5 Steps to Buying an Airbnb in Hawaii
If you’re looking for a great real estate investment opportunity in Hawaii, buying a home to rent as an Airbnb is an excellent choice. However, before you begin, there are a few important steps you’ll want to take that will make sure your investment pays off.
For those who aren’t familiar, Airbnb is an app that allows people to rent out their property to travelers, either partially or in its entirety. It provides a great alternative to traditional accommodations like hotels, which can be too noisy or poorly maintained.
Buying a house to use as an Airbnb can be a great investment opportunity, as it allows you to earn passive income from renters while also enjoying the benefits of owning a home whose value will increase over the next few years. However, before you purchase the property for your Hawaii Airbnb, you’ll want to do these five things first.
Choosing the Right Neighborhood
The first step is to choose the right neighborhood for your new rental property. For example, if a property is too far into a residential area and isn’t within walking distance of any major sites or attractions, potential customers who decide not to rent a car will likely choose to rent a more convenient location.
On the other hand, if you choose a neighborhood with too much crime, not only will guests be less inclined to rent that location after the negative reviews start pouring in, but the property value of the house you buy will likely decrease over time, which can be even worse for your investment.
It’s highly recommended to talk with a local real estate agent who can help you select the right neighborhood. By using a combination of personal and professional knowledge, they can help you find the perfect location for your Airbnb investment property. As the old saying goes, “the three most important things in real estate are location, location, location.”
Analyze Airbnb Investments and Real Estate Data in Each Market
After that, you’ll want to begin analyzing the market more thoroughly. You can start by asking questions such as, “How many Airbnbs are nearby and how successful are they?”, “Are houses in this market appreciating in value or going down over time?”
Market saturation is another important factor. A few other Airbnbs in the area are fine and could actually be good for business. However, if there are too many rivals nearby, the competition will drive down prices and therefore your profits. At the same time, a lack of Airbnbs in a given area could mean that others have tried and failed.
Compare Airbnb Investment Opportunities in Multiple Markets
There are many factors that will determine the success of your Hawaii Airbnb. Before you settle on a market for your investment opportunity, you’ll want to compare at least three of them to find the one that will work best for your needs. The housing and rental markets in Honolulu will be much different than in Kahului or Hilo, for example.
You’ll want to pick the strategy that works best for your business model when comparing these markets, depending on your goals. If you want an area with an untapped market, you’ll want a market with less competition. If your strategy is to provide a premium location near major tourist attractions, competition will be much less relevant.
Estimate your Airbnb Investment Income
Next, you’ll want to estimate the amount of money that you’ll be able to make if you buy an Airbnb property in Hawaii. The first step to determining this is to figure out your operating costs. How much will you have to pay on a daily basis to keep your Airbnb open? How much will you have to spend on annual maintenance to keep the property looking fresh and attractive to renters?
For example, after each guest checks out, the property will have to be inspected to make sure that it has been cleaned properly and is suitable for the next guest. If you aren’t doing this check yourself, you’ll have to pay someone else to do it, which will add to your costs. This is just one of the many “hidden costs” that potential investors might sometimes overlook.
It might be a good idea to start out with a target baseline level of profit, either a dollar amount or a percentage, for the first year or so. Airbnb real estate investing in Hawaii is, like many things, a long-term investment that might not be profitable right away. However, with the right steps, you can make sure that once it does start generating profit, it stays out of the red for the rest of your ownership period.
Strategically Price Your Airbnb
Finally, you’ll want to make sure that your Airbnb investment property is priced within the correct range. If it’s too high and renters can find a larger property in a better location for a lower price, you probably won’t get too many rentals. On the other hand, if the price is too low, renters might assume there’s something wrong with the property and be more likely to choose another Airbnb nearby.
The cleaning fee is an important part of this as well, as there has been a lot of social media pushback in recent days against Airbnb hosts that charge an excessive amount for cleaning when guests are expected to handle most of that themselves. You should still charge the fee, especially if you use a cleaning agency, but the price should be competitive.
Another potential issue with charging too little for your property is that you could be leaving money on the table. Let’s say you rent out your property 200 nights a year at a certain price. However, if you could increase that price by $10 per night and get the same number of rentals per year, that’s an extra $2,000 worth of profit you’d be receiving from your Airbnb investment property.
If you’re interested in Airbnb real estate investing in Hawaii, there are many things you’ll have to take into account before choosing the right property. You’ll want to do thorough market research, decide the best possible price point for your investment property, and figure out the approximate operational costs to make sure you’ll be turning a profit.
By using these strategies and asking yourself these questions, you can make sure that your Airbnb real estate investment in Hawaii will be successful and profitable for years to come!