Choosing Right Rental Property Investment Strategy

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One of the best investment solutions for any investor is deciding to invest in the right rental property. Once you choose the right property, all you need to focus thereon is on reaping the significant returns with consistent incoming cash flow, which will help you stay afloat for a decent time. Rental property investment is considered as the best time to make good money in the real estate industry.

However, in the recent past, real estate investors have clouded thoughts about a brand new probable problem:

Should I opt for Airbnb rental or go with the traditional rental strategy?

Yes, we agree that the new ‘millennial age’ has introduced us to several new ideas in the real estate industry itself, and at the same time shaken the very core of this industry.

Investors globally are considering the new options for real estate investment such as Airbnb, but a part of them still wants to work with the traditional methods. Here we will guide you in understanding which can be the ideal rental property strategy for you.

#1 Consistent

By all means, one of the major advantages of rental properties in the traditional investment strategy method is consistency. If your property is in full occupancy, you know for sure how much income you will be generating month-on-month from your renters.

This puts you at ease financially, especially if you have taken a loan for buying this rental property. The reliable and consistent income source is what attracts several real estate investors.

If you consider the Airbnb option, the occupancy rate in this option is volatile. In a few months, you will have max occupancy and sometimes you will be struggling to find a single renter for the month.

If financial safety is what you are looking for, then traditional rental property investment is the option for you.

#2 Income

Like we mentioned in our previous point that traditional rental properties are a great way to make money—and there are plenty of good reasons to back that up! These properties are ‘chosen ones’ because they provide a steady income flow.

Also, another advantage, if the property is in one of the prime locations, then the occupancy and rental income are also on the steeper side, which is a win-win.

But when we consider the maximum potential, investing and owning a rental Airbnb investment often is a step ahead as compared to the traditional rental properties.

The Airbnb community is ginormous and increasing by the minute. There are over a million travelers who are constantly on the lookout for good holiday rental properties.

In the peak seasons, Airbnb’s are often rented at a much higher price than their standard rates, which is higher than the traditional rental option.

The peak season also brings an increased number of occupancies. In most scenarios and if placed at the right location, Airbnb does offer more returns than the traditional rentals. If you are looking for only maximizing your returns, then Airbnb is realistically the better option. However, this also does depend on the location and the kind of property you have.

#3 Tax

So, what is the mounting difference between traditional rentals and Airbnb rentals? The taxes! Long-term rentals will always provide better tax benefits, which does have a good impact on the return of investment.

Therefore, investors will often have several tax incentives that will coax them to further invest in real estate.

When it comes to Airbnb properties, it is a financial burden on the investor. Every single booking that you receive on your property, you will be paying taxes for that.

Depending on the local laws of your city, this may prove a deal-breaker for you. Before you invest your hard-earned money in an Airbnb, ensure that you have checked the local laws for owning an Airbnb rental property.

#4 Work

The real estate investors have to dedicate a significant amount of time for both the properties. However, for traditional rental properties, the investor after a point will be less involved. Once the tenants have moved in, the amount of work for the investor reduces marginally, reducing it to looking after maintenance, support, and rent collection.

With holiday rental properties, the investor has to invest a lot more time to ensure that the place is up and running. With every new guest checking in, a designated person or you will have to personally greet the guest, maintaining cleanliness and hygiene at the property at all times, and make sure everything is well-taken care.

Not to forget the constant interaction with guests from before booking until after they leave, and at the same time taking care of the existing guests. This hard work is the only reason that deters people from investing in the Airbnb or holiday rental investment strategy.

This has also given rise to hiring professional property management service, wherein the company will look after the everyday operations of your investment property. This option comes with both disadvantages and advantages.

Many don’t prefer this option due to the added cost, which does impact the investors’ return on investment. However, if you have found a property that comes with excellent returns, the expenses of such services can be bearable.

These services introduce professionals who are better positioned to run the property, making it easier for you to sit back and relax and only fret about the income.

Choosing the right rental property investment strategy

Honestly, it only depends on you. There are numerous factors at play, that you help you understand the ideal rental property investment strategy. Some properties will yield good returns as the traditional properties, but at par for Airbnb or vice versa. Therefore, every rental property should evaluate single handily.

Another alternative is depending on the rental property calculator. There are plenty available online. Simply add a few necessary details and the calculator will do the job. Personally, doing the research is tedious and time-consuming, therefore, depending on a tool that can give results in minutes is a good option. The tool compares similar properties within minutes and provides different investment options.

Pay attention to only a handful of numbers before you make the decision—cash return, capitalization rate, cash flow—for identifying the right investment rental strategy for yourself. All these elements are important for making a smart investment decision.

Top features to consider in a rental property:

  • Neighborhood: Depending on the kind of property you pick, look for the ideal neighborhood.
  • Crime rate: Avoid investing in a property that comes under the high crime area vicinity.
  • School and job market: Consider these things if you are an option for traditional rental investment.
  • Amenities: Be it any kind of property, the amenities you offer can be a real game-changer.
  • Average rent: Understand the average rent in the vicinity before investing. After all, you need a good rent for better income.

The deciding factor

Every city comes with good localities, every locality comes with a good neighborhood, and every such neighborhood will come with a plethora of good properties. To align all these elements, you need a good amount of research and footwork.

The ideal investment strategy for rental properties can only be backed by the correct numbers. Any rental strategy is a good choice, but it all boils down to picking the right property. To your study, pick the best property, and then move ahead with the commercial real estate investment strategy.

Want to learn more? Get in touch with us today.

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