Discussing the pros and cons of buying an Airbnb or VRBO property.
Are you looking to invest in real estate? It’s becoming increasingly popular to buy properties to rent as Airbnbs and VRBOs; in fact, I recently bought an Airbnb property. I’ve learned some things along the way, so today I want to share some pros and cons of buying an Airbnb or VRBO property.
First, what is an Airbnb or VRBO? Basically, they are short-term rentals. Rental properties usually have one-year terms, but short-term rentals can be occupied for as little as one day. This arrangement comes with a lot of benefits, but also many issues.
“Even though your Airbnb is a business, you’ll still gain equity as it appreciates. ”
Let’s start with the cons. The biggest con is that your expenses will be higher. Utilities will be more expensive, wear and tear will be higher, property management will be more extensive, etc. Running an Airbnb or VRBO is kind of like running a hotel; it’s a business, and you should treat it as such. There’s also an emotional cost to consider. You own this home, but it will go through some rough days. People don’t tend to take care of short-term rentals like they might long-term ones.
Now, let’s move on to the pros. One huge benefit of running your short-term rental as a business is that you’ll have a ton of tax write-off opportunities. You can also rent out your short-term rental at a higher rate than a long-term one. Last July, our Airbnb made just over $10,000 in gross rental income. Plus, you still own this property, so you’ll gain equity as it appreciates.
If you decide to buy a short-term rental, I suggest you incorporate it as an LLC. It’s a business, and you should protect yourself. You should also check local and state laws. Not every area is friendly toward these new business opportunities.
If you have any questions about this topic, please call or email me. I’d love to speak with you.
