Up until 10 years ago, homeowners seeking to make a profit off of their home investment either had to rehabilitate a property and hopefully it will sell for a profit or rent out the home and pray that the tenants will pay their rent on time. Now, thanks to Airbnb, homeowners have the ability to lease out their property for a night, weekend, or long-term rental. However, some homeowners/entrepreneurs, have difficulty deciding which avenue they should follow in order to make the most profits. From this, Quality Business Plan asked our business plan writers to research and examine each option’s benefits and challenges to determine which choice best meets your needs.
Airbnb has been in existence for approximately 10 years. This organization is an online marketplace where homeowners and potential short-term renters may come together for mutual benefits. From the homeowner’s perspective, employing this option has a multitude of benefits. First, homeowners are able to rent out their home or just a room for whatever length of time they choose. Further, homeowners or ‘hosts’ are able to set their price and house rules. Often times, homeowners are able to ask for comparable prices as compared to local hotels. A challenge for the structure is that short-term visitors may do significant damage to the property. Fortunately, Airbnb does offer up to $1 million protection for the house.
From a financial perspective, utilizing this option is excellent for homeowners in high demand areas, such as high tourist areas or near business centers. A second financial benefit, based on research from our business plan writers, is that homeowners only need to rent out their home 10 to 12 times a month in order to break even. In other words, after approximately 10 nights, the other 20 nights would be profit, which may be quite substantial. However, breakeven points do vary from property to property. From this, we recommend doing a professional business plan utilizing proven financial models.
Home Rental Business
The home rental business is beneficial for owner seeking consistent and steady income. The reliable income is based on the assumption that tenants will pay for a home in a timely manner. A drawback with this scenario is that some homes may stay vacant for 30 days or more. This leaves the owner with no rental income whatsoever. When applying this business model to multiple homes, our business plan writers strongly recommend having a business plan written up with financial projections utilizing current market rent rates and associated costs.
House Flipping Business
House flipping has become almost a pop culture phenomenon because of the numerous TV shows and investors reaching celebrity status by partaking in the practice. A benefit for utilizing a house flipping business model is that business owners are able to recuperate their investments in a property in a relatively short time span. Usually 30 to 180 days. A drawback from house flipping is that there is no steady income. From this, business owners seeking to start a house flipping business should definitely have a professionally prepared business plan my business plan writer in order to fully understand the totality of the business model.
Published Books by Paul Borosky, Owner, MBA., Doctoral Candidate
In summary, homeowners have an additional option to make money off of their property. Not only can they lease out the property long-term or flip a property and get cash quick. They may also utilize a short-term rental business model for potential exponential returns on their property investment. As always, make sure to fully explore each business model utilizing a professionally written business plan and proven financial models to ensure optimal returns and understanding business model specific investment risks.
Author: Paul Borosky, Doctoral Candidate, MBA., Author