Airbnb Real Estate Investing: 6 Pros and Cons

Airbnb Real Estate Investing: 6 Pros and Cons

4 min read
Scott Smith

Scott Royal Smith is an asset protection attorney and long-time real estate investor. His law firm, Royal Legal Solutions, helps thousands of real estate investors and entrepreneurs in all 50 states protect more than $1.2 billion in assets. Since 2014, he has published over 1,000 posts and articles on BiggerPockets and has appeared on hundreds of podcasts.

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Scott fell in love with real estate when his commercial property investment allowed him to graduate from Albany Law School debt-free. He immediately began practicing at the trial and appellate court with the district attorney, placing him in the top 1 percent of lawsuit attorneys in the county in terms of professional experiences. He also worked in private practice, suing insurance companies for denying valid claims (which is surprisingly common!).

After his friend lost $3 million in real estate from a single lawsuit, despite having ample insurance, Scott dedicated himself to educating real estate investors on the importance of affordable asset protection, specifically when it comes to folk knowledge and misconceptions that still exist in the investment and legal community. The solutions Scott recommends for his clients are the same ones he originally created for himself and has been refining on his mission to help people protect themselves from frivolous lawsuits.

Follow Scott as he deconstructs the litigation game and shows you how to free your time, protect your assets, and create wealth that lasts for generations.

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Scott regularly appears on shows with folks like Grant Cardone, BiggerPockets, Entrepreneurs on Fire, Wheelbarrow Profits, and his own real estate investing podcast. He frequently interviews industry experts on his Facebook and YouTube accounts and has published thousands of posts and articles on BiggerPockets and his blog for real estate investors.

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Scott graduated from Albany Law in 2014.

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He has passed both the Texas and New York bar exams.

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Airbnb has been the poster child for “disruptive innovation” since it was founded in 2008. The online marketplace has made it easier for many property owners to rent out spare rooms and make some extra money when long-term tenants were nowhere to be found. Today, 2 million people stay in an Airbnb on any given night.

Plenty of real estate investors have made the move from traditional leasing to Airbnb. But this move may not be right for everyone—there are a variety of risks, costs, and rewards that come with using this platform.

If you’re interested in working with Airbnb, you’ll need to do your homework to make sure the work is worthy of your time, money, and energy.  There are plenty of pros and cons to listing an Airbnb real estate investment—weigh them equally before you make the move.

nicely decorated bedroom with big windows and open curtains

Pro: The Potential to Make More Money

Let’s say you have a property in Austin, where renting out a two-bedroom house could generate up to $2,500 each month. Renting out that entire home on Airbnb could easily net between $70 and $200 each night. (And I’m talking about any old night—not a night during SXSW, ACL, New Year’s Eve…)

It could take less than two weeks to make $2,500 from an Airbnb listing. That kind of math is what draws many real estate investors to the platform—they don’t have to fill up their property with guests every day of the month to make more money than they would with long-term renters.

Related: How to Triple Your Rental Profits with Airbnb

Con: More Maintenance

Of course, there is more to renting out an Airbnb than sitting back and watching the money roll in. After each stay, which could be just one or two nights, you’ll need to clean the property to return it to a state ready for new guests.

Before each stay, you’ll also have to field questions from guests, ranging from instructions on how to enter the property, to where to park, or to how to activate and deactivate an alarm system, among others. You’ll also need to stay up to date on any events going on in your area to make the most of seasonal pricing, and then reset prices after those dates to keep your rates competitive.

Overall, Airbnb requires a more hands-on approach compared to renting out a space to long-term tenants.

airbnb arbitrage

Pro: You Don’t Have to Buy Property to Get Started

You can start earning money off a property that you don’t own by renting it out on Airbnb. If you search online, you’ll see dozens of videos from investors who leased or rented out a property and, with the owner’s permission, then rented out the property on Airbnb. These owners typically have multiple properties and just need someone to fill it with tenants, making them primed to work with Airbnb.

There are plenty of monthly expenses, however, that come with this plan. First and foremost, you’ll likely have to pay the owner some sort of rent or monthly fee for using their property. Most owners will also want to know that you are regularly cleaning the place and have proper insurance. If you can consistently fill the property with tenants, though, you’ll be able to recover all of those expenses before the month is over.

Con: More Expenses

Even if you own a property you list on Airbnb, you may find yourself spending more than you would on a property with long-term renters. Tenants bring their own linens, toiletries, and cleaning supplies. Airbnb guests don’t. Tenants may be willing, or required, to pay for utilities and wifi. Airbnb guests won’t. (And heaven forbid the property doesn’t have wi-fi!)

Some Airbnb owners even make food, beverages, and other amenities available upon arrival to create a more memorable experience for guests. If you’re not budgeting for these expenses (on top of professional cleaning services and insurance), you might be surprised at the end of the month by the amount you’ve spent on creating a top-notch guest experience.

Pro: Bad Tenants Come and Go

Enforcing a three- or seven-night minimum stay can help to reduce costs of preparing your Airbnb for new guests. Even if you decide to go this route, your tenants will mostly be short-term guests, as the average Airbnb stay is less than one week. While this may create some inconsistent cash flow, it can also reduce the risk of having bad tenants staying in your property long-term.

Even if a tenant complains or has loud parties, you won’t have to worry about them being late with rent payments or running down the property until their lease expires. If you’re particularly worried about bad tenants, you can always review a guest’s profile and ratings before you let them book.

Related: How to Improve Your Ranking in Airbnb Search Results

Con: Bad Reviews Can Make or Break a Guest’s Decision

A single bad Airbnb review could make potential guests hesitate before booking with you, especially in a highly saturated market.

Fortunately, Airbnb has a double-blind system that requires both guests and hosts to leave a review before they can see what the other party had to say. If there is a dispute, both parties can communicate before any final reviews go public. The website gives hosts two weeks to complete this process—if ignored, the review will automatically go up on Airbnb for future guests to see.

If you don’t stay on top of reviews, a bad one may make its way onto your listing. But with proper maintenance of your listing, both online and offline, you can bounce back from a single bad review within a few weeks.

There’s a lot to consider before you put your property on Airbnb. Reach out to a local legal services provider to discuss potential issues with listing your property on Airbnb in your city.

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Have you had success or struggles renting out your property on Airbnb?

Let us know your experiences in the comments below!

Property owners have the option of finding long-term renters or using a platform like Airbnb to rent on a shorter-term basis to vacationers, business travelers, and the like. Before setting up your Airbnb profile and jumping in, weigh the pros and cons here.