Sell Your Airbnb For A Profit
What Happens When You Sell Your Airbnb ?
Whether you specifically bought your property to rent out on a 3rd party agents such as Airbnb, or you stumbled into Airbnb with your legacy home, you may now realize that you have a very valuable asset and should take steps to protect the value. Residents are starting to look at their real estate properties in a new light now that they are making money. Real Estate investing is not a new concept, but it is taking on new meaning to many Airbnb owners. When someone specifically buys a property as an investment, that is one thing, but when someone has been in their property for years and just uncovered a way to make money with an extra room, a bigger picture is revealed to them. For those AirBNBers that stumbled into real estate investing, there are a couple of details that you need to know before you sell or transfer your property to a new owner or family.
What you should know before you Sell Your Airbnb
To understand Airbnb, you first need to know their mission statement:
Airbnb’s mission is to create a world where people can belong through healthy travel that is local, authentic, diverse, inclusive and sustainable. Airbnb uniquely leverages technology to economically empower millions of people around the world to unlock and monetize their spaces, passions and talents to become hospitality entrepreneurs.
The key word here is hospitality. Airbnb wants you to use your space to be friendly and inclusive to travelers. Hospitality is defined as: the friendly and generous reception and entertainment of guests, visitors, or strangers. These adjectives are descriptive of a good host. Anyone with space can sign up on Airbnb and become a host. The Airbnb website even says no matter what kind of room or home you have, you can host. They are selling the illusion that their platform is about the host and not the property. The procedure to be on Airbnb is a process of becoming a host, not a home listing. Therefore, you need to start your understanding that Airbnb is about the host and not the home. This is important because your account is a reflection of you. According to the Terms and Conditions, you cannot transfer your account to another person. This is a clear condition in the policy. You cannot transfer future reservations and reviews. If you are caught breaking the Terms and Conditions, you could be penalized or banned from the platform. So how do you go about transferring your Airbnb property? The following are items that you should consider if you would like to move forward transferring you Airbnb.
1. You need to get real about your hosting business. Since you will not be able to transfer the Airbnb account to a new owner, you need to either create a company or closely document your activities that are related to the property. Once you document and/or create a company, you can leverage that in a sale. You will not be selling your Airbnb account, but you will be creating a portfolio for your property to be listed again on Airbnb. Things that need to be in that portfolio are:
- chart of accounts, expenses, and income,
- listing information
- house guidebooks
- amenity vendors
- email lists
- details of your special hosting style.
2. Is your property making decent money? If your property is supporting the expenses that it takes to host, that is great. One of the most important factors when evaluating an Airbnb business is understanding the expenses and income. Is the ledger for this business clear and easy to understand? Have the expenses been categorized correctly? Can a buyer look at these books and have a clear picture of the month to month revenue? If this property is generating money you should work to preserve the value that you have created while being an outstanding host.
3. Do you have a corporate identity and is it in good standing? Now that you will be asking for more money based on your Airbnb income, you are acknowledging that you are a business and you engage in commerce with your property. If you are a business, are you set up as a business? What designation does your business have and is that business in good standing? Have you paid all the fees and taxes? The importance of having a good standing business is that lenders and buyers will want to know this. Ultimately, if you are asking for a higher price, the lender’s requirements are very important. You should check with your local lenders and see what their checklist of items are when evaluating a business for lending. SuiteRev can connect you to proper legal professionals that will make sure you have the proper business entity and policies.
4. Cap Rate. When real estate investors look at buying a property, they evaluate a capitalization rate aka Cap Rate. The Cap rate is the return of investment of the real estate investment. This is a simple mathematical equation, the NOI, Net operating income is divided by the current market value. A high cap rate is beneficial to a buyer, a low cap rate is beneficial to a seller. Cap rate is just a starting place to evaluate value, there are other factors that need to be considered. Some other factors that buyers and real estate agents should understand are the factors that contribute to a low NOI.
SuiteRev helps you create your assets. Get the most money when you sell your airbnb
5. Location, Audience, and Categories. The phrase, location, location, location takes on a very broad definition in Airbnb. Airbnb promises to help travelers feel at home anywhere. The important thing to look at in addition to where the property is located is why people are choosing that location. There are many reasons to choose an Airbnb property. Perhaps the property is on a busy road with no views, but it is near a train station that takes them to a nearby city, or there is a stadium nearby for sports games or shows. What audience does the lodging business cater to and does that location fill a niche or a gap? This will be important to point out to the new owners. The Airbnb category that your property is listed under in Airbnb is also important to understand. Is your property in the family-friendly category or a work-friendly category? There is a collection for weddings and honeymoons and dinner parties. As you will see in the next item, understanding growth is important and utilizing categories and Airbnb collections could be a stepping stone to new audiences.
6. Understand your occupancy rates and understand the potential for growth. Although it is up to the buyer to do due diligence on your property, understanding growth is a good exercise for every Airbnb owner. There are ways to increase income for a property. Perhaps the person you are transferring the property to is your son with a new baby on the way. Don’t you want to help him understand the possible avenues for growth with your home? The first part is understanding your occupancy and deciding if there is room for growth. Growth can happen in many ways. You can adjust your days open, adjust pricing, adjust channels that you are listed on, increase direct bookings to avoid commissions, get new licenses to sell other items in your property. We at SuiteRev help hosts see new ways to increase the bottom line while being realistic in any limitations.
7. Are you a SuperHost? Ok, this is going to be the hardest thing to give up about your Airbnb account. Having a Superhost badge is like having an Olympic goal medal. It helps to separate you from the pack and it makes you reputable. If you offer your services to the next owner, you can technically become the manager of the property and keep your reviews, custom URL and status. The bank account information would have to be changed to the new owners. If you can work with the new owner and negotiate a contract, you will be able to keep your reviews and badge.
8. Are you a Plus Listing? Have you paid for the inspection and received a badge? Plus listings can demand a higher price, but again are connected to the host. Once you turn your listing off, the new owner will need to go through this process again. Like above, if you become a manager, you will be able to preserve the value of this higher ranking plus listing.
I made this list to help Airbnb owners start to understand the value that they have created in their homes. You should be proud of what you have created and make a plan to protect that transfer.