Airbnb vs Renting! Are you looking for the right real estate strategy? You don't know whether Airbnb or traditional renting is the right one? Then you should definitely read this article!

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Introduction of Airbnb vs Renting

If you are looking for extra income, renting out your property can be a solid investment strategy. You may have an extra home that is not being used. So why wouldn't you make money from a rental?

In terms of renting, there are two viable options. Either you can go the traditional route and rent out to a tenant for a longer period of time, or you can use Airbnb as a platform. This hosting platform allows you to list your house or flat on their website for holidaymakers and tourists who want to stay in one place temporarily. Both options have their advantages and disadvantages, but which offers the best real estate strategy?

Legal issues

There are some legal concerns you need to consider when using Airbnb, especially if you do not own the property you want to rent out on a short-term basis. Every state and even municipality has different regulations. Therefore, you want to know if it is even possible to rent out accommodation on a short-term basis in your region. In some regions, a permit may be required for people to stay overnight in your rental property. (If you want to set up a professional Airbnb business, you may well need a trade licence).

"If you don't own your own property, but you want to sublet your home on a short-term basis through the Airbnb platform, it is advisable to ask your landlord for permission so that there are no legal issues between you and your landlord!"

If you go the traditional rental route, you most likely will not have to worry about legal issues as in the case of an Airbnb rental. You can rent out your property for as long as you want and to whom you want. For this reason, traditional renting is slightly less complex from a legal point of view compared to Airbnb.

Hospitality

The great thing about traditionally renting out your property is that you do not have to worry so much about your guests. Sure, you want to greet your tenants when they move in. However, after the first few days, you can pretty much leave the tenants alone. You can check in occasionally to make sure they like the accommodation and to fix any problems. So for the most part, traditional renting is pretty straightforward.

Airbnb, however, is more focused on hospitality. After all, the people looking for short-term accommodation are often on holiday or travelling to a new city. You therefore want to give them the best experience possible, which means being more hands-on. This can include cooking meals, providing transport and cleaning up the room while they are away.

Additionally, Airbnb has a review system. Therefore, if you provide better service and increase hospitality, you are likely to get better reviews from your guests. The more positive reviews you receive, the more profitable your Airbnb business can be in the long run.

Pricing

Prices vary greatly between traditional rental and Airbnb offers. The price of traditional rental properties is essentially determined by the market. If other rentals in your area are priced around USD 1,200 per month, you can expect to pay a similar price. However, there will be times when you can deviate from this price base. For example, if your property is much larger or has many modern amenities, you may want to increase the monthly rent.

Airbnb's listings work a little differently in terms of price. Instead of pricing based on properties in the area, you usually calculate it based on estimates and the desirability of your Airbnb accommodation. For example, if your accommodation is near a landmark or in a popular city, you can charge more. However, you need to be careful. Pricing too aggressively can put people off and limit the number of reservations you would receive each month.

You must remember that you are competing with other Airbnb hosts in the area. Therefore, it may be necessary to make your rental rates more affordable to attract more attention. Once you have received many positive reviews and attracted more attention, you can continuously adjust your prices upwards.

Meet new people

If you like to meet new people and learn more about their stories, Airbnb is the best option. Every weekend, different guests can stay in your accommodation. This includes people from different cultural backgrounds, ethnicities and walks of life. While giving them the best holiday they can have, you will be able to take something away for yourself. This will allow you to grow as a person and ultimately improve your service as you work with guests who each have individual characters and attitudes.

On the other hand, if you prefer to have some consistency, traditional renting is the way to go. When tenants sign a lease, you know that they are the same party you will work with until the end of their lease. In some cases, you may be working with a particular tenant for decades. You can put your mind at ease because you can get to know them on a more personal basis. Then both parties can work together harmoniously and avoid heated dilemmas.

The only thing you need to watch out for is renting to bad tenants. People who are hostile or do not pay the rent on time make renting a nightmare. Therefore, if you choose to rent traditionally, you want to screen every applicant. You need to make sure that candidates have full-time jobs, a good rental history and are trustworthy.

Fees

One of the main disadvantages of attracting tenants to view your property is the listing fee you have to pay if you want to be listed on a property platform. This can be charged on a daily or monthly basis, depending on which property platform you use. If you do not market your rental property wisely, these fees can add up very quickly.

A cheaper option is to place your property on the Airbnb platform. There is no listing fee. You only have to pay the service fee per booking. Therefore, you do not have as much pressure to get people to book your properties.

Income stability

One of the most important aspects to consider when investing in both options is income stability. In general, you have more stability with traditional renting. Tenants are required to pay their rent each month according to the contract they signed in the lease before starting. It is nice to know when this money is coming in, as you may have to pay for repairs and regular maintenance.

You will get not so good income stability if you choose Airbnb. This is mainly due to the short intervals people stay in your accommodation. You may only be there for the weekend, and you do not know exactly when the next guests will arrive. Your reservations on the Airbnb platform can also make you seasonal. For example, if you have a beach front property, you will probably only get reservations in the summer when the weather is nice.

Property damage

With Airbnb, while you have the opportunity to meet all kinds of people, there is a higher chance that your property will be damaged. After all, it is so difficult to check every candidate who comes, especially if your Airbnb accommodation has a high demand every month. Once damage is found, you may have trouble finding the person responsible.

Traditional rentals are also prone to property damage, but you do not have to bear these costs yourself. This is because tenants can pay a deposit upfront to repair any damage that occurs on their behalf. This way, you essentially get a safety cushion, so you do not have to pay for costs you cannot be held responsible for.

Insurance

The great thing about these rental options is that they both offer insurance cover. Therefore, if something bad happens - like a fire or vandalism - you won't have to pay thousands of euros. With Airbnb, you can take out what is called Host Protection insurance. It covers damage from guests up to one million US dollars, and you do not have to pay a cent for this type of insurance.

With traditional renting, you have to pay for the insurance. However, there are many insurance options. From simple to comprehensive insurance plans, you can choose insurance that can be paid for in the long term and is suitable for the type of damage you are likely to suffer in your home or to the home.

Tenant or guest satisfaction

Customer satisfaction is hugely important when you are looking for more Airbnb reservations. Guests looking for accommodation in your area check these reviews in great detail, and a negative experience could refer them to your competitors. Therefore, you need to go all out to make sure guests are satisfied. This can be a challenge if you are not good with people or simply do not have enough time to respond to their needs.

However, with traditional rentals, you do not have to worry as much about tenant satisfaction as you do with an Airbnb rental. Sure, you want tenants to be happy and have no problems with your property. However, if they are unhappy, your rental business is not greatly affected. You can simply part ways with a tenant after their lease is up and rent your property to another tenant.

Final judgement

There are so many differences between Airbnb rentals and a traditional long-term rental. Both have their pros and cons, and it really depends on which property strategy you are looking for. If you are looking for more flexibility in terms of how long you can rent, Airbnb is the best option. However, if you want to adopt systematic practices and build long-term relationships with tenants, traditional renting is the better one for you.

Optimize your property listing on Airbnb.

Danny's focus on getting your Airbnb listing to the top of search. It’s called Airbnb SEO (Search Engine Optimization). Depending on the package you purchase, he gives you Airbnb specific suggestions for your listing (Basic), create a custom report based on your listing with specific suggestions (Advanced), or rework 100% of your listing and send you a custom report with additional info (Superhost). Additionally, you will find hosting tips in all the reports as this is a big factor in your search rank (i.e. reviews).

He also offers phone consultations, electronic guidebook creation, and other services.

[Full Disclosure: I’m a compensated advisor and affiliate for optimizemyairbnb.com.]

About Alexander Kelm

Alexander Kelm is a passionate value investor and runs the website Wall St. Nerd. Here, the passionate value investor writes in-depth articles on the topic of Value Investing. Value Investing involves analyzing a company's fundamentals and can be characterized by an intense focus on a stock's price, its intrinsic value and the relationship between the two.

Alexander Kelm offers online courses on stock investing.

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