So you’re ready to buy an Airbnb property. Whether it's your first or first of many, the world of short-term lets, holiday homes and serviced accommodation is a wonderful way to make extra income, and you can even make a business empire from it if you so desire. Further, it’s a great chance to meet people from all over the world, and design an experience so they feel at home in your property. It's the business of hospitality.
That said, it is a unique asset class and there are specific things you must consider when deciding which one to purchase. To help you, we've summarised the top 12 things every investor must consider when buying an Airbnb property and holiday home in 2023.
The 12 point checklist for buying an Airbnb investment property
1. Airbnb legal permissions
This is number 1 for a crucial reason. Make sure your property has the relevant permissions for you to rent it out some or all of the year to regular short term guests. If not, you could be going against the law. While this could be around city and regional restrictions of renting out an Airbnb (e.g. London's 90 day rule, see point 3 below), it's more often about the property you own and the covenants of any building freeholder and mortgage provider. We wrote a more in depth guide about the UK regulations for Airbnb including what to watch out for in the leasehold agreements when buying the property.
There is an easy tip to solve this blocker: buy an active Airbnb that already has trading history with relevant permissions. On the Airbuy & Sell marketplace, you can narrow down your search to active short term rentals and Airbnbs, making the process easy for you to find these hot investment properties. Furthermore, many flats and serviced apartments for sale on the plaform now show whether there are other short term lets and Airbnbs in the building, so again you have a good indicator that your target property has the relevant legal Airbnb permissions.
2. Airbnb location, location, location
Here, you should consider what the serviced accommodation community often refer to as the golden triangle of tourism, business and universities/higher education. If your area is pulling in people for all of these reasons, you will be attracting guests all year round. And nothing beats actually staying in the street / area itself - check out the competition, grab a coffee and walk around the neighbourhood, and ultimately make sure it feels right for your purpose.
3. Short term rental compliance with Local Authority guidelines
Research the specific area you are interested in buying your Airbnb in to learn about the dos and donts of short term lets. Even in the UK, specific cities and countries can have very different rules, mostly around restrictions on the number of days the property can be let out and having a license to do so. Airbnb has a great page on responsible hosting including the different city and regional short term rental regulations to comply with.
Most commonly, you will need to raise a mortgage from the bank for this. Getting a mortgage for this type of investment property is not as complicated as you may think, and you can easily get expert advice from a mortgage broker. Typically, a Holiday Let mortgage is the most suitable but there may also be BTL mortgages that could work as well as Residential if you are planning on staying in the property and only renting certain rooms out.
You can arrange a mortgage for your property by contacting one or more of the holiday let mortgage broker partners we have listed on our site, but in the meantime you may want to learn more detail about the different products at the link in the sub-heading.
5. Renovate or buy a turnkey Airbnb property
Are you looking to buy a property, renovate it and fit it out? Or are you looking to start earning from the property immediately via buying an existing trading Airbnb? Perhaps you're wondering why this in the checklist for buying an Airbnb investment property.
The former is where the bargains are to be had but it’s time and capital intensive. You will have to consider funds for both the purchase and the refurb immediately after. The latter - known as a turnkey investment - means you can hit the ground running with less upfront expenditure albeit often for a higher price and higher finance obligations. However, buying turnkey also means that you have the historic data of the property as a short-term rental with confirmation that the property has the permissions to be run as an Airbnb.
Knowing what you want will help you find the right property sooner.
6. How much could this property earn as an Airbnb?
The classic question. Luckily, understanding the potential nightly rate of an Airbnb can be easily obtained from sites such as AirDNA. The other way is to see what properties in the area are actually pulling in from marketplaces such as Airbnb and Booking.com - be sure to check weekday vs weekend rates, as well as at different times of year. You can also look at the calendars of these properties to get an idea of their occupancy. If you buy an existing holiday home or Airbnb, remember that you’ll have the historic data from the seller to make sense of before purchase.
7. Investment yield of the Airbnb purchase
This leads us onto the annual return on your Airbnb investment. Use this simple method to calculate your airbnb investment yield. First, take the property's likely revenue (using average price and average occupancy rate). Next, estimate your Airbnb's operations costs – a typical amount for this in the region of 40% of the total revenue, however you should obtain quotations where possible to get a more accurate figure. This should cover aspects such as management, cleaning, linen, maintenance, supplies, software, and utilities (see below for a more detailed breakdown). You can then calculate the likely net annual income by deducting the costs from your annual revenue, and the net income as a proportion of the total investment gives you your yield. This is helpful to compare different properties and, as investors in this space, we generally think yields above 10% make for a healthy investment.
Check out our article where we provide a breakdown of the typical Airbnb costs so you can better estimate your own likely profit margin and yield for different properties.
8. Property management and cleaning
The main question for you here is to do it yourself, outsource it or the best of both worlds? If it’s just a spare room in your own property that you want to rent out from time to time, you can probably get away with maintaining it and cleaning it yourself as well as managing the guests on the booking platform. If you have more than 1 property or don’t have the time to do this, it may be time to consider the plethora of Airbnb/serviced accommodation management companies – please get in contact if you would like a recommendation for the best in your local area.
9. Maintenance
If you're using an all-in-one Airbnb property management service then you won't need to worry about this, however if you're doing the maintenance yourself you will want to ensure that you set the property up in a way that it can be maintained easily by ensuring high quality appliances and durable furnishings.
10. Short term rental booking websites
Airbnb has become the synonymous catch-all term for the short term rental industry but you should consider the different ways to attract guests. Different booking platforms have different service fees and charges, and they can also be targeted at different markets. You can also use a channel manager service like TravelNest who will help you advertise your property across 30+ platforms. Research this to ensure you get the types of guests you want for your property and that the costs of using the marketplaces go into your calculation of yield. If you’re more established, you can even consider direct bookings and creating your own branded platform/website - there’s a whole load of benefits to this approach but it can take time to build that following.
11. Design of your Airbnb
Following on from the types of guests you want to attract, how you design the property and market it will have a huge bearing. A family of 4 is likely searching for a different type of property to the backpacking traveller. Reflect this in how you furnish your Airbnb, describe it on the marketplace and of course in the pictures.
12. Why are you doing this, Airbnb investor?
Last and by no means least. What is your why? This is the most important question to consider. Is it to maximise the investment? Is it to rent spare rooms every once in a while and host travellers? Is it passive income to support another occupation? There are lots of reasons to buy an Airbnb property and your reason(s) will then dictate so much of the above. From deciding the area, the type of property, whether a management company becomes worthwhile etc, the great thing about this investment and this business is that it can truly be tailored to what you want to get from it.
Ready to make the plunge and buy an Airbnb? Head over to the Airbuy and Sell marketplace now where you can find both active Airbnbs for sale as well as potential properties that would be great short-term rental / serviced accommodation investments.