AirBNB Host: How to Analyze property Cash Flow
A common question I get when working with new and experienced AirBNB hosts is “How much rental income can my property generate?”
Great question, and really isn’t this the main reason or one of the primary “Why’s” you decided to become an AirBNB host? Its’s okay to admit it! It is why I wanted to get into becoming an AirBNB Host!
For your cash flow analysis to be accurate, you need to know how much rental income a comparable property in your area will generate.
There are a few ways to determine property cash flow analysis.
- Check rental property listings in your area
- Review rental property history
- Get a rental appraisal
If the property is already rented, this is easy. This was the case with the property I used for the example — all three units were already rented when I bought the triplex, so there wasn’t any guesswork involved. Better yet, if the property is occupied, ask the current owner for a detailed rental history. This not only lets you know how much rent has been generated by the property but can also give you good insights into vacancy trends.
On the other hand, things can get tricky if the property is vacant or owner-occupied. A rental history is a good indicator for a property that’s vacant but had previously been used as a rental. If no rental history is available for that property, check rental listings for comparable properties in the area, ask a local property manager for their opinion, or get a rental appraisal done. Appraisals can be expensive, but many investment property lenders require one.
Err on the side of caution and be conservative when estimating rent in your analysis. If the property ends up renting for more than you think, great. But remember that as a responsible investor, you want to know what the property’s cash flow will be if things don’t work out perfectly.