App based businesses are taking the world and smartphones by storm. Apps like Uber have revolutionized the way we travel across big cities by using GPS based car requests on smartphones. Overnight, individuals with their own car could apply to be an Uber driver, and just like that, these drivers had a great money-making opportunity in the palms of their hands. Uber was just the beginning.
Now, the self driven app based entrepreneurship has made its way to the real-estate market in the form of Airbnb. Airbnb, like Uber, is an app based service that allows its users to rent out spare bedrooms, couches, and properties built to specifically take advantage of the new service. Airbnbis flexible, able to conform to whatever rental operation an individual wants to provide for their tenants. With the rise in popularity from the app, there is also an air of curiosity. The circling question is: does it make sense to convert a traditional rental property into one that caters to airbnb users?
Who Uses Airbnb & Why?
Airbnb has quickly become the go-to alternatives to hotels that can even be much more affordable and especially more accommodating than your run-of-the-mill motel. The people most likely to use an Airbnb services are vacationers, travelers, and people on business trips. Ultimately, people looking for short term stays but also looking for something different than your standard hotel stay.
The Airbnb experiences your tenants have are entirely up to you. If you have a pool, WiFi, video games, cable, etc, it is at your discretion to allow your tenants to enjoy these amenities. If you wanted, you could even provide a home cooked meal or brunch. The services that you have to offer is what will separate you from others in your area who are offering similar services.
Location Location Location!
The successof your rental properties, especially an Airbnb property, all depends on location. It does not matter what kind of services and amenities you can provide; if you are in an undesirable location, nobody is going to frequent your property. This is where the conversion of traditional rentals to Airbnb comes into play.
If your rental property exists in a rural area, with no state parks, attractions, etc, and you have steady long term tenants, there is no use in kicking them out and converting your property into an Airbnb. This is simply because you will not get any tenants to stay, and if you do, they will be few and far between.
However, if your property is located in a large city, near a national park, or another attraction, like a popular beach, then converting your property to an Airbnb unit starts to make more sense. This is because these locations have the attractions vacationers or travelers are seeking, restaurants, and shopping venues.
Converting Your Property to Airbnb
Fortunately, the “conversion” of your property is going to be more about logistics than a complete overhaul. What is going to have to change is how you manage your properties. What is going to change is your rental rates, maintenance, and recruitment. In terms of rental rates, you are now considering pricing no longer based on long term stays, but the short term. If your property is in the city, you need to consider keeping your pricing competitive because you want your potential tenants to choose you over a hotel, but expect accommodations that are superior to those of a motel.
A quick check of local hotel and motel prices should provide you with an acceptable median price, and then you can adjust that price accordingly considering the accommodations you will provide your tenants. This includes cable, high speed internet, food, drinks, and hospitality services. Speaking of hospitality services, before, when your property was inhabited by long term tenants, you did not have to worry about cleaning up after them on a regular basis. Now that the stays are much shorter, the maintenance falls on your shoulders. You have got to clean up after Monday’s stay to prepare for Tuesday. That means everyday there needs to be fresh sheets and a clean room awaiting all of your tenants staying the night. Unfortunately, that list of duties extends in length the more amenities you offer. If you have not guessed, this means maintaining your property will be a more hands on affair, meaning you may need some help managing it all.
So Does it Make Sense?
The case for you to convert your traditional rental into an Airbnb property is varied and depends on different variables. Your return on investment greatly depends on what your property has to offer and how you manage your properties.
Say you have a beach property that you have been leasing out for a year at a time. The rent you charge is $1,000 a month. Now, say you convert your property into an Airbnb, and you charge $180 a night. On an average week, your property is not vacant four nights a week. That means you are, on average, making $720 weekly and $2,880 monthly. Congratulations! You have more than doubled your revenue, but do not get too excited yet! Since you are dealing with short term stays, the utilities also fall on you. Water, electricity, internet, and cable are now factored into your expenses if you provide those amenities.
After you have factored in those costs and you still come out ahead and have the means to take on a more hands on real-estate experience, then by all means start your conversion. The conversion to Airbnb is not as easy as just installing the app on your iPhone. The operation can be entirely different from a traditional rental, and you need to know what you are getting into. it mostly means more costs for you to swallow and a higher investment of your time. So you tell me if Airbnb makes sense for you.