Short-term real estate investments: Exploring the potential of Airbnb & house flipping

Investing in real estate has long been recognised as a safe strategy to generate revenue. Short-term real estate investments, in particular, have gained popularity in the past few years due to their flexible nature and higher earning potential. 

"Popular strategies for short-term property investments include the ever-popular Airbnb and flipping houses," says Andre van der Merwe, property development specialist at Chas Everitt. "While these can prove lucrative, just as any other property investment, potential buyers should carefully consider the price versus the expected returns." 

This blog explores the advantages, drawbacks, and advice on these strategies. 

Airbnbs 

It's an unassailable fact that the hospitality industry has been revolutionised by the advent of Airbnb. This short-term real estate investment involves renting out an owned property as short-term holiday accommodation. Since its launch, the site has boomed in popularity leading forward-thinking individuals to invest in character properties or properties in desirable locations with the sole intention of renting them out on Airbnb. 

Here are some of the advantages of this strategy: 

• Higher earnings than if your property were leased long-term

• More flexibility, as you can determine when the property is available 

• The ability to vet guests

Here are some drawbacks to becoming an Airbnb host:

• Stress of managing a property

• Revenue is not guaranteed and can fluctuate seasonally

• Unforeseen expenses such as higher utility bills

Advice for maximising Airbnb returns

• Location, location, location

Before investing in a property with the intention of creating an Airbnb, do extensive research on the market and look into the demand for rental properties within the area. Investing in a property close to popular attractions such as town centres, transport links, historical landmarks, or natural wonders is always a good bet. 

• Check out the competition 

Look into the other holiday accommodation that is available in the area. Think about what will set your property apart and how you will compete for guests. 

• Become a Superhost 

Superhost is a title given to hosts who consistently deliver a high-quality stay. It's based on several criteria ranging from how quickly you respond to inquiries to the number of night stays you've had. Becoming a Superhost means that your listing will be more visible to potential guests and is likely to boost your occupancy rate. 

House flipping 

This strategy involves acquiring a property with the intention of renovating and remodelling it in order to sell it at a higher price. Investors will purchase a property that has issues and add value by correcting those issues and making strategic improvements. It's a trend that has been on an upward trajectory since the early 2000s and shows no signs of tapering off. 

Here are some of the advantages of this strategy: 

• Quick profit through higher returns in a short period of time 

• It's a safe investment as the property market is more predictable than other markets 

• Enables you to build a variety of skills - from DIY to networking 

Here are some drawbacks to house flipping:

• Unforeseen expenses can arise and impact profits

• High barrier to entry as it can be expensive 

• Competition, which makes it difficult to find homes with ample opportunities 

Advice for maximising returns on flipped houses

• Scope to extend 

Ensure you research what type of renovations are permitted on the property and will be able to secure planning permission. It's also important to assess the feasibility of any additions you would like to make and if the property has the space and existing utility lines to support the planned alterations. 

• Focus on budget

Carefully plan your budget so you can accurately assess the viability of a project. Consider all costs and make sure the budget can accommodate worst-case scenarios, such as fluctuations in the cost of building materials or supply chain shortages. 

• Point of sale 

Selling the property is the last but arguably one of the most important steps in the house flipping process. To ensure that the hard work of the renovation does not go to waste, make sure to stage the home appropriately and entrust the marketing and sale to a dedicated estate agent.  

Both short-term investments offer incredible opportunities for capitalising on the dynamism that characterises the real estate market. For expert advice on property investments, reach out to a dedicated Chas Everitt property practitioner.