10 Must-Follow Tips for Buying a House for Airbnb in 2024 – Defining Goals, Property Type, Tax Terms & Conditions

Buying a house for Airbnb is an interesting alternative to developing your income. Indeed, this famous platform is today essential in renting furnished tourist accommodation. But the process remains framed by the law, and the slightest infraction risks costing you dearly. Such investment can generate much more income than a traditional rental, especially if the property is high-end. In this article, we will advise on buying an apartment for rent.

What are the advantages of buying a rental property? What precautions should be taken before buying? Here are 10 tips for a successful rental investment in Airbnb.

Why you should consider buying a house for Airbnb

Real estate goes through cycles, but demand is growing due to rising demography, the increase in single-parent families or single people, the scarcity of building land, etc. To meet this need, rental investment offers many advantages:

• Acquiring an apartment, a studio, or a house is to buy a tangible and durable asset that will always keep an intrinsic value on resale, but also less volatile than the stock market, for example.
• Real estate rentals benefit from credit leverage. With a small personal contribution, you can buy a property partly financed by rents collected, leveraging a tangible asset. Credit-linked insurance adds security, covering repayment in case of death or disability of one party.
• With a rental property, you keep control of your investment: you are the one who makes the decisions! To help you, CHM Inc. offers many services to manage your rentals with complete peace of mind and maximize your profitability.
• Rental real estate provides a decent return (between 5 and 10% on average) thanks to the rental income received and the potential capital gain on resale. We give you all the tips to make a good purchase! In addition, if you opt for a tax system, you further reduce the overall cost of your rental property project.
• Buying an apartment to rent out is an attractive solution for preparing for retirement, thanks to the additional income generated by rents, and a good strategy for passing your assets to your children.

Are you convinced of the benefits of investing in rental property? Now let’s see the purchase criteria and steps for a good return on investment.

1. Define your investment goals

Before jumping headlong into the search for a nice apartment to buy to rent, it is necessary to determine your objectives:

• Build long-term wealth?
• Receive regular additional income?
• Realize a capital gain on resale?
• Reduce your taxes?
• Recover housing in several years to live there?
• Become famous in the world of vacation rentals?

Your choices will influence the property type, location, and tax arrangement. Opt for a well-maintained apartment in a high-demand area for higher rental income. Alternatively, invest in an older property to renovate and increase its resale value. When inheriting property, explore ways to minimize inheritance taxes.

For buying a house for Airbnb, don’t hesitate to contact a wealth management advisor to carry out an asset and personal assessment: age, marital and family situation, distribution of your current assets, available reserves and savings capacity, current loans, level of taxation, etc.

This analysis allows you to obtain a global vision to make the right decisions and anticipate the next stages of your life (marriage, child, studies to pay, dependency on a parent, etc.) as well as the risks and hazards of life (loss of job, accident, death, etc.).

2. Set your budget and financing

Now that you know why you want to buy a house for Airbnb to rent out, it remains to determine the envelope amount and how you will finance your project. Several criteria must be considered:

• Your available savings;
• Your debt ratio and your borrowing capacity;
• Your level of income (to which will be added the rents provided by the future rental, retained by the banks up to 70% of the amount of the rent);
• Your possible savings effort to determine the amount of your future monthly loan payments.

Thanks to the leverage effect of credit, you can acquire real estate even with a small personal contribution. However, keep in mind that the rent does not always cover the monthly payment of your loan and that you will have to be able to repay the loan even in the event of a rental vacancy.

3. Market research for buying a house for Airbnb successfully

The decision to buy a house for Airbnb is crucial. And the location of a property is certainly THE criterion not to be overlooked. The attractiveness of the municipality, rental demand, population growth, employment pool, transport, services, schools, shops, leisure, green spaces… many criteria come into play. Of course, it is impossible to tick all the boxes, but renting accommodation must meet the primary needs of your future tenants.

Start by targeting cities near you: you already know the area and it will be easier to manage the apartment rental later.

Browse real estate sale websites to assess the amount of housing available for purchase and on the rental market, price levels, average rental rates, etc. You will see if rental tension exists if the rents charged make it possible to make a rental investment profitable if specific neighborhoods are less in demand.

4. What type of property is worth buying for Airbnb tenants

In general, small areas (studio and one-bedroom or even three-bedroom apartments) offer the best returns, especially since rental demand for this type of accommodation is vital. Beyond that, larger properties are less profitable but limit rental vacancy and the risks associated with frequent changes of occupants.

• 1BR studios and apartments are perfect for students or young professionals. The demand is located in cities, near universities and colleges, or in the city center to take advantage of the many services, transport facilities, and the animation that reigns there. These areas are often offered for furnished rentals, with a rent difference of 10 to 20% higher than for unfurnished rentals;
• The 3Br and 4Br apartments suit young couples (with or without children) and families. Favoring a location in large cities and medium-sized towns with high demand is safer. Proximity to business areas (tertiary or industrial) or direct access to the transport network, the presence of leisure facilities and green spaces will be all assets to attract workers and parents of young children;
• The detached house can generate a good return if well located because the rental vacancy is low and damage is infrequent. To attract families, wealthy working couples or young retirees, invest in a house in a quiet area, close to schools, cultural venues, and green spaces… and choose a house with an exterior, it’s a real plus!

5. What is better: new or old apartment

Buying a new or old property to invest in Airbnb is quite possible. Advantages and disadvantages, here are the elements to take into account to choose:

7 points to think of when choosing between the old and new property

Points	Things to consider
Selling price	On average, selling prices for new properties are 15 to 20% higher than for old properties. This difference is explained by the quality of a new property: construction and equipment to the latest standards, insurance, guarantees, parking included, etc. In addition, when you buy a new apartment, you have to pay VAT to the developer, which is not the case for an old property.
Expenses	The charges are lower in the new and there is no work to be expected. Conversely, an old home will need more regular maintenance and work.
Notary fees	The acquisition costs and notary fees amount to 2 to 3% in the new, against 7 to 8% in the old.
Acquisition procedures	Acquisition deadlines and procedures are more restrictive in new real estate. By buying in the old, you can rent faster.
Location	It is easier to judge the attractiveness of the neighborhood where an old dwelling is located than a new one, often built in new development areas out of the city center.
Tax exemption schemes	Rental investment in new construction is often associated with tax exemption schemes. In the old purchase, taking advantage of tax advantages on the taxation of rental income is possible. But it all depends.
Capital gain	On resale, a new apartment is no longer new… and therefore suffers an immediate depreciation: its potential for capital gain is lower than for an old property which can appreciate over time.

At first glance, purchasing an old property seems more flexible and less expensive, but it will be necessary to study the project as a whole, with a long-term vision, to have all the cards in hand, particularly on the cost of work and maintenance.

6. Consider buying a house for Airbnb as an investor

When you want to buy an apartment to rent out directly, you have to keep a cool head and remain objective in your decisions to avoid mistakes. Your perspective should be that of an investor: does your product correspond to a market? Does it meet the needs of future tenants? This is all that matters to make a profitable investment.

Do not turn away from your objective because of an attractive price in a disaster area, because the floor at the tip of Hungary is superb, or because this 4BR is in excellent condition. However, it is located near a university… You will have understood it, you have to put your affect aside when you buy to rent.

Another piece of advice, especially if this is your first rental investment: don’t think too big. It is better to start with a “small,” realistic, and sustainable project in the long term that will not choke your daily budget. You will be able to develop your housing stock afterward.

7. Look into real estate taxation terms and conditions

When buying a house for Airbnb or any other short-term rental venture, it’s essential to consider the taxation aspects to ensure that you maximize profitability and comply with all legal requirements. Taxation can significantly impact your rental income and overall financial situation, so studying the relevant tax measures based on your specific circumstances is crucial.

7 taxation aspects of short-term rentals

Aspect	Description
Rental income tax	Tax on the income earned from renting out the property is to be reported on personal income tax returns.
Local and municipal taxes	Additional taxes, such as occupancy or tourist taxes, are imposed on short-term rentals.
Deductible expenses	Expenses related to operating the Airbnb property that can be deducted from the rental income for tax purposes.
Depreciation	A tax deduction allows a portion of the property’s value to be deducted over time to account for wear and tear.
Tax reductions/incentives	Tax breaks or incentives are offered for short-term rental properties that meet certain criteria or support local tourism.
Transitory tax regulations	The regulatory environment for short-term rentals can change, and new taxes or regulations may be introduced.
Consultation with a tax professional	Seeking advice from a tax pro or accountant experienced in rental income and property taxes to optimize your tax strategy and ensure compliance.

Each situation is unique, and the tax implications of an Airbnb property can differ widely depending on many factors. Taking the time to research and understand the tax aspects of your investment will go a long way in maximizing your profitability and avoiding any unforeseen tax issues.

8. Managing property on your own or delegation to the rental management company

After buying a house for Airbnb, as an owner, you can entrust your property’s management to a real estate agency or keep this prerogative for yourself and rent your apartment directly, each time with advantages and disadvantages.

Delegate rental management to a third party

The property management service is divided into two parts: marketing (visits, studies of files, drafting of the rental lease, etc.), and day-to-day management (rent collection, sending receipts to the tenant, monitoring of repairs at the owner’s expense, management of the exit of occupants, etc.).

These services have a certain cost: on average, from 10% to 30% of the rent for day-to-day management. Other indirect costs may be added, especially for small works, because the agency calls on partner craftsmen, whose prices are not always competitive.

Going through professional hospitality management can relieve you of the search for tenants and regular monitoring. However, this solution also relieves you of a significant part of your rental income. It has a major drawback: the loss of control over the decisions that affect your property: choice of tenant, choice of craftsmen, choice of materials, etc.

Delegated management is suitable for owners who do not wish (or cannot) take care of their rental and who agree to reduce their rental yield. You may consider our professional Airbnb property management services, which will help you succeed on this platform quickly.

What is the point of managing your property alone?

First of all, why “alone”? CHM’s mission is precisely to support you in all the steps related to rental management. It is also preferable to be supported to avoid errors and any disputes that may arise.

Renting your property directly allows you to control all decisions and limit costs. You also have a direct relationship with the tenant, making it easier to avoid misunderstandings or to react quickly in case of difficulties (unpaid, neighborhood disturbances, etc.).

In addition, independent rental management gives you cost control:

• Either you are confident enough to manage the aspects of renting out, drafting the lease, entering and leaving the premises, etc., on your own. ;
• Either you choose to be accompanied on certain points by an online rental management software like BailFacile. A good solution to save money and time while having the support necessary for the success of your rental!

The only downside, renting and directly managing an apartment requires involvement on your part, in time and legal or regulatory knowledge. In return, your rental yield could increase by more than 20%! A non-negligible sum that can be invested again… in rental real estate. Especially since there are inexpensive solutions to facilitate property rental management.

9. Select your tenants for Airbnb carefully

Property owners and landlords mainly fear three problems:

• Unpaid rent for the accommodation;
• Low level of occupancy of the property;
• Damages and defects after tenants.

As zero risk does not exist, the choice of renters is a crucial point in the success of your investment.

Studying the rental file is important to select tenants objectively. Engage in conversations with candidates, showing interest in their life, hobbies, and plans (while respecting personal boundaries). This interaction helps detect essential signals, like distant workplaces or strong travel desires, which may impact their lease duration.

In any case, take the time to choose your guests. It is better to lose two weeks of rent than to select a bad profile.

10. Insure yourself against rental risks

To make your rental property investment profitable, it is strongly recommended that investors take out a rent guarantee investors (RDI) to protect themselves against unpaid rent and possible damages.

Generally, it takes 1.5 to 2.5% of the amount of the rent to be insured against these rental risks. Do not hesitate to compare the offers of traditional insurance companies or online brokers to find the best prices and services.

As a conclusion

The right choice of buying a house for Airbnb is key to success. Factors like location, property condition, and taxation directly impact profitability. A well-chosen property can boost income, while considering tax arrangements can optimize returns. Thorough research and careful decision-making are essential for a profitable venture.

Frequently asked questions about
buying a house for Airbnb

Updated on: 2024-10-01. Author: Karina

Tags: Airbnb management