Categories
Real Estate

Why Airbnb Is Successful

Understanding why Airbnb is successful and learning to create passive real estate income is easier than ever. Passive Income investment has been taught by Robert Kiyosaki, a well-known real estate investor for decades. He discusses these concepts in his book, Rich Dad, Poor Dad.”

In this article we not only discuss why Airbnb is successful, but we also show you how to generate passive income from real estate investments, such as temporary rentals like airbnb. Short term Airbnb rentals are in high demand because travelers are searching for a special experience. For example, adventurous travelers want to stay in a place that is unusual and fun. We will also discuss the BRRRR method for rentals how this may be a methodology for scaling your investment portfolio of properties.

Considerations When Buying Airbnb Property

There are several things to consider when determining whether an Airbnb will be successful in attracting tenants. Airbnb considerations include:

  • Location: In the City or Countryside? Near Events or Tourist Area?
  • Type of Development: Small Cottages? Apartments? Houses? Tents?
  • Cost of Property/Expenses: How much does it cost each month to maintain your units?
  • Local Restrictions for Rentals: Are there local ordinances or restrictions on rental properties?
  • Profitability: Calculate whether the properties will be profitable or not.

Why Airbnb is Successful: Money and Experience

Money for Landlords

how to start an AirbnbOne of the biggest reasons why Airbnb is successful with landlords is the app provides access to thousands of clients who want to rent. As a result, the heavy lifting of advertising for landlords is taken care of, making it easier than ever to just sit back and let the money flow in.

Owning an Airbnb is one of the best ways to create passive income in real estate. As a result, it is simply earning money with little or no effort. Moreover, with passive income, you earn money while you sleep or vacation. Although this idea may sound impossible, it is a secret that millionaires and billionaires have utilized for hundreds of years to become wealthy by learning why Airbnb is successful.

Common examples of passive income include owning leisure property or investment rental properties. Of course, there are other examples of passive income, like stock dividends, high-yield savings accounts, annuities, and real estate investment trusts (REITs) as well.

Unfortunately, although passive income may seem like easy money, it’s not. Generating passive income requires upfront work that lays the groundwork for future income. It is not a get-rich-quick scheme. In addition, it may require some additional work as you move forward. For example, if you own a leisure rent property, you will be required to pay for property maintenance, improvements, taxes and insurance on your investment.

A New Experience for Travelers

Another reason why Airbnb is successful with renters is because Airbnb offers travelers an experience, instead of just a room. Travelers in the 21st century are looking to experiences something new and different. They want their stay at an Airbnb to be something special, not just a night in a high-rise hotel with continental breakfast. One of the reasons why Airbnb is successful is that it has capitalized on what the newer generation traveler truly desires: a new experience.

Where Should I Buy Airbnb Investment Property?

Shifting Populations: People are Leaving the Big Cities

It’s important to understand that real estate prices have been rising at an unusual rate. Demand for real estate in suburban and rural areas has skyrocketed recently. In addition, understanding population migration patterns and knowing where to buy can help when considering why Airbnb is successful. However, there will be winners and losers in the market short term. For example, it appears that in the short term, a divided real estate market may present itself. In addition, keep in mind that each city has its own real estate market that varies.

Current data being reported in the media shows people leaving larger coastal cities and going to smaller inland cities. For example, Californians have been moving out of California to places like Washington, Arizona and Texas in record numbers. This is not a new phenomenon and the trend appears to be gaining speed.

As a result, larger coastal cities like Los Angeles and New York City are seeing reductions in demand for real estate as residents leave the cities permanently. In turn, smaller cities like Phoenix and Las Vegas are experiencing higher demand for real estate as residents move in from the coastal cities.

It appears that in the short term, cities where people are moving to (like Las Vegas) may see higher prices during the coming real estate bubble deflation. The worst-case scenario for cities receiving the influx of those moving from elsewhere would be that property values would remain steady.

Juxtaposed to this phenomenon, larger cities are seeing an increase in available real estate, causing supply to outpace demand. As a result, prices are already dipping lower in cities seeing a mass exodus.

Are You in a Growing or Shrinking Real Estate Market?

The lesson here is that in order to make logical real estate market predictions for your home market, determine whether you are in an area where people are moving to or from. For example, if you live in Phoenix, Arizona, you are probably in a strong market that is attracting Californians. As a result, prices will likely be stable or even positive in the near term.

Now, one other caveat to consider is the state of the economy currently. Unfortunately, unemployment rates are high the US. Higher unemployment rates are negative for home buyers and are typically seen as a harbinger for decreased demand. As a result, unemployment may cause a decline in home buying nationwide. But we still haven’t answered the question of where the best place to buy rental property might be. Let’s take a closer look at demographics.

Demographic Changes

In “The Demographic Cliff” by Harry Dent, it is noted that the baby boomer generation (“Boomers”), those born between approximately 1946-1964, are retiring now. As a result, these baby boomers will be down-sizing from larger homes to smaller homes and buying vacation homes.

Prior to the COVID-19 Pandemic people were already beginning to shift in where they lived and how they lived. Now, the changes in living patterns and demographics have been accelerated. In general, more people will move out of bigger cities and move to areas with less dense populations. For example, people are moving out of cities like Los Angeles and moving to places like Idaho. Obviously, when considering why Airbnb is successful, purchasing property in expanding markets like Idaho may improve your long-term returns on the investment.

Individuals are selling expensive homes and flats and buying more affordable properties to replace the high priced, big city real estate. Boomers are selling their large family homes and moving into smaller, more affordable homes.

Rental Properties Become Airbnb Properties

How to Invest and Acquire Airbnb Rental Properties

You may be wondering how the big real estate investors acquire so many properties in just a few years. Well, the secret to buying more investment properties is using the “BRRRR” strategy. So, what is BRRRR and how will it help in buying more investment houses?

The BRRRR Real Estate Strategy for Real Estate Passive Income

“BRRRR” stands for buy, rehab, rent, refinance and repeat. The BRRRR investment strategy has been very effective for successful real estate investors. It allows investors to build a portfolio of investment properties quickly. In addition, it requires using less personal capital. Let’s breakdown this step-wise process to understand the details and the order of this strategy.

Step 1: Buy Real Estate Investment Properties

Buy Undervalued Properties and Calculate Profitability Before Jumping In

Once you have determined that you want to focus on Airbnb passive income, such as cabins, lake homes or tiny houses, it’s time to buy. First, you will want to search for real estate passive income via undervalued or significantly discounted properties. Many investors credit their profit margins to buying investment houses at prices that are significantly below the potential market value.

Next, after screening properties, you must do some calculations. One calculation that can help determine whether the real estate passive income you have chosen is profitable is the After-Repair Value (ARV). This will tell you what the potential investment property is worth after it has been rehabbed. If the cost to rehab a home is too high, profitability can be an issue. In turn, this can jeopardize your BRRRR strategy.

Finally, you will want to conduct a rental analysis. A rental analysis is a process of determining how much rental income the property is capable of generating. You will use this value in your overall profitability calculation for the deal.

Some other considerations: Don’t forget to include costs such as closing costs, rehab costs and the amount of cash that you will put down for financing. Many investors expect to use 20% down for investment houses. Clearly the BRRRR method is a great way for why Airbnb is successful.

Step 2: Rehab Investment Property

The next step in the BRRRR process is to begin repairing and renovating (rehabbing) the real estate passive income investment property. The object of the rehab is to quickly conduct repairs that will make the home appealing, safe and add value to the property. In addition, you want to rehab the property as quickly as possible. Furthermore, the quicker the process of rehab is complete, the quicker you can begin earning money from rental income.

Step 3: Rent Investment Property

After completion of the property rehab, it’s time to find tenants for your property. Good tenants will consistently provide income (in the form of rent), for your airbnb property and for your investment. Furthermore, a good renter will take care of your property and not allow it to be damaged. The easy part to this formula is simply listing the property for rent on the Airbnb website. You may also want to find a management company to handle the maintenance and cleaning of your units.

Step 4: Refinance Your Investment Property Challenges of Working with Lenders, Obtaining Financing and Economic Cycles

real estate market predictionThe third “R” in the BRRRR process is refinance. After rehabbing the property and finding a renter, you can begin to look for a lender. The refinancing process means you will be working with a bank to borrow money based upon the remaining equity in the property. However, there are several things to know about refinancing real estate.

First, banks typically only lend approximately 75% or less of the appraised value of the property in a cash-out refinance. The lender will consider your credit score when determining whether to lend money to you. In addition, you may need to demonstrate that the property is generating rental income and is legitimately appraised at the value you say it’s worth.

Dealing with banks can be a slow, frustrating process. Keep in mind that banks only lend money in situations where they feel that the money is secure. Furthermore, they don’t want to lose money or lend too much money out for an overvalued property. In addition, economic cycles can change factors such as interest rates and credit flow. For example, after the 2008 housing crisis, it was very difficult to obtain a loan from banks and the BRRRR method was not smooth.

Step 5: Repeat the Process

If everything lines up correctly, the BRRRR method will be a success. You will find an undervalued property, buy the property, rehab and rent it and then obtain financing that you can use to buy the next property. You can then repeat the process of acquiring investment Airbnb properties. If the BRRRR method is successful, you will be generating a net profit each month.

Getting Started with Real Estate Passive Income

Buy Where There is Growth and Population Movement – The South and West United States

One rule that smart real estate investors use is to buy properties where populations are growing. Population growth and population movement tend to drive prices up in real estate markets. Basic economics tells us that when there are more people demanding housing, supply cannot keep up with demand. As a result, prices go up, which is good for landlords.

For many years, there has been growth in the South and Western United States. For example, a United States Census Bureau 2019 Article states that of the 15 cities in the US with the most growth, eight of them were in the South, six were in the West and one in the Midwest. Popular cities include places like Phoenix, Arizona, San Antonio, Texas and Jacksonville, Florida.

Special Attractions, Natural Features and A Quiet Place in Nature

Another consideration when finding successful Airbnb properties is area usage. Look for properties that offer a special experience for renters. For example, a property on a lake or river, a cabin with a great view, specially designed units (like a yurt or temporary structure). If it’s normal and boring, adventurous travelers will pass it over.

A second consideration when understanding why Airbnb is successful is understanding regional and area attractions. Travelers are more likely to want to stay in a home that is near special attractions, than in areas with no attractions. Examples of attractions include things like national parks, special events, monuments, seasonal events, vacation locations (like Disneyland), etc. Even offering small events in your area like farmers markets can improve traffic from travelers. Remember, adventurous travelers are searching for an exciting new experience. Many travelers are escaping hectic, noisy city life and just want to find a quiet place to relax and enjoy nature.

Why Airbnb is Successful Wrap Up

Hopefully this article has helped you understand why Airbnb is successful, as well as how to generate passive income from rental properties. Buying real estate to generate passive income as an investment can be a great opportunity for generating wealth for many years. Using the BRRRR method for acquiring investment properties is a proven strategy for success in generating passive income. Furthermore, now is a great time to invest in Airbnb properties because they are in high demand by young travelers.

Read More:

What is Virtual Wholesaling Real Estate?

Best Place to Buy Rental Property

Why Saving Money is Important

Investment Houses

Investing in Commercial Property

Home Buying Power

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.

Leave a Reply