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Getting Started Investing in Airbnbs

What are Airbnb properties called anyway? - Key Terms to Know

Vacation Rentals & Short-Term Rentals (STRs)

Short and long-term home stays and rental experiences are known as “Vacation Rentals” and have become one of the mainstays of the Hospitality Industry. Also referred to as STRs these property types are a booming business and are here to stay.

Many property owners are now seeking to create additional rental income and opportunities for their personal homes or rental properties that don’t fall under the long-term tenant umbrella. In good news, property owners are getting creative with how to maximize the benefits of their real estate. Thinking of owning a vacation home but want to rent it out when not there? These are the properties for you.

These rental properties are technically referred to as Vacation Rentals and Short Term Rentals (STRs) but are NOT to be confused with Time-shares, Hotels, or Bed and Breakfast type properties that can also be rented for tourism and vacations alike (bc these need different permits)

Airbnb vs. VRBO Brokerage Listing Sites Comparison

The public knows these properties as AirBNBs but technically listing websites such as AirBNB and VRBO (Vacation Rentals by Owner) are the brokers of these properties and charge owners and guests a commission from each booking. 

Sites like Airbnb and Vrbo should be thought of as your marketing tool, though many owners with specific niche destinations or commercial complexes have been able to successfully reach their desired bookings without relying on these booking sites.

In the Nashville area, Airbnb is a more popular listing site bookings at 49% compared to 14% with VRBO. However, in Gatlinburg, TN people use VRBO more at 30% of bookings compared to 23% with AirBNB. 

Outside of Bookings, Hosting friendliness also comes into play with fees, services, and marketing tools. STR Property Management Companies can help you navigate managing your properties. Here is a great host comparison of both Airbnb vs VRBO and the Key Hosting Differences

Ultimately we suggest checking out your local market before committing to one over the other or double down and use both if you plan to make the most out of your rental strategy.

The 3 Types of Airbnb Investors

We see owners of AirBNBs falling into 3 categories as it relates to their investing strategy. Each property owner has a different goal or vision in mind even though all are interested in profiting off of short-term rentals:

  1. Owner Occupied – You may consider AirBNB if you own a personal residence that has an extra room, suite, or use that is conducive to short-term rentals. Many people will consider AirBNB’ing their home to rent out space, say above a garage or in their basement and offset their mortgage payments. Others, who travel frequently also find opportunities in renting their homes while away.
  2. Non-Owner Occupied – You may want to own a rental property and like the idea of making more money with shorter stays. Often non-owner occupied rentals are located in vacation-friendly travel areas that have high tourist markets. Many Airbnb owners in this demographic intend to use and stay at their rental throughout the year for personal reasons and rent it to others for the remainder of the year. Ie. Purchasing a Lake House or Beach House that can also double as an investment property.
  3. Hospitality Investors – These are more of your institutional investors that are looking to purchase or amass a portfolio of properties with short-term rentals as their business model. Often these owners are investing in multiple “doors” or homes at a time and are treating the investment strategy as more of a commercial Real Estate investment play. Portfolio management, CAP rates, cash flow, and market impact these owners as they are looking at properties to invest in.

Buying an Airbnb Property Due Diligence - Data & Codes

If you are considering investing in an Airbnb property, you have to check out  AirDNA.co. This is my number one secret weapon for analyzing a future Short Term Rental property’s potential and just generally seeing if the local market and property make sense for your personal financial goals. It has data on Vacation Rental Stats and pricing for every market and it’s FREE, so check out this online tool before you get started to see if your rental strategy even makes sense.

Vacation Rental Investment Numbers to Consider in your Property Assessment:

  • Annual Revenue
  • Average Daily Rate
  • Occupancy / Vacancy Rate
  • Operating Expenses 
    • Property Management 10-12%
    • Airbnb and / or  VRBO Listing Fees
    • Cleaning Fees
    • Maintenance & Service – like when your HVAC goes out
    • Staging & Design
    • Hospitality Supplies
    • Start Up Costs – Furnishings
    • Insurance
    • Business Expenses – Professional Services (Attorney, CPA, Software, etc)
  • NOI (Net Operating Income)
  • Cap Rate

Getting an Airbnb Permit in Nashville

You also NEED to check with your local codes to see if you can even get an AirBNB permit before writing any contracts. This means checking not just County Codes, but also City zoning, ordinances, and local requirements, before Buying or embarking on any further expenditures towards an Airbnb property.

For instance, in Nashville, there has been a lot of drama surrounding Airbnbs and politics came into play early as Hotels hit peak rent, and Airbnbs started to compete over the same market share. 

Nashville’s Airbnb permit process is ever-changing, and at one point they were no longer offering new Non-Owner occupied permits unless the property was in a specific zoning. Many owners of Airbnb properties with permits had to get creative with grandfathering while legislators fight over property rights and whether or not these limitations are even legal. Check out the current Nashville Short-Term Rental Codes.

Here is our Shortlist of the Steps you will need to take to get an Owner-Occupied AirBNB permit in Nashville:

  • Create a Floor Plan (certified by a licensed Architect, Engineer, or Home inspector) ← We can help with this! Schedule a quick discover call here.
  • Provide proof for all tax payments due and liability insurance
  • Notify adjacent property owners
  • Provide Affidavit
  • Provide an HOA statement (even if the property is not in an HOA)
  • Provide proof of identification and residence
  • Pay permitting fees
  • Receive and visibly post the permit

Certain areas like Franklin, TN could leave you dead in the water as they changed their AirBNB zoning laws to ban many AirBNB rental types, and the city treats these permits as more of a Hotel now than a personal residence. That means adding in taxes, sprinklers, egress, and other architectural requirements for proper permitting – Franklin Short Term Vacation Rentals.

Our suggestion is to always check your local codes before buying investment real estate. That way they can tell you in person what you can and can’t do with your property before you get too far down the line.

6 Must-Haves for your Airbnb Vacation Home

We believe the number one make or break for your Airbnb is how well you provide a memorable experience and welcoming atmosphere for your guests. 

Your property will need a brand, personality, a catchy name, and amenities that speak to your property’s unique destination and location. And how you make your guests feel will ultimately drive your success or failure.

After you create your Property’s unique brand, then you need to dive into actually ranking high to make guests pay top dollar for your property.

Short Term Rentals are Rated on 6 Main Items

A good question to consider is “Why will someone love your rental over other local hotels, bed and breakfasts, and competing vacation rentals?” Create that special sauce, price it right in the market and you will be booked up.

  1. Listing Accuracy
  2. Value
  3. Location
  4. Communication
  5. Cleanliness
  6. Check-In Process

Now, if you’re thinking about dipping your toes into the waters of vacation rentals, whether it’s local or far away, it’s essential you hire a real estate expert to help you navigate the lay of the land and ensure your investment is a winning property.

It’s easy to get bogged down in the details, overwhelmed by the numbers and permitting processes and goodness knows the staging and design details. Not to mention property management, keeping guests happy, and ensuring your ratings stay high.

Our team of experts will guide you through the maze of annual revenue, occupancy rates, and even that tricky Nashville permit process. Contact us today and let us help you navigate the process together.

Southern Athena Airbnb Investment Resources:

Download our Free Investing in Short Term Rentals Guide