Airbnb Investment Guide

Posted by Hannah Lapin on Jul 8, 2024 1:52:33 PM

airbnb guideThe travel industry provides an excellent source of income for savvy real estate investors. Short-term rentals typically cost more per night than long-term conventional rental properties, so owners can make more money.

In particular, an Airbnb investment property could be the perfect asset in your investment portfolio. Airbnb is one of the largest hospitality brands in the world, with over 7 million active listings available in 220 countries. Property owners can take advantage of this service to generate consistent income from their Airbnb investments.

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What Is an Airbnb Investment Property?

Airbnb is a property rental company. People who are looking for places to stay outside of hotels when they travel can connect with Airbnb hosts who own properties that are available to rent. If you own an Airbnb investment property, Airbnb’s platform makes it easier to find short-term visitors who are traveling in the area. 

How Does an Airbnb Rental Property Work?

An Airbnb investment is fairly simple. As an investor, you own a property or unit that you renovate, clean, and prepare for guests. You then apply to become an Airbnb host and must follow all the company regulations.

In return, the platform will list your property for travelers to find. These short-term guests pay a nightly rate to reside in your unit. Airbnb will take a small percentage of your booking revenue, and the rest will go to you. 

Pros and Cons of Owning an Airbnb Rental

An Airbnb investment might sound like one of the most profitable strategies to increase your income, but it is not for everyone. It is certainly not a form of passive income unless you hire multiple contractors or a property management company to handle some of the logistics. Here are a few of the pros and cons of owning an Airbnb property.  


  • Potential for significant profits
  • Operating like a business owner
  • Not locked into long-term tenant contracts
  • More flexible than a conventional rental property
  • Less of a marketing burden



  • More work and costs on the front end to get started
  • Bad tenants can leave messes or damage behind
  • Maintaining very good reviews is difficult and impacts the property’s listing
  • Lots of hard work to manage the investment


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Airbnb Rental Property vs Conventional Rentals

An Airbnb property is very different from a conventional investment rental property. The path you choose should be based on your objectives for this investment.

For example, an Airbnb property usually houses short-term guests. Your tenants could be people going on vacation, business travelers, or parents of a college student who is graduating from a nearby university. A conventional rental property, on the other hand, usually secures tenants for longer periods, such as six months, a year, or more.

Another difference is the amount of money you can make. Conventional rental properties typically have rates that are comparable to mortgages in the area. Since an Airbnb property has much shorter booking periods, you can charge a higher nightly rate. 



How to Invest in Airbnb Rentals

Vacation rental properties can be incredibly lucrative for investors who know what they are doing. With Airbnb services on your side, marketing becomes much easier, and there is a set structure for managing your property. If you are interested in getting started with these vacation rentals, there are some steps you must follow. 

Find the Best Location to Invest

Location is everything for Airbnb real estate investing. If you find a property in a difficult real estate market, it may be hard to find tenants for your unit, which will result in low-income opportunities. When searching for a desirable location, try to consider many factors.

Is it a state that is a popular tourist destination? Are there nearby community amenities in the city that guests will enjoy? Is the neighborhood filled with high-value properties? The most successful Airbnb properties are found in desirable locations.

Top 5 Locations in the USA

If you want to run a profitable Airbnb business, some locations are better than others. The US has many markets where Airbnb investors can generate a lot of passive income based on the rates in the area and the popularity of the destination. The top five Airbnb locations for investors, according to projections, are:

  • Charleston, South Carolina
  • The Poconos, Pennsylvania
  • Slidell, Louisiana
  • Chattanooga, Tennessee
  • Savannah, Georgia

Other popular and profitable locations include Maui, HI; Crystal River, FL; Joshua Tree, CA; and Key West, FL. 


Select a Type of Airbnb Rental Property

Now you need to figure out what kind of investment property you will offer to guests. There are four main categories of Airbnb properties to choose from: entire places, private rooms, hotel rooms, and shared rooms.

Airbnb rentals are diverse in contrast to most offerings that hotels have. You could invest in an entire property to offer your guests or even a separate living space in your home. Making your investment property family-friendly is a great strategy for attracting the right kinds of guests.

Analyze the Market

Similar to choosing the right location, analyzing the target market is critical for Airbnb investing. During this stage, a real estate agent can be your best friend. They can help you understand the local market and what prices are fair for certain properties.

You should also research rental rates for similar properties in the same Airbnb market. Looking up the values of nearby properties in the neighborhood can also give you a picture of a fair deal for your property.

Before you invest in any property, make sure you pay for a professional inspection. This process will reveal any significant maintenance or repair needs that could affect the value of the property, ensuring you don’t waste money on a bad investment that requires a lot of repairs. Also, confirm that the given area allows short-term renting.

Consider Your Budget

Coming up with a budget is necessary for an Airbnb investment property. You should take a hard look at your finances and calculate what kind of down payment and mortgage payments you can afford in the future. Skipping this step could get you in over your head once you own the investment property, especially if you have trouble finding tenants early on.

Other important factors to look at when planning your budget include maintenance costs, cleaning services, repairs, utilities, security, HOA fees, insurance costs, furnishing, and decor. 

Choose an Airbnb Rental Financing Option

Part of your budgeting plan should involve finding a financing solution for your investment property. Buying Airbnb rentals usually requires extra funding upfront because people do not have that kind of money saved.

To afford the Airbnb property investment, you may need to take out a loan. There are multiple loan options for vacation properties, including DSCR loans, traditional home loans, and home equity lines of credit. Research the options to determine your best path to financing a real estate investment.



Q: Is buying an Airbnb property worth it for real estate investors?

A: If you know what you are doing, then absolutely. Savvy investors know how to research markets, choose a good location, evaluate property values, and prepare their rentals for guests. Since an Airbnb property gets an extra marketing boost through this massive travel service, a solid investment can yield immense profits for the investor. 

Q: Do Airbnb properties have a good ROI?

A: ROI depends on several factors, including location, local rental rates, and occupancy rates. However, if you can secure a good deal for the property and keep the property filled with guests, then the potential ROI can be very high. Although there are higher upfront costs for Airbnb rentals, you can generate plenty of income once you are up and running. 

Q: What is Airbnb arbitrage?

A: Rental arbitrage is a strategy by which long-term tenants turn their units around into short-term rentals. Since long-term rental rates are much cheaper on a per-night basis than vacation rates, they can generate income for the initial renter as well as the owner of the property. What does that mean for an Airbnb property?

For example, you may rent a one-bedroom apartment unit in a desirable location. If the landlord agrees, you can rent out that apartment as an Airbnb property to short-term guests for Airbnb’s nightly rate, which is higher. You would make enough to cover your own rental payments and then some while the landlord still makes money from you paying the rent. 

Q: What type of property do you buy for an Airbnb investment?

A: As mentioned previously, there are several options for Airbnb rentals. You could invest in an entire home or private property for your guests. You could turn part of your current home into a separate living space.

Perhaps you buy a condo unit in a complex or a shared-room property. Airbnb rentals offer many options for traveling guests, so the type of property that works best will depend on the kind of rental business you want to run.


Topics: Real Estate Investing

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