The dispute between Airbnb and renting is a hot topic of conversation among real estate investors, and for a good reason. According to VRM Intel, 45% of investment property purchasers purchased a home to rent it out rather than sell it. Airbnb is all about the aggregator model that follows the strategy of playing a mediator between the hosts and travelers. We have explained the Airbnb business model in detail. However, given that short-term rentals do not provide the same level of revenue as long-term rentals, are the risks worth it?
Airbnb vs. Renting: Advantages and Disadvantages
- Increased Opportunity to Maximize Your Income
Because you will be renting your home at a higher nightly fee, you will be able to earn more money as long as you maintain a high occupancy rate. Additionally, you may offer other services to your Airbnb visitors, which can help you create additional revenue in addition to the rental income.
- Absence of a lease agreement
A leasing agreement is not required. You have your own home regulations, and Airbnb has its own restrictions to protect hosts. If a visitor violates your home regulations, you may contact Airbnb promptly. Additionally, you may choose a rental agreement to ensure your safety.
- Increased Pricing Flexibility
Every day, hosts have the option of adjusting their costs in response to several criteria. You may offer discounts for extended reservations or midweek stays, for example.
Likewise, the converse is true. You may charge a premium for weekend reservations. This implies that you may have two (or more) different pricing sets to meet current demand.
- Host Protection (AirCover)
The AirCover is an excellent bonus since it provides up to $1 million in security. Additionally, Airbnb’s review system protects hosts. By reading the evaluations left by other guests, you can better understand what to anticipate.
Disadvantages of Airbnb
The risk of damage is greater than with a typical rental. While most reservations are without incident, some visitors book only via Airbnb, intending to exploit your house as a party location.
Consequently, many hosts worry more about damage to their house while renting it out through Airbnb than renting. However, since you will be renting your home for shorter periods, you will have more opportunities to inspect it.
- Inconsistent Income
Contrary to popular belief, you will not be able to rent out your house every day of the year. Indeed, you will appreciate it that way (hosting so many different guests can take its emotional toll). You may be entirely booked for one month, whereas the next month, you may only get one booking.
Typically, your income will fluctuate seasonally. Your location, attractions, and events all contribute significantly to your occupancy.
Additionally, some cities have restrictions on the number of days you may rent out your Airbnb. As a result, you may be required to block off certain days.
- Increased Expenses
You will need to fully furnish your property and put time into an appealing interior design. Following each booking, you’ll need to clean your home, replenish some things, and maybe repair broken or non-functioning objects.
- Added Fuss
To be a successful Airbnb host, you must promote your home well. This will need you to take high-quality images and update them often to reflect the season, create compelling property descriptions, and respond to guest evaluations. Additionally, you have the added strain of ensuring that your house is perfectly prepared for each visitor. With a far greater turnover rate, this equates to much more work. In a nutshell, it’s much more than being a landlord!
- Consistent Income
The primary advantage of conventional renting is the assurance that your home will be occupied for an extended time. This ensures that you know the amount of rental money you will get at the end of each month.
- Reduced Turnover of Guests
Reduced visitor turnover equates to reduced effort. You will spend substantially less time cleaning and maintaining your house.
Disadvantages of Renting
- Limited Flexibility
Not only do you lose price freedom, but you also lose the ability to make your item temporarily inaccessible. This implies that you cannot rent your house on a “part-time” basis under conventional renting. For example, with Airbnb, you may rent out your house solely on weekends, but this is not possible with regular renting.
- Less Opportunity to Increase Your Income
Additionally, you must monitor your long-term renters to verify they are paying their monthly rent on schedule. Even missing one month’s payment might have a significant effect on your revenue. Additionally, depending on your region and local rental rules, it may be difficult to establish adequate grounds for eviction. Additionally, if they vacate the premises, it may take time to locate a replacement renter. In comparison, Airbnb asks customers to pay the whole sum in advance.
- Adherence to a Lease Agreement
Before the rental period begins, you and your visitor should sign a long-term lease agreement. This implies that you cannot adjust the rental price in response to market conditions or introduce new restrictions before the rental term expires.
Consider the Following When Comparing Airbnb to Renting
When selecting between regular rental and Airbnb, keep the following aspects in mind:
1. The Location of Your Property
What contributes to its popularity? It’s straightforward; there must be a cause for people to come to your area. If you choose short-term rentals, you will only achieve high occupancy rates if your property is in an excellent location. Alternatively, if your resort is not located in a large city or popular tourist area, it must provide something distinctive.
2. Local Statutes and Ordinances
Conventional renting will be the prudent course of action in cities with very severe short-term rental regulations. Additionally, you must research to see any additional requirements, such as permits or limitations on the number of nights. These may seem trivial, but they may significantly impact your rental earning potential.
Indeed, in certain locations, short-term rentals are completely illegal. As a result, you may not even have the choice of Airbnb vs. renting.
3. The Maximum Profit Potential You Could Achieve
Airbnb, on average, generates a greater nightly fee than a conventional rental. Some hosts have reported earning up to three times what they would have earned via regular renting. That is if Airbnb has a high occupancy rate.
There is no apparent victor when it comes to Airbnb vs. renting. Airbnb has the potential to increase rental revenue. However, this comes with a cost. Hosts must guarantee that their investment property is desirable, which may require more upfront expenses.
Even if you own a beachfront home, you will only produce more cash if you go the extra mile. This requires marketing your home, ensuring that you acquire a sufficient number of five-star ratings, and implementing an effective pricing plan. Without the desire to put in additional effort and patience while building your reputation (which might take time), conventional renting will be the most advantageous rental plan for you.