If you’re looking to break into real estate investing, the growing vacation rental industry can be a great place to start—in fact, 19% of travelers who booked a vacation rental between March 2020 and April 2021 were doing so for the first time. Whether you plan to create a DIY listing on Airbnb or call in the help of a full-service management company, we’ve got your full guide to investing in short-term rentals. There are many things to consider when buying an Airbnb. Even seasoned property buyers can be overwhelmed without a clear approach to making this decision. We break down the main factors to think about:
Step 1: What are your goals?
Are you purely in this for investment purposes and your goal is to maximise yield? Or are you perhaps planning to live at the property in future? The answer to this question can have a big impact on the type of property you should buy.
Typically, if a buyer is planning to use the property in the future they would like a little more space. This space comes at a cost, however, which reduces yield. For example, a compact 30m2 studio apartment for R1,3m will perform better than a 60m2 1 bedroom apartment for R2.6m. The 1 bedroom will generally only generate 15-20% more revenue but in this case the purchase price is double. The yield is therefore much lower. The reason for this is that travelers staying for a few days or weeks don’t value excess space very highly. They are happy staying in a compact apartment.
If you are in the market purely as an investor then it makes much more sense to purchase compact properties (e.g <35m2 studio or 1 bed, <65m2 2 bedroom, <110m2 3 bed etc.). However, if you know that space will one day be useful then factor that into your decision.