Airbnb and traditional rental properties have long battled for which holds the best investment strategy. When delving into a rental investment, you would want to put them side by side and see which would best suit you, your investment, and your situation best. As an investor, you have to compare the income generated, expenses, and maintenance among other things when deciding which to invest in. As Airbnb and traditional rental share the sole similarity of being real estate investments, we’ll unfold their differences in this post.
Income and pricing
Due to the difference in the rental agreement length, the prices of each rental differ. The duration at which a person stays in an Airbnb is significantly shorter than that of traditional rentals. Guests and hosts are protected financially in Airbnb because the guests would have to have a certain amount of money in their bank accounts before lodging, this money will then be transferred directly to the host when guests check-in. In this case, the rights of both parties are secure. Traditional rental, on the other hand, requires the landlord to constantly check in with the tenant when the rent is due.
In contrast to traditional rentals, income from Airbnb is not as steady. This is where things might get tricky when comparing income. You could have a ton of reservations one month but barely get any the next while traditional rental offers a steadier and more secure flow of income. Airbnb also gets extra income from cleaning fees as opposed to traditional rental. Cleaning fees are often a requirement from hosts.
Airbnb and traditional rental vary in expenses due to their various differences. There are things Airbnb hosts have to take care of that a traditional rental landlord never has to worry about and vice versa. The following list shows how the two services differ in their expenses.
- Maintenance: Airbnb requires constant maintenance because new guests are regularly moving in. Apart from fixing some broken appliances, you would also have to consider the cost incurred to wash sheets, provide fresh towels, clean the house and give the house a hotel-like feel. If you’re someone who owns multiple Airbnb or Vrbo properties, utilising a service like Lodgable would be helpful – it is an all in one software that has everything a property manager needs in one place, reducing cost and an increase of revenue. However, traditional rental maintenance can in some cases actually occur more often and is mostly needed for fixing things around the house. A tenant will spend more time using appliances and furniture than the average guest will.
- Taxes: Apart from federal and state income tax, occupancy tax is also required for Airbnb as opposed to traditional rental.
- Insurance: Landlords of traditional rental often require a security deposit. But Airbnb hosts do not always require this because they might not physically see their guests all the time. Airbnb also provides “Host Protection Insurance” that provides coverage of $1 million for bodily injury or property damage.
Due to the large number of guests Airbnb has garnered, it is more competitive than traditional rental because everyone is fighting for as many bookings as possible. Further more, if you’re someone who owns or manages a lot of vacation rentals and second homes then make sure you leverage marketing and management software to succeed.
Investing in Airbnb and traditional rental requires lots of consideration as they both have different nature, policies, management, and income. They both offer a tonne of advantages which is why careful thought is required before investing.