Are you considering buying and owning an Airbnb rental property in Prescott, Arizona? With the current slowdown in the market, it may be a great time to consider becoming an Airbnb host and investing in a vacation rental property.
Prescott is Arizona’s playground. Yes, that’s right.
Tens of thousands of people every year come to Prescott to enjoy our mild climate and annual events like the Prescott Frontier Days Rodeo, Acker Night, Christmas Courthouse Lighting, and the New Year’s Eve Boot Drop.
A Prescott Airbnb rental is one of the best businesses you can have here as there is always a need for short-term rentals.
However, there are many things that need to be taken into consideration before making such an important decision.
From licensing requirements to maximizing profits from your rental investment – understanding all of these factors can help ensure a successful purchase and ownership experience for anyone looking at investing in vacation rental real estate.
In this article, we will explore the benefits of buying and owning an Airbnb property (also commonly referred to as VRBO and short-term rental) as well as some tips on how to make sure your investment is profitable while navigating any challenges along the way.
Table of Contents:
- Benefits of Buying an Airbnb Property in Prescott, Arizona
- Licensing Requirements for Owning an Airbnb Property in Prescott, Arizona
- Current Interest Rate Environment for Purchasing an Airbnb Property in Prescott, Arizona
- Tips for Maximizing Profits from an Airbnb Property in Prescott, Arizona
- Challenges of Owning an Airbnb Property in Prescott, Arizona
- FAQs in Relation to Buying and Owning an Airbnb Property
Benefits of Buying an Airbnb Property in Prescott, Arizona
My husband and I have owned and operated The Shady Victorian, an Airbnb property in the heart of Prescott for the last four years. Overall, it has been a great experience.
Owning an Airbnb in Prescott can be a great way to generate income. We have benefited from significant profits every year since our Airbnb has been in operation.
A key benefit and advantage for us are that we were able to purchase our Airbnb rental on the same street where we reside.
Our immediate neighbor informed us that the owners were going to be listing the property for sale.
We were familiar with the property and jumped on the chance to purchase it.
And best of all, it was turn-key. All of the furniture was included. Being in proximity to your Airbnb rental is the absolute best way to protect your investment and keep your neighbors happy.
Because we live close by, we are able to take a hands-on approach to our hospitality Airbnb rental business and provide our guests with the best experience possible.
Another key factor in our success is that our Airbnb rental is a charming historic home, built in 1906, and listed on the National Register of Historic Places.
It once housed members of the Daniel Hatz family who were some of the earliest Prescott pioneers.
Daniel Hatz built the Governor’s Mansion which is located at Sharlot Hall Museum. His daughter, Bessie Hatz Bork, was once considered the most beautiful woman in all of Prescott.
Our guests really appreciate the history of the Airbnb rental. We have added many historic touches throughout the rental to enhance our guests’ experience during their stay. They leave learning a bit about the history of Prescott.
Our Airbnb is also large enough to accommodate families. Guests appreciate the cute front porch and a sizeable front and backyard.
Our Airbnb rental also happens to be located on the most historic and iconic street in all of Prescott.
The biggest plus for our guests is that our Airbnb is within short walking distance of the Prescott Courthouse Plaza where all the excitement happens.
Shopping and restaurants are everywhere and you don’t ever have to get in your car.
As Airbnb owners, we have had the pleasure of meeting many people from around the country.
Families who travel from across the U.S. to bring their kids to Embry-Riddle Aeronautical University for their education often book with us.
Additionally, every year there are many couples who are married at the Prescott Courthouse Plaza. Many wedding parties have booked stays at our Airbnb and many family reunions, bridal and baby showers, too.
This year our Airbnb will be host to the producers of the Whiskey Row Off-Road Mountain Biking Event.
In addition to rental income, there are other financial gains associated with buying an Airbnb property, like appreciation of the property’s value over time, and tax deductions related to maintenance costs.
Rental income is one of the primary benefits of owning an Airbnb property. By renting out your home or apartment on a short-term basis, you can earn money that would otherwise go unearned if you were just using it as a traditional long-term rental.
If you do things right, there is as much more that can be made each month. It’s all about taking the Airbnb rental business seriously and treating it as a hospitality business which it is.
Additionally, depending on market conditions and other factors like location and amenities offered at the property, there may be potential for appreciation in value over time.
We have seen a significant increase in appreciation for our Airbnb, even when you consider current real estate market conditions.
Owning an Airbnb property also offers some unique tax advantages that may not be available with other types of investments. For example, owners are able to deduct certain expenses related to maintaining their properties from their taxable income each year – including repairs and renovations made during the course of ownership. This could potentially result in significant savings when filing taxes annually.
Owning an Airbnb property can provide increased visibility for businesses located near your Airbnb rental.
Guests who stay at my Airbnb explore and frequent nearby restaurants and businesses while they’re visiting.
This leads to more customers patronizing local Prescott establishments which benefit business owners (many of which are my friends) and residents alike by providing additional economic activity within the Prescott community.
Licensing Requirements for Owning an Airbnb Property in Prescott, Arizona
When considering investing in Airbnb real estate in Prescott, the number one thing that must be determined is whether a short-term rental is allowed in the neighborhood or subdivision you are considering.
Performing due diligence in this regard will save you headaches and grief later.
Check with the City of Prescott, your real estate agent, and get access to any covenants, restrictions, and homeowner’s association regulations that may exist.
Talking to the neighbors nearby the Airbnb rental property is also helpful. Many problems with short-term rentals arise from unhappy neighbors.
Just the mention of a planned Airbnb rental to prospective neighbors may result in pushback.
Talk with the neighbors and let them know the potential plans for the property in advance.
Even if a vacation rental is allowed in the neighborhood, you may find that some neighbors who are opposed to Airbnb rentals can and will cause trouble for you and your guests which isn’t good for your vacation rental business.
Knowing the best location and what type of property would best suit you (i.e., house, condo, cabin) are other major considerations prior to purchasing.
The City of Prescott has a very straightforward licensing procedure. Follow it and you will be golden.
Licensing regulations vary from city to city, so it is important to research what your specific municipality requires before getting started.
Generally speaking, most cities require a business license for any rental property that will be listed on Airbnb or other short-term rental platforms like VRBO.
Additionally, many cities have restrictions on how long guests can stay at a given property as well as noise ordinances and parking requirements that must be followed.
State and federal regulations also apply when owning an Airbnb property in Prescott.
It is important to understand the state’s landlord-tenant law which outlines the rights of both parties involved in a rental agreement.
The Fair Housing Act is another important regulation that prohibits discrimination against potential tenants based on race, religion, gender identity, or sexual orientation among other protected classes.
All taxes related to renting out your home must be paid according to state and federal guidelines including income tax payments for any profits made from renting out your home through Airbnb or similar services.
I use Avalara to report my state and local taxes. They make it so easy. All I have to do is fill out an online form with the number of nights, and gross income each month, and Avalara takes care of the rest. The cost for Avalara’s service as of the date of this writing is $27.00 per month. It is well worth it.
Current Interest Rate Environment for Purchasing an Airbnb Property in Prescott, Arizona
Interest rates are elevated which has caused the real estate market to cool here somewhat.
Still, the inventory in the Prescott area is low, especially for homes that are in a desirable location and don’t need a significant renovation investment.
Redfin reports that Prescott’s housing market is still competitive, meaning there is still demand for homes in Prescott.
The Red Fin website states: “In December 2022, Prescott home prices were down 8.1% compared to last year, selling for a median price of $577K. On average, homes in Prescott sell after 65 days on the market compared to 33 days last year. There were 99 homes sold in December in 2022, down from 147 last year.”
Average homes, not necessarily Airbnb rental real estate, sell for about 3% below the listing price and are on the market for an average of about 67 days. Proven Airbnb rentals on the market will generally sell for more. Homes that are hot and desirable (like downtown Prescott) are typically sold within 26 days.
Tips for Maximizing Profits from an Airbnb Property in Prescott, Arizona
Setting the right price for your Airbnb property is essential to maximizing profits. Consider researching comparable properties in the area to get an idea of what other hosts are charging. This can be done by accessing the Airbnb and VRBO websites and searching for homes similar to the ones you are considering for purchase.
The above step is pretty much eliminated for us because we use Evolve Vacation Rental Management to manage our Airbnb.
We have been very happy with Evolve’s performance and it makes the operation of our Airbnb rental so much easier.
With Evolve, we don’t have to worry about offering discounts or deals to attract guests. They do a great job of using an algorithm to set the best price for us, much like the airlines operate.
Utilizing online platforms like Airbnb and VRBO can help you reach more potential customers from around the world. This is another thing that Evolve Vacation Rental Management does for us.
Evolve will come to your property and take professional, high-quality photographs. They will write and prepare your rental listing and advertise it on every vacation rental platform there is. This alone saves you time and money.
Evolve makes sure that your listing description accurately reflects what guests will experience when they stay at your property.
You can also interact with your guests through the Evolve online platform. Easy peasy.
Creating unique experiences is key if you want your rental property to stand out from the competition.
Think about offering activities that appeal specifically to tourists visiting Prescott such as kayaking, horseback riding tours, wine tastings at local vineyards, or even guided hikes through nearby trails and parks.
These types of experiences not only make visitors feel welcome but can also increase revenue for both yourself and local businesses in the area.
Challenges of Owning an Airbnb Property in Prescott, Arizona
Now, down to the nitty-gritty.
There are some challenges that come along with being a landlord. Managing maintenance and repairs is one of the biggest issues for owners of rental properties.
Regular upkeep is essential to keep your property looking its best and make sure that it meets all safety standards. It’s important to stay on top of any necessary repairs or upgrades so you don’t end up dealing with costly problems down the line.
You should also consider setting aside money each month for unexpected expenses like plumbing or electrical work that may arise during peak season.
We have a construction contracting business, so we have an advantage over most in the Airbnb rental business, especially when it comes to more expensive repairs or damage.
It’s important to assemble a team that can be dispatched to the Airbnb rental at any time for repairs or emergencies.
In fact, the City of Prescott requires someone to respond to a guest’s concerns within 45 minutes of being contacted.
So, if you do not live within 45 minutes of where your Airbnb rental is located, you need to have someone that will respond for you.
We have a great cleaning team for our Airbnb rental property. Katie with Airtidy is the best in the Prescott area.
However, we are still hands-on when it comes to our Airbnb.
We make sure our guests have a handwritten welcome card and a basket of goodies. We also include a bottle of complimentary wine. Including special touches like this always makes our guests feel special.
We also provide complimentary toiletries, coffee, sugar, spices, and condiments. The kitchen is stocked with every type of appliance that you would want. Believe me, it is appreciated by our guests.
There is nothing worse than staying at an Airbnb that is lacking the basics. Going above and beyond will bring your guests back, again and again, every year.
And, yes, we occasionally replace light bulbs, clean the outdoor grill and fix little things here and there.
Dealing with unruly guests can also be difficult for Airbnb hosts. There are stories I could tell you, but that wouldn’t be productive. You are dealing with the public and it’s the hospitality business. Enough said.
While most people who book through Airbnb and VRBO are respectful of their hosts’ homes, there will always be those who don’t follow the rules or treat your property as if it were their own home.
This has happened to us a number of times, but nothing that was so terrible, a little extra cleaning wouldn’t solve it.
For those items that are accidentally damaged, Evolve Vacation Rental Management handles the claim for us.
Evolve reimbursed us for a broken porch swing, using their accidental damage protection.
The amount of coverage is up to $3,000 for each stay. Another great thing about Evolve is the peace of mind of knowing that you are covered from accidental damage to your property.
It’s important to set clear expectations from the start by including house rules in your listing description and having them available at check-in time as well as enforcing these rules throughout their stay if needed.
If someone breaks these rules, you should take action immediately by contacting Airbnb and VRBO support staff if necessary or asking them to leave without refunding their payment depending on how serious the violation was.
In our case, we simply call Evolve Vacation Rental Management and they will communicate directly with the guest. Another great reason to use them as your Airbnb rental management partner.
FAQs in Relation to Buying and Owning an Airbnb Property
Is it worth buying an Airbnb property?
Buying an Airbnb property in Prescott can be a great investment, depending on the location and market conditions. It offers the potential for high returns as well as a unique lifestyle experience.
However, it is important to consider factors such as local regulations, rental demand, maintenance costs, and the competition before making any decisions. Ultimately, whether or not buying an Airbnb property is worth it depends on your individual goals and financial situation. It’s a great option for retirement income.
Is buying an Airbnb profitable?
The profitability of buying an Airbnb depends on a variety of factors, such as location, amenities offered, demand for rentals in the area, and pricing.
Generally speaking, if you purchase a property in an area with high rental demand and offer competitive rates compared to other listings in the same market, then it is possible to make a profit from owning an Airbnb.
However, as with any real estate investment, there are also potential risks associated with this type of investment that should be taken into consideration before making any decisions.
Ultimately, the success of an Airbnb investment depends on a variety of factors and requires careful research and planning.
How much does an Airbnb owner make a year?
The amount an Airbnb owner can make in a year varies greatly depending on the location, size of the property, amenities offered, and the number of bookings.
Generally speaking, Airbnb owners have reported making anywhere from $1,000 to $10,000 per month.
However, some hosts (like us) have been able to generate significantly more income through their rental properties by leveraging local events such as rodeos or festivals that draw large numbers of visitors.
Additionally, factors like seasonality and demand can also play a role in how much money an Airbnb owner makes annually.
For example, in popular tourist destinations or areas with high rental prices, an owner can generate significant income from renting out their property.
However, in less desirable locations or areas with lower rental rates, profits may be much lower. Ultimately, it depends on the individual situation and market conditions.
Ultimately, the amount of money an Airbnb owner can make in a year is largely dependent on their individual circumstances.
It is important to understand the licensing requirements and current interest rate environment before making such an investment.
Additionally, it is beneficial to have tips on how to maximize profits and knowledge of any potential challenges that may arise when buying and owning an Airbnb property.
With proper research and planning, investing in an Airbnb property can be a rewarding experience with long-term financial benefits.
Are you interested in buying or owning an Airbnb property in Prescott, Prescott Valley, Chino Valley, or Dewey? Let us help you discover the unique lifestyle of Northern Arizona. Contact us today to learn more about how we can assist you with making this dream come true.