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Airbnb Investing A Short Term Sure Thing!

May 28, 2021 | Investing

By now the majority of the general population and investors alike have heard of a little company called Airbnb.  In this article we’ll learn more about Airbnb investing, a short term sure thing!

Airbnb operates as an online marketplace for lodging, primarily homestays for vacation rentals, and tourism activities – Wikipedia

Most of us at this point may have already vacationed in a stranger’s home; connected via the Airbnb App readily available on our smart phones.  The Abode team has personally stayed in a variety of gorgeous apartments, homes and villas both locally and abroad.

The appeal of living authentically as a local and staying in an aesthetically pleasing vacation spot is just too hard to beat!  No to mention, usually cheaper than a hotel, unless of course you’re an Airbnb Luxe enthusiast (more on that later).

So on with it, let’s explore. Airbnb Investing, a short term sure thing!

Airbnb Short Term Rental Investing

Airbnb Investing – The How

Short term rentals using Airbnb are a really unique investment opportunity.  It allows investors to rent out their properties or portions of their properties as “hosts” to guests at a premium for a short term duration of stay.  All from the convenience of their smart devices.

Premiums are based on how beautiful an experience you create for your visitors.  Extras like exceptionally staged and modern furnishings, hot tubs, pools, other recreational items like kayaks, tennis rackets and ping pong tables to keep everyone entertained are sure fire Airbnb gold.  Location also certainly plays it’s part.  Waterfront properties are paid a premium, as are unique views or proximity to local hot spots.

There are certainly limitations to the premium one can charge, however with Airbnb, it’s highly likely that multiple short term stays paid out at even a small premium will make greater returns on your investment than the traditional long term stay tenants.

Some will note though, that managing an Airbnb investment can be somewhat taxing on time.  Those are the investors that chose to self manage their investment, and would be considered active investors – not passive.

In order to create a passive rental business, a potential investor would have to work towards streamlining the process.  This would include hiring a network of cleaners, maintenance workers and operators.

Airbnb Investing – The Why

Higher return on investment and the allure of being able to potentially vacation in your own property is high on the list of reasons why.

Let’s say, on average, a 3 bedroom home anywhere on the outskirts of the GTA can rent for $1800- $2200/month.  Wonderful, but can it get better? Yes. Yes it can!

That same 3 bedroom home anywhere on the outskirts of the GTA (as long as it’s within proximity to local amenities etc.) can rent for $180-$220/night.  Average this out over 30 days and you have $5400-$6600/month. Now you’ll have to obviously include for the home not being rented consistently and maintenance, but the point is there.

For example purposes, let’s say an average 3 bedroom home costs $600k in smaller cities throughout the Golden Horseshoe.  The downpayment “investment” will be 20% or $120,000.

  • Long Term Rental = $1800/month or $21600/year.  Potential Return on Investment = 18%
  • Short Term Rental = $5400/month or $64800/year. Potential Return on Investment = 54%

Airbnb investing, a short term sure thing! Yes, indeed!

Airbnb Short Term Rental Investing

Airbnb Investing – The What

The first thing that comes to mind when thinking about short term rentals is usually a vacation home or cottage of some sort.  This is simply not the only case!

People travel for a wide range of reasons beyond vacationing.  Airbnb is used just as frequently for business, events, to visit family, in between housing and so much more.  Thus it’s important to note that it really doesn’t matter where your located, there is always a need for short term housing.

Finding a great investment with Airbnb potential starts by searching Airbnb listings and identifying if there is a demand in your preferred area.  If so, the next step would be to partner with a real estate investing consultant (ahem – Abode Realty!) and dig a little deeper into the details.  A consultant who knows the market and streamlines the process is ideal.

You’ll want to look at homes that fit your criteria and the needs of the Airbnb market it plans to service.  Doing a cost analysis and breakdown of how much the home and furnishings will cost you will help you plan your short term investing business.  If the opportunity makes sense based on the nightly or weekly rate you can charge, it’s green light go time!

In addition to normal Airbnb hosting, the platform now also offers its hosts and guests Airbnb Plus & Airbnb Luxe as options; levelling up the short term investing game and gain.  The spaces in these categories pull out all the stops in creating exceptional guest experiences in top notch quality and luxury homes in unbelievable locations.  Nightly rental rates will increase dramatically as a result of being on these platforms. Think tens of thousands vs thousands.

Depending on your initial investment budget, this will definitely make the Airbnb investing, a short term sure thing to add to your rental portfolio!

Abode Realty

The Where (Urban)

One of the most common questions we get asked is where oh where is the hottest spot for an Airbnb?  The best answer really is:

Everywhere – except Toronto!

Toronto was a city in such hot demand that it officially found itself in a bit of a housing crisis. Arguments as to if it was all Airbnb’s fault vs total city supply vs demand aside; city officials laid down some pretty serious rules and fines for those who don’t abide.  So for the near future, until the dust settles, better safe than sorry, let’s avoid Toronto as an Airbnb investment area.

Notable areas that you may or may not have considered include smaller, medium sized cities in the Golden Horseshoe of Ontario.  Think Barrie & Orillia to the North, London, Kitchener, Cambridge, Windsor (yes Windsor!) to the West and Bowmanville, Peterborough and Belleville to the East.  In addition to already having a fairly decent population, these are cities that some city dwellers have flocked to recently.  Eventually family, friends are bound to visit for life events and getaways alike.  They will need short term places to stay, places more economical than staying at a hotel for a week.  You get our vibe..

In addition, many of these cities will be travelled to once again for business.  Zoom meetings will not live forever, with many companies and employees alike seeking to get back to in person meetings as soon as they can.

{ We are social mammals after all! EXTRA EXTRA Have you seen the gum commercial yet? }

The Where (Get Outta Town)

As well, we most definitely have to note the cottage and wine country surrounding the GTA.  Muskokas to the north, Niagara to the West, Kawarthas to the East are all popular vacation destinations.  Trying to secure waterfront property in a pandemic is not the easiest thing, but for those who do, fantastic returns abound.

At the risk of adding to the over tourism of one particular region, we cannot help but mention a favourite spot of the Abode Realty team. Prince Edward County!

This serene and bountiful county is a gastroeconomic hub, a wine lovers paradise and a country core enthusiast’s wildest dream come to life.  Waterfront cabins can rent from $500+/night, while entire waterfront homes can rent from $1000+/night.  Not to mention that PEC recent made waves for having the highest increase in house pricing across CANADA, making this an incredibly lucrative Airbnb or any kind of investment indeed.

Airbnb Investing A Short Term Sure Thing

Pros of Airbnb Investing

  • Greater returns on investment than long term rentals.
  • Simplicity in marketing the rental via the Airbnb app.
  • Airbnb insurance (in case anything goes wrong!)
  • You can use it too! Book a week yourself and enjoy the free getaway.

Cons of Airbnb Investing

  • Self managing an Airbnb can be a time vampire.
  • Costs are higher upfront to include the extras guests are expecting.
  • Higher operating costs (more guests, more laundry!).
  • Short term tenants can be less secure than long term ones.
  • Location restrictions can limit your ability to rent to short term tenants (case in point Toronto itself – the city kiboshed the Airbnb industry last year with these regulations).

At the end of the day don’t ask yourself if you can do it – ask yourself HOW you can do it.  It’s that good.

Curious to learn more about Airbnb investing, a short term sure thing? Contact the Abode Realty team today and let’s get started!

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