Investing in an Airbnb can be a great opportunity to generate passive income. However, before jumping in and buying one, there are a few key things you should keep in mind!
Get a Realtor with Experience in Airbnb Rentals
First and foremost, it is crucial to work with a realtor who has experience in Airbnb rentals specifically. This will help ensure that you are working with someone who is knowledgeable about the local market and understands the unique needs of Airbnb operators. A realtor with experience in Airbnb rentals will also be able to provide valuable insight into factors such as pricing, occupancy rates, and the level of demand in the area.
Check for Any Laws Restricting Airbnb Rentals
Another important consideration when purchasing an investment property to operate as an Airbnb is to ensure that there are no laws or regulations in the area that restrict short-term rentals. It is important to have a thorough understanding of the local laws and regulations so you don’t end up buying a property that can’t even legally operate as a Airbnb. This is why having the right realtor is crucial because they can tell you if there are any restrictions AND if there aren’t currently restrictions, if there is a push to restrict in that area in the near future.
Speak with Your Mortgage Broker About Loan Options
When it comes to financing your Airbnb, there are a few different loan options available. Two common options for investment properties are the DSCR loan and the conventional loan. DSCR stands for debt service coverage ratio and is a type of loan that looks at the property’s ability to generate income to cover the loan payments. DSCR loans do not require tax returns or other income documents. If you want more information, see our DSCR article. A conventional loan is a traditional loan that can be used to purchase an Airbnb and typically will offer more competitive financing than DSCR, but is more document heavy and can have more restrictions if you want to put the property in a LLC.
If you’re looking at buying an Airbnb this Spring – it’s an exciting opportunity and a great investment, but make sure you do your research and make sure you’re treating it as a business decision. Approach the process with a strategic mindset. Work with a realtor who has experience in Airbnb rentals, check for any laws or regulations that may impact your ability to operate (or ones coming up), and have a plan with your mortgage broker about the right loan type. Good luck on your Airbnb journey!