expectations of staying at a Ritz Carlton. Even though each of these tasks might only require a few minutes of work, they add up fast.
3. CONSTANTLY CHANGING RULES & REGULATIONS
When you decide to move forward with opening an Airbnb unit, your goal should be to own and operate this unit for a long time to really maximize your profits. With creating this long-term plan, your success lies in the hands of a lot of different entities – including things like your local neighborhood/HOA, your city, state, the federal government, and Airbnb itself. If these entities at any point decide to change the rules, you’ll be forced to comply.
For example, what if your local municipality allows short-term rentals but changes the permit fees from $200 a year to $2,000 a year, or worse off what if the HOA of the condo building you are in votes to no longer allow short-term rentals in the building? What if things get tight at Airbnb and they decided to increase their fees? Before opening a short-term rental it’s extremely important to check with all of your governing bodies, and then having a plan B and C in place should things change.
Final Thoughts
There has been buzz around owning and operating short-term rentals for quite a few years now. After trying it out myself, I’ve experienced all of the pros and cons included in this article. If you’ve been considering a short-term rental, I’d love to connect and help you out. Call/text me at 314-252-8416.
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