Is AirBnB a good investment?
According to a survey by Airbnb in 2022, South African hosts earned just over R26,000 over a six month period, equivalent to around one month’s pay. So it may instinctively feel like a lucrative opportunity, but whether you’re renting out a spare room, building a guest cottage or even buying a new property to run your business, it’s important to look at the full picture before making a decision.
The first thing to realise is that it’s also going to cost you more to operate. You’ll need to furnish and decorate the property, spend money on cleaning, maintenance, utilities, streaming services and possibly insurance. With increased competition, travellers are also demanding more luxury and personalised service, which can cost you more time.
The location is also important – make sure there is a demand for accommodation in the area. Not all guests are tourists. There is a market for businesspeople if you’re located near a business hub, as well as families of people hospitalised, if you’re close to a hospital. Enlist the help of a professional real estate agent who can guide you in terms of which areas are sought after by Airbnb guests.
Be prepared to put in the hours needed to ensure success. You’ll have to manage multiple check ins each month, regular cleaning and ongoing guest queries. Its hands on and can be a 2nd job, so make sure you have the time to devote to it.
Some other factors to ensure success:
There is no hard and fast rule as to whether an Airbnb business is lucrative or not. So many factors impact this but it’s important to research and run the numbers before putting your money on the line. .
Jason’s comments:
The first thing to realise is that it’s also going to cost you more to operate. You’ll need to furnish and decorate the property, spend money on cleaning, maintenance, utilities, streaming services and possibly insurance. With increased competition, travellers are also demanding more luxury and personalised service, which can cost you more time.
The location is also important – make sure there is a demand for accommodation in the area. Not all guests are tourists. There is a market for businesspeople if you’re located near a business hub, as well as families of people hospitalised, if you’re close to a hospital. Enlist the help of a professional real estate agent who can guide you in terms of which areas are sought after by Airbnb guests.
Be prepared to put in the hours needed to ensure success. You’ll have to manage multiple check ins each month, regular cleaning and ongoing guest queries. Its hands on and can be a 2nd job, so make sure you have the time to devote to it.
Some other factors to ensure success:
- Don’t overprice - people generally choose and Airbnb because it’s cheaper than a hotel so be careful not to out price yourself. Also, a fairly priced property is more likely to receive positive guest reviews, crucial for your business.
- Stand out from the crowd – get a professional photographer to capture the character, surrounding areas and facilities of your property. You’re competing in an ocean of other properties so focus on the entire guest experience.
- Keep accurate records of income and expenses. You’ll have to declare your income to SARS, but can offset your legitimate business expenses against this income, so keep track.
There is no hard and fast rule as to whether an Airbnb business is lucrative or not. So many factors impact this but it’s important to research and run the numbers before putting your money on the line. .
Jason’s comments:
- Don’t assume that you can run an Air BnB business from any property that you own or buy. If you buy into a sectional title scheme or any property with home ownership bylaws make sure that the rules of the association allow you to rent out your unit nightly.
- Air BnB is a great way to get more per day/night for your rental property than a standard rent, but as pointed out above, it is more work.
- Another benefit is that you can rent it out when you want as opposed to full time like a standard rental. This has become a very good way for owners of vacation properties to receive income while they are not using the property.
- With soaring interest rates, this would be a good time for struggling homeowners to consider an air bnb business in a room or unused section of the house to make additional income to pay the mortgage. In my first home that I purchased I rented out the garage to a restaurant for storage and a second room in the house to a physio therapist. The rent received went a long way in paying my mortgage every month.
- Air BnB is a great way for retired people to supplement their retirement income and give them something to keep busy with.
