Chicago's Short-Term Rental Airbnb Investment Market
Chicago might be one of the best markets in America for short-term travelers and investors. According to Airbnb, in 2019 there were 500,000 travelers in 2020. 700,000 in 2017.
It is creating a new culture along with it, too. The lesser known neighborhoods, and their businesses, now benefit in unexpected ways.
The Overview: Airbnb In Chicago
Airbnb gives property owners with extra space to rent a platform to connect with travelers. Through the Airbnb platform, owners and investors in Chicago can list their property with images, amenities, and details for their ideal guests.
Chicago travelers look through the listings, and when a user finds the right place to rent, they can simply (and safely) book and pay.
The Airbnb platform makes it simple to rent out your garden unit or coach house or guest suite or any space that you only use occasionally.
Here are the Airbnb benefits for Chicago property investors include:
Surge pricing profits for events, Seasons, and weekends
Supplemental income
A nice place to house family and friends coming into Chicago
Airbnb guests get a local Chicago experience instead of being limited to hotels. We've seen all ages use Airbnb to save money versus a hotel because of additional amenities and a more home-y feel. Here are some of the benefits for travelers:
Airbnb's safe vetting and identification process
More options in more Chicago neighborhoods
The LOCAL Chicago neighborhood experience
Unique buildings
PRIVACY
LITTLE-KNOWN AIRBNB GEMS IN CHICAGO
Welcome to our rare brownstone in Downtown-River North. RIVER NORTH GALLERY on the Park w Parking
The apartment is located in River North in Downtown, Chicago. It's the place to be! Formerly home to many factories, it's modern mix of high-rises and historical buildings adds to the neighborhood's eccentric feel.
You can find some of the most popular restaurants, dive bars, lounges (nightclubs), jazz clubs and art galleries here. The area is ideal for a traveller. The apartment is near all major shopping and nightlife streets, while also being walking distance from Lake Michigan.
Do you know how many hundreds of thousands of people come to Chicago each year to go to a conference at McCormick or visit the Museums with their family? While the McCormick area is a sleeper for typical real estate investments, it is a hidden gem for Airbnb
AIRBNB’s EFFECT ON CHICAGO NEIGHBORHOODS
Airbnb’s impact in Chicago is a hot topic among property owners, city government leaders and community members. The news in the beginning of 2018 says that Airbnb raised $2.9 million for homeless services.
Some argue that Airbnb rentals hurt the market. They say that short-term rentals take away the option for longer term renters to claim space, leaving fewer rental options and driving up the prices. They also say that it takes away from the sense of community.
For these reasons, Chicago has put in regulations with the goal of keeping the sense of community and not driving up prices.
Proponents for Airbnb in Chicago know that the guests bring money into the Chicago communities where they are located. A visitor who might normally choose a hotel in the heart of Downtown Chicago instead chooses a unique rental in a lesser-known neighborhood. The restaurants, boutiques and other businesses in that area earn increased revenue as more guests stay in the area.
For Chicago property owners and investors, the home-sharing market offers a major benefit. In 2017, according to data from Zillow and Airdna, Short-term rentals on average made 40.1% more money than longer-term rentals. Airbnb investment properties give owners a major source of income to offset the cost of the mortgage. For homeowners who rent a room or the whole unit, home sharing is a way to supplement income or help pay for the home. For business owners with investment properties, it maximizes profits.
CHICAGO REGULATION FOR AIRBNB
While guests seem to want a more local experience through Airbnb, the growth has caused many cities to implement regulations.
Chicago passed regulations in 2016, and a supplement in 2017, to better foster home sharing in Chicago. Airbnb property owners now must upgrade their homes and experiences. Some home sharing opponents feel there is room for more regulation. Here are some components of the regulations:
Extra tax on the income generated from the property
Cap on how many units in a 5+ unit building can be rented via Airbnb — 6 units or 25 percent of the total units, whichever is smaller
Requirement for hosts to keep records on guests
Inspections of rentals from building commissioners
Primary residence requirement for single-family homes and buildings with two to four units
Another component is the Prohibited Housing List. Essentially, the owner of a building can place units on the list, meaning those spaces are ineligible for renting on Airbnb. As of 2018, about 91,000 apartment and condo units are on the list. That may sound like a lot of units, but it’s only about 7.6 percent of all Chicago housing units, so there are plenty of properties not on the list.
The list of properties on the list is concentrated highly in the downtown area, especially for big condo buildings, although there are properties throughout the city that don’t allow home sharing. Always check before purchasing a property as a rental. No matter how tempting it is to rent out a unit for profit, ignoring the rules can result in fines of $1500-5000.
HOW TO INVEST IN AN AIRBNB PROPERTY
Evaluate your readiness to jump into an Airbnb rental business with these questions:
Do you have the capital to invest or secure a loan for the property?
Can you cover the payments if you aren't able to rent out the place regularly?
Is the building suited to have short term rentals? (ie security, egress, maybe separate entrances)
Does your insurance allow for short-term rentals? (We know a few that do!)
Are you prepared for the possibility of damage to the property?
Do you want to manage all of the guests and increased turnover by yourself or with a management firm?
Do you know the latest regulations for Chicago Airbnb properties?
Do you have time to manage needy guests and bookings?
How much more income can you make, and is it worth it?
Will you handle cleaning, check-in and check-out, customer service and other issues yourself? If not, can you still make a profit when you hire someone to handle the work?
WHAT MAKES A GOOD AIRBNB INVESTMENT
Most Airbnb rentals in Chicago are unique. They stand out as an experience to remember rather than just a place to stay while in Chicago. When considering investment opportunities for Airbnb property in Chicago, here are a few factors to consider:
1. Location
Proximity to the downtown is one of the most important parts of the game. Imagine you are at traveler who has never been Chicago - you don't know about the neighborhoods or local tastes. Airbnb guests in Chicago want proximity and safety! Travelers want neighborhoods that are safe, close to amenities and give them easy access to landmarks in the City.
Landmarks for Airbnb travelers vary according to the guests you are trying to attract. You may attract business travelers with McCormick, sports fans with United Center or Wrigley Field. The museums, concert venues, and Hyde Park all attract various travelers to Chicago and your Airbnb.
Distance to public transportation is not as important as you think. While it helps for business travelers, it is not as big of an issue because Chicago has Uber/Lyft. That said, public transportation helps because renters want access any attraction in the city. Investing in a property with a prime Chicago location increases your chances of filling up your calendar with rentals.
2. Compliance
Regulations in Chicago can change at any time. Make sure a potential investment property meets current Airbnb regulations set by the City of Chicago. Ensure the property isn’t on the Prohibited Housing List. Verify that the building association or homeowners’ association doesn’t have restrictions in place on home sharing.
3. Amenities
What amenities does the property offer, or can you offer? Does it have outdoor space, a patio, a hot tub, a pool table, great views or a gourmet kitchen? What about parking? Those extra touches make your Chicago Airbnb more appealing to Airbnb guests who want a unique, homey experience.
4. Size
This is a sleeper. The size of the unit is an important factor because the bigger the unit, the more people you can sleep. The more people you can sleep, the more money you can potentially make (as long as it is compliant with Chicago's fire code!).
Some Airbnb guests want to accommodate a whole family. Others use Airbnb to find even larger spaces for reunions, retreats or other large-group travel.
5. Style and Character
Chicago homes with classic character and unique style often gain attention on Airbnb because pictures are one of the most important parts of your listing.
You don’t need to buy an old church to have a popular rental option. You might choose a modern-style loft space or a vintage apartment with exposed brick walls.
FROM LONG-TERM TO SHORT-TERM RENTALS
If you’re a property owner in Chicago, upgrading your home with Airbnb travelers in mind can be a ticket to making more profits with Airbnb. Simple cosmetic updates or renovations can make your Airbnb more appealing.
Here are a few ideas to boost revenue:
Simple Guest Amenities
Simple additions to your home make for great guests stays. Think of the things we take for granted at home, sometimes. Maybe a rain shower-head or free Wi-Fi and free parking? A fireplace? Coffeemaker?
Outdoor Space for Summer, Spring, Fall
Any outdoor space from a balcony to a backyard is a value-add to be included in pictures and to be upgraded for a great guest experience. Add seating if the space allows. Other options to upgrade outdoor spaces include plants, BBQs, hot tubs, and gardens.
Nice Finishes
You don't need to do a full renovation, but guests want to stay somewhere nice and clean. Take time to upgrade the kitchen, common areas, and any part of the property that guests may become attune to.
Create Your Own Theme
You'd be amazed what some art and knick-knacks can do for your place and for the photos. Add some decorative touches to give it a distinct theme. If your space is an industrial-loft, play up the contemporary industrial vibe in your color choices, furniture and decorations.
Home away from home
How can you make your airbnb homey and have your guests feel like they are home away from home? Adding little accents that make it feel more like home help a lot! Hang artwork on the wall, places flowers in a vase and display coffee table books in the living room. Simple touches make a big impact.
One way to identify upgrades you need to make is to spend the night in your own rental from the perspective of an Airbnb traveler coming to Chicago. If you were to rent that space for a vacation, what would you like? What would you dislike? What would you change?
What do you think? Ready to see what it looks like to create cash flow in Chicago. Go to contact us and request a call back, and we can help guide you on what a profitable investment looks like.