eBusiness Weekly
Anele Zifiso Dube
Owning a hotel or a lodge might be a bridge for investors in this economy hence investing in Airbnb is most feasible. Airbnb investing is substantially different from traditional real estate investing.
Depending on the money at hand to invest it can be a very lucrative investment considering adequate research and planning is done.
Like any other investment understanding the risks and benefits of Airbnb investing can help you decide if it’s the right form of investment for you. The following are the risks and benefits of Airbnb as a type of investment
Benefits of Airbnb Investment
1.Great Source of Passive income.
With the enhanced popularity of Airbnb and other vacation rental platforms there is an opportunity for investors to generate a stream of passive income.
All the host (investor) needs to do primarily is to appoint a caretaker to take care of the premises whilst the host just handle bookings and payments.
Due to its nature, it can be great way of diversifying your investment portfolio enabling the investor to put more focus on more hands-on investments.
2.Easy to Maintain
Surprisingly, there is reduced work required to sustain the property than traditional rental properties.
Guests when making bookings are charged a cleaning fee hence the property is cleaned routinely. Also, hosts can use reviews from the guests after a stay to see areas that need advancement.
Lastly, the grounds and surrounding areas can be an obligation of the caretaker whilst the host (investor) supervises from a distance which actually can be in a different country.
3.Flexibility.
In resort areas in Zimbabwe Airbnb’s can be more profitable during holidays, with that in mind you can rent your property only in that time period if you want. Also, the application allows you to book of time for reasons best known to you that is., birthdays, parties.
Lastly when managing Airbnb’s, you can alter rental prices according to your valuation of the property or when improvements are made.
4.Easy to Find Guests.
As guests write positive reviews and rate their stay as great it lures more guests to experience the same for themselves.
The app also screens the guests and recommend the best stays according to the type of guests searching for the rental. And because short term rentals you don’t sign legally binding documents it attracts more guests as it is freer per say, all you need to do is to read terms and conditions.
Risks of Airbnb Investment
1.Higher Start-up Costs.
John Wanamaker once said; “When customer enters my store, forget me. He is King.” In this case, we refer to customer as our Airbnb guests.
To make the property more attractive investors need to spend great deal of money upfront and often to provide best experience. This can be in the form of pavements, refurbishment, furniture etc.
2.Irregular Income.
Initially you need to book off days for repairs and maintenance and secondly the hospitality industry is seasonal which will trigger a ripple effect as some months income to be lesser than others.
Also, with short term rentals while you can yield a high profit, your cash flow depends on how many days are booked per month.
3.Risk of Theft or Damage.
Perhaps one of if not the biggest risk of Airbnb investment is theft and damage. With a high turnover of guests, if the host (investor) loses track of the movement of keys or the guest’s, property can be stolen or guests can damage property and get away with it without paying for the damages.
Most of the hosts are abroad and depend on caretakers to manage the property hence it is out of their control really.
4.Guest Liability
As a vacation rental owner, a significant concern is guest injury or risks of an incident happening on the premise. Even if you as an investor is not on the premise at the time of the incident, you can be still be held legally responsible. The very thing that attracts guests like a swimming pool might end up in you paying medical bills, legal fees etc.
Anele Zifiso Dube is a Charted Professional Accounting student at CPA BC in Canada. +1 (778) 512-4588 or [email protected]
