You would be surprised at how frequent it is to sell an established Airbnb. Hundreds of homeowners sell their properties every year for a variety of reasons. In the case of Airbnb, the opportunity to showcase that the property can generate income is also included in the purchase price. That sounds great and all, but there’s a catch.
While anyone can purchase Airbnb properties, the new owner won’t be able to benefit from the Airbnb account tied to it. This means that the new owner of the Airbnb property will have to start from scratch, regardless of the excellent reviews, ratings, or current bookings.
Aside from the inability to transfer your Airbnb account to the new property’s owner, the selling process is pretty straightforward. In this guide, we’ll share insight about what you can and cannot do and give tips on selling your Airbnb for top dollar in 2023.
Let’s get started!
1. Understand Airbnb’s ToS Before You Sell Your Airbnb
First and foremost, you need to know that your host account will remain in your name even if you sell your Airbnb property. Because of this, the new owner would not be able to use the reviews or the traffic data. So while you could advertise that the property is a profitable Airbnb, potential buyers won’t be able to see (and consequentially won’t be able to use the data once they take ownership).
Airbnb hosts are identified by their profiles rather than their actual properties. By doing so, renters are sold on the individual host and the personalization of their experience, which is the main selling point.
To attract more potential buyers, emphasize the property’s unique features or upgrades that will allow the buyer to make the most of their investment. You can also use the positive reviews from previous visitors and highlight specific features they mentioned.
In other words, while buyers cannot benefit from all of your work to get your positive reputation on the platform, you are essentially giving them a playbook they could follow (if they so choose) to achieve similar success.
Note: Despite what other hosts may say on various forums online when you sell your Airbnb, you cannot sell your Airbnb account to the property’s new owner. Nor is it wise to make the new owner a “co-host” and replace your banking information and tax ID with theirs. We DO NOT recommend this!
Please read section 13.3 of Airbnb’s Terms and Conditions for more information.
2. Know Your Target Buyer
There are two primary sorts of investors: individual investors (your Average Joe types) and institutional investors (like BlackRock).
Usually, small investors’ approach to investing is similar to how a real estate agent finds properties for clients. Like a real estate agent, these buyers will use data that compare a property’s asking price and amenities with those of recently sold Airbnb listings in the area.
On the other hand, more prominent real estate investors judge properties based on their cap rates. But we’ll go into more detail a little later in this guide.
Not only do you need to know who your target buyer is, but you’ll also want to think about how quickly you need the deal to go. For example, if you sell your Airbnb to a cash buyer, regardless of their business size, you will likely have a much more manageable, stress-free sale. Whereas if you’re selling to a buyer who is relying on financing… Well, there are a lot of things that could derail the sale.
|Pros of Selling to a Cash Buyer||Cons of Selling to a Cash Buyer|
Attention! If you want to sell your Airbnb quickly and for cash, HomeGo can help. You needn’t worry about prepping your home for a tedious inspection or appraisal and trust that you’ll be presented with a firm cash offer–no strings attached.
For more information regarding how to sell your Airbnb, click here!
3. Show Off Your Property’s Value, Income History, and Potential Income
If your Airbnb is generating enough income to cover all the costs of being a host, that’s fantastic! You can use that to your advantage when you finally sell your Airbnb.
You’ll want to compile a booklet, ledger, guidebook, etc., that shows:
- Income History
- Monthly Revenue
- Occupancy Rate for 12 months
- Cap Rate
Highlight Earning Potential by Using Income History
The average cost in the United States earned $44,235 from their listings. American investors earn 63% or more than hosts in other countries. Depending on your location, hosts in specific markets could make much more than that.
One of the main reasons investors buy established Airbnb properties is the earning potential. In addition, in specific markets, it is more profitable to focus on short-term rentals rather than long-term rentals.
For the sake of argument, let’s pretend that you’re looking to lease a Santa Ana apartment with one bedroom. RentCafe recorded that the average monthly rent for the unit in October 2022 was $2,517, giving you approximately $30,204 in profit over a year.
However, you have the potential to earn more money by charging higher rates for shorter stays.
According to the graph above, an Airbnb in Santa Ana can generate $3,858 per month with a 70% occupancy rate. If the property earns that much for an entire year, that’s $46,296! A $16,000 profit isn’t too shabby, wouldn’t you say?
Of course, you don’t want to focus solely on earning potential. You want the buyer to see (and appreciate) the property’s value.
Highlight the Capitalization Rate
Your next step should be to calculate the value of your vacation rental business. For the most part, a property’s worth is determined by its “market” capitalization rate if it has a positive cash flow (cap rate). This is the rate of return a new investor would need to see on an annual basis to consider taking over the management of the property.
Investment properties, which include short-term rentals, are evaluated according to their expected future earnings rather than their actual past earnings, just as is the case with any other type of business.
As an investor, you’ll want to determine the fair market worth of your short-term rental by first estimating its financial performance over the next year. Ask yourself:
- Have you seen an increase or decrease in your daily rate?
- Is there a change in occupancy rates, either up or down?
- Do you have consistent property taxes?
- Is there any legislation in the works that could affect your ability to run a vacation rental business or the ability of a future owner to do so?
- Is there the possibility that future increases in occupancy taxes will cut into your profits?
Using last year’s data as a benchmark is good if things have been somewhat consistent. Add 2% to 3% percent for inflation, or 6.5% if you’re going by 2023’s inflation rates. Remember that a potential buyer may have a very different outlook on what is ahead. We found that valuing things more realistically than optimistically led to more accurate results.
You can find the cap rate for your Airbnb by using this formula:
Net Operating Income/Property Purchase Price x 100% = Cap Rate
Using the Airbnb example from above, here’s what the figures would look like:
|Monthly Rental Rate:||$3,858|
|Annual Gross Rent Income||$3,858 x 12 months = $46,296|
|Annual Operating Expenses
(excluding financing costs)
|Net Operating Income||$46,296 – $20,000 = $26,296|
|Property Purchase Price||$761,011 (as per Zillow)|
|Cap Rate:||$26,296/$761,011x 100% = 3.1%|
Although 3.1% is a low cap rate, indicating a lower amount of risk, most investors like a rate in the 5% to 10% range. But as Fortune Builders points out, not every cap rate is created equal. The level of danger you are willing to take is something only you can determine.
4. Create a Portfolio for Your Airbnb
A portfolio for the property, along with the income history, operational costs, and cap rate, is a helpful marketing tool that potential buyers may appreciate. Even if you can’t transfer your Airbnb account to the new owner, you can share the strategies you used to make your property profitable.
What Should the Portfolio Include?
It’s essential to have a goal in mind before beginning a new venture. First-time investors may not have a business plan for running a profitable Airbnb, but you do. You know what works and what doesn’t. In addition, your business plan may bring awareness to things the new owners may not have even considered.
When you’re writing out the business plan to include in your portfolio, be sure to include things like:
Some hosts prefer to hand the keys off to their guests upon entry; others do not. If you’ve installed a keyless entry system, be sure to have any paperwork (warranties, service numbers, codes, etc.) on hand.
If you’ve self-managed your Airbnb, you might want to include your day-to-day activities regarding managing your property. For example, provide phone numbers, email addresses, websites, or other contact information for any services you use, such as cleaning companies, landscapers, plumbers, handymen, etc.
Properties are listed on Airbnb for free, but there are other ways to get guests. Do you have a social media account(s) for your listing? Do you have a website or work with a lifestyle blogger who will review your property on their social media? Are you listed on a local tourist website? These are all things a new host will certainly appreciate!
How do you communicate with your guests? Are you available 24/7 via text or phone call? Do you have a phone specifically for your Airbnb guests? These things can all go a long way to improving the overall guest experience.
If you have unique features or offerings at your property, mention them in your plan. These can include a fully-stocked pantry, seasoned firewood on hand, access to a hot tub, laundry room, pets allowed, and (of course) the Wi-Fi password. In addition, Airbnb has a great article you can include if you want to throw the new owner a bone.
This is a “nice-to-offer but not necessary” inclusion that you may or may not wish to include with your portfolio. This can include a list of nearby tourist attractions, places with the best food, and points of interest.
Short-Term Rental License:
When you include your short-term rental license in your portfolio, you show potential buyers that your Airbnb abides by local zoning laws and health and safety standards. Transferring the license to the property’s new owner might be possible if you have your license and other essential documents, but that’s not usually the case. Nevertheless, the potential buyer knows that your property meets the requirements to get the STR license; therefore, it’ll be easier for them to get licensed.
Print out some of the best reviews and highlight key areas past guests have raved about. You can use the reviews alongside Instagram-worthy photographs to drive home the point that guests who stay at your Airbnb enjoyed their stay. This can reassure potential buyers that your property has been (and is capable of) a lucrative investment.
5. Sweeten the Pot with Furnishings
When you want to sell your Airbnb, consider including the furniture and décor because it can be a big plus. First, home staging can increase the asking price (up to 25% on average!) and help sell it quicker. Let’s say your Airbnb is a beach house decorated as such. While buyers may not like every design choice, they can appreciate the attention to detail.
Secondly, it’s easier for potential buyers to visualize themselves living in a home when it’s furnished and decorated (remember, not all potential buyers will be investors who intend on renting the property full-time).
Thirdly, turnkey Airbnb properties are in high demand from investors because they can start renting the property as soon as possible, even if that means making minor adjustments later. Some buyers would indeed want to do the decorating themselves, but others don’t want to be bothered.
And lastly, if you include the furniture with the property, you don’t have to pack up! Instead, you can hand the keys to the new owner–easy peasy!
HomeGo Makes It Easy to Sell Your Airbnb
There are countless reasons why an investor would want to sell off their investment properties. Sometimes a property isn’t performing as well as it once did, and the owner needs to get rid of it. Sometimes the investor’s investment plans change, and they want to invest in higher-end properties. Then you have some who want to leave the Airbnb business altogether.
Whatever your reasoning, it’s possible to sell your property quickly and easily. HomeGo helps investors losing money on their investments get out while they’re ahead.
The process is easy. All you have to do is call a HomeGo representative and answer questions about your property and situation. They will set up an appointment for a HomeGo agent to visit your property and make a firm cash offerright then and there.
If you accept the offer, you can close in as little as seven days without worrying about the deal falling through due to financial contingencies. But, of course, if your property needs some TLC, that’s A-OK too. When the agent does their walk-through, they’ll identify and estimate the repair costs and factor them in with their offer.
But, that said, you don’t have to pay the agent a commission (usually 5% to 6% of the sales price) or pay closing costs (the average being $6,905 in 2021, but can vary widely depending on your location), so that’s a solid plus!
If you’re eager to sell your Airbnb quickly and hassle-free, reach out to a HomeGo representative–you won’t regret it.