Michael Arnold is a Los Angeles real estate professional and entrepreneur. In the following article, Michael Arnold discusses the arresting potential of Airbnb rentals, profitability, and investment worth.
Michael Arnold of Los Angeles explains that real estate is a deceptively diverse market, often summed up as little more than the buying and selling of houses. Yet for investors with a sense of creativity, certain sides of the real estate market can become an untapped goldmine with the right timing. As middle America embraces summer vacations for the first time in two years, Airbnb owners could make a small fortune says Michael Arnold.
By buying up small rental homes in regional hotspots, real estate investors are able to make a steady stream of income by offering homes listed on Airbnb to middle-class tourists. Michael Arnold of Los Angeles explores this lesser-known side of the real estate market and discover how Airbnb is quickly becoming the next big gold rush.
How Renting Out an Airbnb Becomes Profitable
The first question most people ask is how investors make money by renting out Airbnb property? The answer to this question is two fold. The first part of the equation comes down to location, and the second part has to do with economies of scale according to Michael Arnold.
Any real estate investor will tell you that one of the keys to success in any market is finding properties in high-traffic areas. This rule applies whether you’re looking at traditional rentals or Airbnb says Michael Arnold of Los Angeles.
By definition, tourists are always on the move which means they won’t be spending extended periods of time in any one place. That being said, there are still certain areas that become tourist traps due to their popularity (think Niagara Falls or Disney World).
Michael Arnold of Los Angeles says that these locations with arresting beauty tend to have a higher demand for short-term rental options like Airbnb properties because hotels book up quickly and can be expensive. As a result, investors who purchase homes near these attractions can charge premium rates for their rentals while still providing value compared to hotel alternatives.
The second part of the equation is economies of scale. Michael Arnold explains that when running a traditional rental property, there are many associated costs that come with each tenant (advertising, cleaning, maintenance, etc.). With Airbnb, though, investors only incur these costs when someone books their space. Each night costs magnitudes more than a single night of standard rent, helping to offset costs and earn a profit according to Michael Arnold of Los Angeles.
This means that if investors have multiple Airbnb rentals in different locations, they can spread out these fixed costs across all properties which will result in a higher overall profit margin. In other words, it becomes more profitable to own multiple Airbnb homes than it does to just own one traditional rental property says Michael Arnold.
Why Now Is the Time to Invest in Airbnb Rentals
Michael Arnold of Los Angeles states that investing in any type of real estate is all about timing. Investors must find properties when they’re undervalued so they can sell or rent them out at a higher price point. The same goes for renting out Airbnb properties; now is the time to buy while prices are still low and demand is high.
It’s no secret that COVID-19 has decimated the travel industry over the last two years. As case numbers continued to rise across America, people become increasingly hesitant about taking vacations outside their home state or country. However, as the pandemic is reaching its end, more and more middle-class Americans are hoping to return to their favorite holiday spots says Michael Arnold.
Regional tourist attractions, such as Disneyland, Dollywood, Graceland, Las Vegas, and Washington DC are all expecting a massive uptick in the number of tourists visiting their locales. This sudden surge in tourism is driving many investors to quickly buy and fix up low-cost housing for the sole purpose of renting it to Airbnb members according to Michael Arnold of Los Angeles.
The Risks of Tapping into the Airbnb Gold Rush
Of course, as with any investment opportunity, there are always risks to consider. Nationally, housing prices have skyrocketed in the last couple of years due to a shortage of new builds. This, paired with steadily rising interest rates, makes for an unfriendly investment environment, especially for anyone looking to purchase housing says Michael Arnold of Los Angeles.
On the other hand, though, families with spare rental units or vacation homes stand to profit immensely from the expected return of American tourism. As long as there isn’t another widespread outbreak of COVID-19, summer 2022 should see flocks of vacationers arriving in masses throughout the nation.
The best advice is to invest wisely and track interest rates for the time being. As stated before, timing is everything, and investing in the real estate market takes a close eye and a finger on the pulse of the economy.
The Airbnb gold rush is a real opportunity for those with the means to invest in regional rental properties. By taking advantage of economies of scale and tourists’ desire to return to their favorite vacation spots, investors can make a killing in the coming years.