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The BEST Types of Properties for Airbnb

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SUMMARY:

So many types of homes out there, which means there are so many types of Airbnbs. Some greatly outperform others. But what’s the breakdown?

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There are plenty of options for property types. All Airbnbs are not created equal.

There are lots of different types of homes, which means there are many different Airbnbs.

If you’re an investor, what type performs the best?

Luckily, all of this is about percentages. You aren’t forced to buy a certain kind.

As long as the cash on cash percent works out, a deal can come from anywhere.

But today let’s narrow it down a bit. If you’re just not sure at all, we’ll go into a few of the major ones.

From my experience, success in Airbnb investing requires two things: size or uniqueness.

Usually, larger properties allow for larger groups to split the costs. You can charge more and make more.

If you don’t have a large property, it’s got to be unique. 

Keep that in mind – size and uniqueness – as we go through these.

First, we dig into condos. These are really popular, but I share my doubts and reasons why I avoid them.

Second, we talk about large homes. There are pros and cons to this one as well, but I go into why I think the pros outweigh the cons.

Third, we discuss luxury homes. Who doesn’t want to own a luxury home? These can bring up up to $800,000 every year! But what is the BIG piece of investing in these?

Finally, we discuss ADUs. Auxiliary dwelling units. I’ve gone deep into analyzing these on the channel before, but how are they against these other three investments?

Watch today’s video to learn more.

VIDEO TRANSCRIPT:

What's up guys, it's James here and in today's video, we're gonna be talking about the best types of properties for Airbnb and short term rentals, I'm going to go through exactly what types of properties in any given market tend to perform the best and give the best return on your investment. So for anyone that's interested in buying a property for Airbnb, and looking to buy the best property possible, that's going to get the best returns, this video is for you. Now, if you are interested in investing in short term rental Airbnb properties, then there's a training in the description down below, there's a link to it, that is going to be great for you, we're gonna actually walk through step by step by step exactly how to successfully invest in short term rental properties, make sure you're buying the right properties in the right markets, managing them effectively, absolutely everything it's gonna give our step by step process for all of the major pitfalls to avoid, and all the things you need to make sure of if you want to be successful investing in short term rentals. And we're even going to give you our analysis spreadsheet completely free along with the training, which is also completely free. So I highly recommend you check that out, it's in the link in the description down below. So let's get started and talk about the best. And we'll also mentioned some of the worst types of properties to have as Airbnbs. Now, from a management standpoint, the easiest ones to manage you would think would be a condo, because it's small, there's very little maintenance to do, and there's a concierge there. So a lot of people tend to gravitate towards condos, especially because the price tag on them tends to be a lot more affordable as well. And fortunately, condos are about in my experience the worst types of properties to invest in as short term rentals for a variety of different reasons. For starters, most condo boards actually disallow or ban short term rentals from happening in the condo building. So you're buying an asset that you can't actually use per the condo rules as a short term rental property. Now, I know a lot of people will think okay, well, why don't I just work around that. But unfortunately, all it takes is for one guest to walk up to the coast yours and say the wrong thing. And then your whole investment is kind of down the drains, the condo board is going to shut you down. Now add to that the fact that condos tend to be small cookie cutter nothing original about them, it means that because they're small, you're not going to be able to charge a higher nightly rate by putting more people into the property and having to split the costs amongst more people. It also means that because they're so cookie cutter, and they're so small, there's gonna be a ton of competition. And really no reason that's compelling for a person to choose your property over and other property, you're competing with all the other condos, all the other hotels in that area. So it's going to be a lot of competition, a lot of regulations and kind of rules you need to be aware of and skirt your way around. And so overall, it just doesn't tend to do that, well, those properties tend to be a lot cheaper to purchase than a freestanding home in the same area, but they don't perform well. And so as an investment, it's just not that great. Now, on the flip side of that buying a larger home is going to come with some more maintenance and more things to kind of maintain as far as the yard, maybe it's snow removal. And just the actual property itself. Obviously, with a condo, the nice thing is that all the kind of main bones of the structure are for the most part maintained by the condo building itself. Whereas with a property, you need to take care of that maintenance. That being said, the additional maintenance comes with some additional huge returns. Because in my experience, these larger types of properties tend to be the best performers as short term rentals. And so what I mean by a larger property is typically a property that's going to be three or four bedrooms or larger with at least two bathrooms, those are generally going to do the best. Yes, they're going to come with more maintenance than a condo. But to be honest, the maintenance on them isn't that bad. If you're buying the right property, and you know what to look for, you're not buying something really old that needs a lot of renovations, or if you are you're doing the renovation at the beginning. And so yeah, you're gonna need to do a little bit more yard maintenance and things like that. But the cost of having someone else do that is pretty minimal relative to the additional income those properties are going to bring in. And the nice thing about those properties is as long as you're not buying within an HOA, you're not going to have to worry about rules and regulations outside of the actual city or states rules and regulations, which tend to be pretty favorable to short term rentals in most areas, obviously do your own research. HOAs are something I would recommend avoiding because again, that's just another person that can tell you no and have control over what you can do with your asset, which I don't like I invest in short term rentals because it gives me so much control over my investment. And so that's a big upside for me. So that's why I tend to avoid HOAs. And these larger properties, they tend to do a lot better because there's less competition, there's just fewer properties that can accommodate those larger groups versus the smaller groups because when you think about it pretty well any property can can accommodate a solo or a couple of travelers, but very few properties can accommodate for six 810 People all wanting to stay together so you just have less competition overall because you can accommodate a larger group of people, they can split that cost amongst more people. And therefore you can charge a higher nightly rate. So those things in combination with the fact that you're not paying a multiple more for that property than you would for a smaller property. And what I mean by that is to buy a four bedroom property is not usually going to be twice the cost of buying a two bedroom property, it's usually just going to go up a little bit, it's ultimately going to just give you a much better ROI, because your revenue that you can generate is going to go up by a multiple, but your costs are not. So those robberies tend to do really well. And then another type of property that I've seen do well, but it's a little bit more hit and miss, are the more high end luxury properties, high end luxury properties can do really, really well, you can look on air DNA and see some properties that are doing 200 300 400, even 708 $100,000 a year on Airbnb, and I know that's mind blowing to look at because even for me being experienced in this space, it really does blow my mind to see that some properties can bring in three quarters of a million dollars in a single year as short term rentals. So they absolutely can do well. But they come with a high cost. So you're obviously going to be investing into a much more premium high end luxury asset, which comes with its own kind of fair share of complications when it comes to investing. On the one side, if everything goes well, and the market does, well, that property is probably going to crush it. And you can buy a property that will do you know you'll buy it for maybe a million or 2 million and have it do really well. That's fantastic. We can bring in several $100,000 a year on a couple of million dollar purchase price, that's probably going to make a lot of sense. where things start to fall apart there is where the economy doesn't do so well. Because of the economy's not going well, then luxury high end real estate tends to be one of the first things to drop in value. And luxury high end vacations tend to be one of the things that drop off people's to do lists for where they're going to allocate their money is not to say that the demand is going to completely dry up, it's just to say that it is going to be drastically reduced in a bad economy. And so when you pair that with the fact that property value is going to be going down. And then it's quite hard to find a long term tenant for luxury high end properties in a bad economy. You're kind of banking on the economy more than you likely want to be in a good economy, that asset is going to do well. In a bad economy, you're going to have a tough time, you never want to be in a position where you're going to be potentially forced to sell the property because it's actually costing you money to carry it every month. It's cashflow negative, in other words, and so if you are buying a more luxury high end property, you just want to really make sure that you're doing a good job of analyzing the worst case scenario and making sure that it's something you can stomach and that it's never going to be cash flowing negative. The other type of property that's out there that I see a lot of and that does actually very well are auxilary dwelling units as a blanket statement. I have other videos on this channel that break down the different types of auxiliary dwelling units, whether it's yurts, geodesic, domes, cabins, a framed RVs, you name it, there's all kinds of different auxilary or alternative dwelling units that you can set up if you have some land to set them up on. And these properties tend to do really well also, because what they lack in size they make up for in uniqueness. There's sort of two main things that make properties do really well on Airbnb, in my experience and in short term rentals in general, and its size and uniqueness. from an ROI perspective, if you can get something that's larger and can accommodate more people that's generally going to perform better from a return investment standpoint than a property that is smaller and can accommodate less people. And the more unique a property can be, the more the better it can do as a short term rental property. So what you don't necessarily get with the adu is size, because generally an auxilary dwelling unit is going to be small, and it's generally only going to accommodate a maximum of four people, but in most cases more like one or two. But the really cool thing is uniqueness. That's where they're off the charts. You got a geodesic dome where you've got these incredible views, or you can really trick out an Airstream trailer, you can make tree houses. And all these things offer a really unique experience to guests. And so for that reason, they tend to perform really well. Now on the other side of it, purchasing them or by you know, building one of them actually doesn't cost that much for most of these types of units, you can set them up for anywhere from 15 to $40,000. And they can perform at pretty much that amount every single year. Sometimes you can even get the revenue to go up to $100,000 a year, like we've seen in some geodesic domes. Again, we've talked about this in more detail and broken it all down in other videos. So if you want to learn more about that you can check those out as well. But ultimately, the one downside on these properties from an investing standpoint is that you're not really going to be building much equity with certain property types. For example, in a frame cabin, you might be because it's an actual proper structure, but for a temporary structure like a geodesic dome, you're really not gonna be building any equity by building it. So you just have to understand that you're going to be sinking that cost of let's say $30,000 into buying it setting it all up. And if you had to liquidate down the road you wouldn't be able to get all that money back. Certainly not an appreciated value on it. But the plus side is that on that $30,000 investment, you're probably going to be making 20 to $30,000 if not more in annual cash flow. So after one, one and a half years, your full investments can be paid back and then you're just profiting year after year after year. So those are different property types. Those are ones that perform well and don't perform well and the reasons behind it. I hope you got value from this video. I hope it's helped you to make some better decisions in your Airbnb or short term rental investing. And again, if you are interested in learning more about how to invest successfully in short term rentals, make sure that you don't make any mistakes. Make sure you reach your goals faster if you want to replace your full time income with cash flow from short term rental property so you can have a life of more freedom and more time more flexibility, then I highly highly recommend you check out the free training that's linked in description down below it's going to walk you through exactly how we've accomplished that how we've been so successful, the exact step by step playbook and strategies that we use in our own investing. So I highly recommend checking that out. We're also like I mentioned gonna give you our projection tool or analysis spreadsheet completely free so just make sure you click the link down below and sign up for that free training before it gets taken offline. Now all that said, if you liked this video, if you got value from it if it was helpful for you, then please take a minute and hit that like button it really does help me with growing this video growing this channel getting this video in front of more people so I'd really appreciate if you could just take a moment and hit that like button. Also, if you have any comments, questions, thoughts, anyone share with me just let me know in the comment section down below. And last but not least, make sure you subscribe. I post two new videos every single week on this channel all trying to help you and give you more value when it comes to short term rentals and Airbnb. So if you're interested in staying up to date with those two new videos every single week, then make sure you hit that subscribe button to stay subscribed and make sure that you stay up to date with all the latest videos. Until next time, I'll see you next video and hope you have a great rest of your day.

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