Should You Be Investing in a Philadelphia AirBnB?
Should You Be Investing in a Philadelphia AirBnB?
When it comes to traveling and lodging, the consumer market has evolved considerably over the last decade. Services such as Uber and AirBnB have revolutionized their respective industries. In fact Air BnB which does not own any properties, has become the world leader in lodging. Today there are over 2.3 millon AirBnB listings which average over 500,000 stays per night!
What makes these statistics even more outstanding is the fact that AirBnB is continuing to grow in popularity. However, if you believe AirBnB just consists of folks who occasionally list their homes for weekend lodging, guess again. Investors are starting to realize the potential of investing in properties with the sole purpose of cashing in on the AirBnB phenomenon. So exactly how can potential Philadelphia investors get a piece of the AirBnB action? Well here’s a few things you should know.
What are the Laws Regarding AirBnB?
AirBnB is world-wide and in the U.S, rules and regulations vary from state to state. So depending on where you are looking to invest, buying property solely for the purpose of AirBnB may or may not make sense. In Philadelphia, Bill No. 150441-A states pretty much everything you need to know in terms of running a legal AirBnB. For example if you plan on purchasing a multi-unit as an Air BnB property you’ll need a rental permit. However, if one of the units is owner occupied a rental permit is not needed In addition if a single family home is being used as an AirBnB and accommodate guests less than 91 days out of the year, a permit is not required. In addition to city laws and regulations, condo and homeowner associations may also have their say when it comes to AirBnB. More and more condo buildings are restricting owners from renting out their condos. Which is why it is highly recommended to read through your condo and docs carefully to ensure you’re able to list your property on AirBnB. So before you decide to buy a property as an AirBnb investment, make sure you’re up-to-date with the local laws.
Can AirBnB Generate More Income Than a Traditional Rental?
The real comparison of investing in an AirBnB property is its cash flow compared to traditional rentals. There are several pros and cons with each respective option. However, the real benefit will come to those who live in cities with relatively high tourism or transient locations such as towns near military bases. In Philadelphia, it may be a considerably better option to AirBnB in highly desirable neighborhoods that are close to tourist attractions. With traditional rentals you are receiving a flat rate as opposed to a nightly rate with AirBnB. So how does this breakdown?
According to a case study done by biggerpockets.com, “A great example of this is Westchester, Los Angeles, where median rents are about $2,118 vs. AirBnB nightly rates of $319 per night. Assuming that this beach neighborhood is only rented out for 110 days per year (30% occupancy), then landlords can expect to bring in $35,090 per year through AirBnB vs. $25,416 per year from traditional rental income.” Granted factors such as marketing as well as upkeep of AirBnB’s may require more out-of-pocket expenses, there’s no denying the cash flow opportunities.
In regards to wear and tear, AirBnB has shown to result in less wear and tear on homes than a traditional renter. This can be attributed to occupants spending more time outside of the unit during stays as well as their interest to protect their ratings. Less repairs means more money saved.
Looking for a Home to Possibly Start Your AirBnB Business? Check Out These Great Properties!
Does AirBnB Make Sense for Full-Time Investors?
Let’s say you’re someone who is heavily involved in real estate and owns multiple rental properties. Opposed to a casual investor, full-time investors may be more hesitant to jump on the AirBnB wagon. Depending on the location of your properties, traditional renting may make more sense. For instance if the properties are located in heavy residential neighborhoods not close to attractions they may not see as much activity as ones in an area that tourist or out-of-towners frequent. Amenities such as shopping districts, restaurants, and entertainment are also factors.
In a recent Air BnB report, “94% of Airbnb hosts in New York city rented out 2 units or fewer. This supports the Airbnb company line that the majority of users are average joes renting out their homes. The other 6% of hosts, however, listed from 3 to 272 units. They earned a collective $168 million and were responsible for over a third of all bookings and revenue in the city.”
The downside to full time investors with multiple properties is having to adapt to aspects of the hospitality business including rate structure. It would not matter if you happen to have the best accommodations if the rate is priced out of the market you won’t experience its true earning potential. In addition, a property management company will have to take on the task of upkeep, complaints, as well as other unforeseen occurrences that come with revolving traffic. Full time investors may want to focus more on real estate rather than the headaches that come with operating in the hospitality sector.
Investing in a Philadelphia AirBnB property isn’t for everyone. With the current laws and statistics, it may or may not make sense for you. While owner occupied properties can avoid needing a permit, full time investors could potentially see the most gaains. There are many factors before making the decision to invest so it may be wise to speak with an experienced agent beforehand. If you’re interested in learning more about AirBnBs and if they’re right for you, contact a specialist at The Atacan Group today at 215-592-9522.