When it comes to vacations or needing to change up the scenery, it comes with needing a place to stay. Short-term rental platforms such as Airbnb or Vrbo have got you covered. They have everything from A-frame houses, cozy cabins in the woods, luxury treehouses, tiny homes, airstream campers, to entire homes, single bedrooms, beach condos, or apartments in a busy city. These rental platforms offer unique places to stay during your time away to make you feel right at home.
On the flip side of things, if you’ve ever considered becoming an Airbnb or Vrbo host or getting into real estate investing, it can be a lucrative business if done correctly. But is it worth the time and energy?
How do I start?
Step one is to invest in real estate. Whether you are a first time buyer or already have a property you can use, make sure that the dwelling is well maintained, has competitive amenities, and comfortable bedding to make your guests as comfortable as possible. You don’t need to have the nicest home to get your foot in the door of starting this business, however, it is important to stand out among the other surrounding properties in the area to get more traffic to your listing.
If you are a first time home buyer, there are down payment assistance programs available in the state of Iowa that can help you purchase your first property. Check out Neighborhood Finance Corporation’s website to see if you qualify for $10,500 in free money.
What is the difference between a traditional investment property and an Airbnb?
A traditional investment property rental is usually a long-term rental where a tenant can stay in your property for anywhere from one month to many years. In contrast to that, Airbnbs and Vrbos are short-term rentals where tenants have the option to stay for one night, a few nights, or a few weeks and have the option to stay for multiple short-term stays.
During the short-term stay, guests will have access to some or all of the property. They may have access to the entire house, some of the house, or a single room and bathroom. Here is where the money is up for grabs because you can have multiple different tenants stay at different times helping you pay for your mortgage. If the tenants enjoy their stay, they can write a positive review or return back for another stay another time for continued business.
Can I utilize a down payment assistance loan to purchase a property and rent out my place?
Yes! Let’s say you buy your first home for $250,000. Using your down payment assistance with Neighborhood Finance Corp, you pay 3% down and then they’ll loan you $10,500 in free money to use towards your principal or closing costs and you can pay it back whenever you can with no interest. However, if you want to do this in combination with Airbnb or Vrbo, you have to live in the property while paying off the loan. So, you can rent out a room or a main level or basement while your tenants/guests help you pay towards your mortgage.
For example, let’s say that your monthly mortgage payment is $1,500. If you break that up into a daily rate, divide $1,500 by 30 and you get $50. When you host your home to guests, for a nice home with amenities, you can charge around $100+/night. If you get guests to stay in your home every night for 30 days at $100/night, that’s $3,000! Then after you pay your $1,500 mortgage payment, you not only have other people paying your mortgage but you also POCKET the other $1,500. Airbnb and Vrbo do take a cut of your earnings for booking fees however, Airbnb only takes 3% and Vrbo takes 5%. So if you take your $3,000 earnings minus the 3-5% booking fee, your net earnings come out to $2,850-$2,910 (not including property taxes and insurance).
To be clear, please note that you are only eligible for down payment assistance through Neighborhood Finance Corp if you live in the home. You cannot not buy the property with the loan assistance to solely rent it out and never live in it. This works great if you have a spare bedroom and bathroom you aren’t using or if you have a finished basement or main level that you aren’t using and can make some extra cash.
Should I hire a property management company?
You could! However, you can save more money by maintaining the property yourself. As many of us know, YouTube has a ton of helpful videos showing how to do things. If you get to the point where you don’t have time to do it and life gets busy, we recommend Nest Property Management as they offer home maintenance, additional marketing on other platforms, and tenant screening.
So is hosting on Airbnb or Vrbo worth it?
Yes! If you’re able to get into the market and purchase a house or use a property that you already own, this is a great opportunity to make extra cash or even make it a full-time job.
If you are considering becoming an Airbnb or Vrbo host, we have investment properties that we own and manage and would love to answer any of your questions about getting started. Don’t forget to reach out to Neighborhood Finance Corp to see if you qualify for free money to purchase your first home!
