How to Invest in an Airbnb From Out of State
There are plenty of reasons to think about investing in a short-term rental property out of state. You may have just gone on a vacation and decided the people who own the place you are renting were making a killing.
Maybe you were thinking about buying a home you would like to retire into and can't imagine how expensive they will be by then.
Local Vs. Out of State
This ability to cherry-pick a market for your specific needs is what makes investing out of state so desirable. Are you more interested in appreciation than cash flow? Then maybe a tier-one beach destination would perform well for you. If you are looking for a place you can later use as a family vacation destination, you can find that too.
How to Select a Market
From a purely financial perspective, you will want to choose a market with strong rental demand, low demand for property, and good prospects for property price and rental demand growth. Unfortunately, these factors are usually at odds with each other, so it will be a balancing act to figure out which factors have the most weight for you personally.
Here are the main expense categories: - Mortgage - Property Taxes - Utilities - Insurance - Cleaning - Maintenance - Furniture - Linens
There is a rule of thumb that a good Airbnb should make 3x the long-term rental rate. You can find an estimate for the monthly rent on Zillow or Rentometer. If you find your estimates to be too far off of this metric, you better have a reasonable justification for it. Otherwise, you might need to re-do your calculations.
The Revenue Calculation
Revenue = ADR (Average Daily Rate) X Occupancy The challenge comes to determining what both of these are. First, you can scope out some competition by watching how their calendars fill up and how much they charge. Next, you can use Airbnb to see what other competitive units are getting. Finally, you can get an estimate from Airdna, Airbnb, and/or Mashvisor for the specific property you are looking at.
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