Airbnb vs. Traditional Rentals: A Title Fight for the Ages

One of the hottest topics these days among active real estate investors is whether or not the strategy of your traditional rental property makes more financial sense than the cash stream of an Airbnb, the peer-to-peer accommodations site that’s put booking everything from single rooms to entire villas a click away.

And now that this proverbial bomb dropper on the hotel industry has teamed up with airlines like Delta and Virgin America to offer travelers incentives for booking stays, there’s more chatter than ever about the pros and cons of short-term rental use – which may provide tenants and condominium/home owners with a steady source of income, but also raises questions about the uncertainty of a landlord’s property when it’s housing so-called “fly-by-nighters” as opposed to annual tenants.

The crux of the discussion really centers around the idea that it’s a difference between a commodity and service business. Frankly, Airbnb is in the hospitality industry, meaning it’s a hosting service and not a passive income role. You provide the furniture, supplies, amenities, etc., and if you want to go the extra mile, you might even leave a welcome basket or detailed report of other perks, which just made your to-do list get pretty long. And if you’re looking for tax advantages, you probably won’t find them in the Airbnb market, which requires a short-term rental sales and occupancy tax that rivals what hotels pay: roughly 16 percent.

It’s a no brainer that a traditional rental(s) would offer a few tax deductions that would be applicable in the area of expenses, like repainting, replacing damaged furniture, remodeling, etc. Still, there’s no denying that turning your property into an Airbnb listing would have its advantages, but they just might come at a cost, albeit financially damaging. Why? Simple: Airbnb means playing with your prices, allowing you to take advantage of the weekends and high seasons, or high demand and limited options.

Traditional landlords don’t always have that flexibility to raise rent randomly, on the weekends or during high season. There’s more to consider when tenants have been loyal and are continuing to provide the owner with a return on their investment. But if you’re a social butterfly, and making friends is as valuable as making a buck, then Airbnb might be for you. After all, getting to know people from different parts of the world and nation can be rather enlightening. Obviously, you don’t interact with tenants as much in a traditional rental situation. In fact, you might avoid each other all together, and that might be the goal.

So where does that leave us? Well, the growing economical market of an Airbnb certainly offers ways to make extra income that weren’t readily available a few years ago. Still, many of these opportunities require you being comfortable navigating unclear local laws, sharing your most valuable possessions with strangers and taking on additional legal liability. But if you’re willing to take on a bit of risk, and work a little harder, you could make some extra cash – and you might even make a few friends along the way.