The two most popular strategies when renting property are Airbnb and good ol’ renting. This debate has been going on for as long as Airbnb exists. Since the business’ inception in 2008, it emerges as a viable investment strategy for real estate enthusiasts.
According to The Zebra, Airbnb operates in more than 200 countries and has more than 150 million active members – both hosts and users.
Airbnb provides a service to both landlords and people looking to rent properties. While the main user base of Airbnb are travelers, that doesn’t mean you can’t rent a property through Airbnb for other means different than traveling.
If you’re a landlord that is at odds with what to do, then allow us to settle the debate once and for all.
Examining Both Models
The debate largely revolves around what strategy gives landlords a better ROI (return of investment). To determine that, we have to look at what both options offer to landlords.
Most of the users on Airbnb look to rent properties in the short term. This means anything from a few days to a few weeks. In the most extreme cases, users will be interested in renting the property for a few months – but that rarely happens.
Traditional renting is different. While you could very easily allow tenants to rent it for a month, most landlords are interested in long-term renting – six months or more. So from the very beginning, both strategies operate on a different time model.
So the first thing you need to do is determine what model works better for you. Both come with their own sets of pros and cons, so let’s look at what they are.
The first thing to look at is pricing. Traditional renting ensures, to some degree, a steady income thanks to a thing called “lease agreement”. This means you agree with tenants on price and they’re obligated to pay it each month or every two weeks – depending on the lease agreement.
Airbnb, on the other hand, allows you to be more flexible with pricing. With this model, you can demand different prices based on many factors like time of the year, demand, day of the week, and more.
So when it comes to pricing, traditional renting is fixed while Airbnb is flexible.
Airbnb is a service that expects a certain level of professionalism from its hosts (the landlords). Hosts are expected to keep their properties fully furnished and stocked with the necessary appliances, tools, etc. That means to become a host on Airbnb, you do have some upfront expenses. More so, you’re supposed to maintain the property, meaning there are plenty of ongoing expenses.
Traditional renting is a different type of beast. You don’t have to keep the property furnished nor do you need to regularly restock certain items. This means apart from some expenses, you don’t have to furnish the property at all. You will have to maintain it but the tenants can do that as well.
If there’s an emergency, you will have to deal with it. So, let’s compare what sort of expenses both models come with.
Airbnb expects you to pay for high-quality furniture, decor, bedding, towels, kitchen utensils, Wi-Fi, TV, internet, utilities, cleaning service, and more.
Traditional renting expects you to pay for expenses such as water, sewage, garden maintenance, and trash removal.
In both cases, you do have to get the property rent-ready.
This is a very important factor that oftentimes tells you what model to go with. There will always be a demand for both short-term and long-term renting.
With Airbnb, there is more demand during the high season and less demand during the low season. But what that allows you is to drive prices when demand for your property is high. With traditional renting, the demand is evenly spread out. But what you can’t do is drive prices.
With Airbnb, you need to receive a few five-star reviews before more people decide to rent your property. This isn’t difficult to do as all you need to do is to be honest with your guests and provide a quality service. In most cases, you might need to offer a discount so that your property goes in demand on the platform.
The last thing we’ll briefly talk about is the potential to maximize income. With Airbnb, you can charge more and offer extra services to your guests. This will help you generate more income if occupancy rate is constantly maximized. If you’re having periods where no one is renting out your Airbnb listing, then you’re not maximizing your income.
The same can be said about traditional renting. In both cases, you want to minimize tenant turnover.