Airbnb allows property owners to rent out accommodation to the public for a fee. Anyone with extra space, such as a spare bedroom, annex, or even a whole property, can start earning extra money from the platform. As such, Airbnb offers a tremendous economic opportunity for those looking to supplement their pension or wages.
In this post, you’ll learn how to start an Airbnb business and what you need to do to make it lucrative. Read on to learn more.
Before we dive into the “how” of starting an Airbnb business, it’s helpful to ask why you would want to start one in the first place. While everyone is different, most people share the following motivations for doing so:
Airbnb has a vast market. While it is popular among vacationers, many people on business trips also use it. There are many opportunities to build a thriving Airbnb business, even if you don’t live next to a tourist hotspot.
With Airbnb, you can be as hands-on as you want. However, you should always prioritize guest satisfaction. If you get bad reviews, you may have to lower your prices or reconsider how much (or little) you get involved in running the place, making sure it’s clean, and so on.
Most hosts welcome guests and introduce them to their accommodation. They also answer quick questions and tell guests how they can get in touch with them if there is a problem. Other than that, the majority of hosts leave their guests alone for the duration of their stay. Once the rental ends, they clean the rooms to prepare them for the next guests.
If you don’t want to manage your Airbnb rental (or you’re going to be away), there are alternatives. For instance, you can leave keys in a coded key box that guests can access when they arrive. You can also hire a cleaning company to come in and prepare the rental for the next guest if you don’t want this responsibility.
In this section, we will present a step-by-step process for starting an Airbnb rental. Please note that some areas of the country do not permit short-term rentals. Airbnb should tell you immediately whether your address is eligible or not.
If you already own the property you’d like to rent out, then you can skip this step. If you don’t, you’ll need to set your budget and choose a location.
Learning how to start an Airbnb business without owning a house is easier than you might think. Start by asking yourself the following questions:
Once you know who you’d like to target, the next step is to set a budget. You’ll want to approach this just like any other real estate investor, thinking about the yield on any property you are considering.
In many cases, you will find that the yield for Airbnb properties is higher than you expect. For example, a property that requires a $20,000 deposit could possibly generate $100 per night (compared to just $1,000 a month if you rented it out as a regular apartment). However, you may need to check occupancy rate limits in your area. There may be rules on how long you can do short-term rentals in your area.
If you’re setting up an Airbnb business as an investor, it’s good practice to form an LLC. Having a brand name for your rental makes it more memorable and encourages people to recommend you via word-of-mouth. It also protects you from certain business-related losses.
Don’t go for something generic like “Lakeside Cabins.” Instead, choose something original that will stick in people’s minds, such as “Cara’s Tree-Top Retreat.” The more authentic you are, the more bookings you’ll get.
Airbnb properties let you generate a large second stream of income (alongside your primary day job or pension), generating taxes. Airbnb calculates these taxes for you, depending on your location.
However, you will need to keep track of expenses associated with running your business, such as cleaning and repairs. Accountants can help you determine your net taxable income more accurately. They can also help you manage the tax implications of renting out accommodation you own (including advising you on sales tax and the local occupancy tax).
If you want to operate a rental business, you’ll need a business license. Depending on where you are in the US, this could be called either:
Make sure that you register your rental business with the agency that collects the local occupancy tax. This way, they’ll have a record that you’ve paid, even if you do it through Airbnb.
Once you’ve chosen a property to rent out and set up an LLC, the next step is to prepare it for guests. Good furnishings allow you to charge a higher nightly rate. However, you will need to invest more money upfront.
The quality of the décor and finishes you use will depend primarily on the type of tenants you want to attract. Budget accommodation is highly sought after in some locations, so you might want to look for deals on furniture from a thrift store or on Craigslist. In other places, people may want accommodation that helps them have fun or entertain guests. You may also want to set up the rental space to be family-friendly, particularly if you operate in an area popular with vacationers.
Whenever you start an Airbnb business, it’s always a good idea to open a business bank account. This way, you can save yourself the hassle in the future as your enterprise grows.
If you make more than 200 Airbnb transactions or $20,000 from rentals every year, then Airbnb will send you a 1099-K form. This form helps you comply with tax law by reporting all your transactions to the IRS. Keeping your business transactions in a separate account makes this process easier.
Insurance is a part of Airbnb startup costs. Here’s what you’ll need as a minimum:
Don’t skip on insurance. If you do, you could be putting your livelihood at risk and may face hefty fines for non-compliance.
Running an Airbnb business often requires assembling a team. While most owners do at least some of the jobs themselves, they outsource others.
You’ll need to consider hiring the following people:
Many Airbnb owners do all of this work themselves. However, some prefer a hands-off approach.
Just like any other enterprise, Airbnb LLCs need well-considered business plans, particularly if you’re learning how to start an Airbnb with no money.
Set out your business plan by first defining the business structure:
Next, calculate your income predictions. Find out the going nightly rate for accommodation similar to yours and then subtract any expenses you expect to incur, including taxes, to determine your net profits. Consider all your recurring costs, such as equipment and furniture replacement, cleaning costs, and utility bills.
Once you’ve completed all these preliminaries, getting started on Airbnb is incredibly easy. The platform provides you with most of the digital tools you need to make it happen.
As you build your profile on the platform, you’ll need to consider the following:
Once you’ve completed your listing, get somebody you trust to look it over and tell you whether they would rent it out, depending on the information provided. Ask for honest feedback and what you can improve.
Airbnb rentals depend on guest ratings. The more positive feedback you can acquire, the more demand there will be for your accommodation.
Here are some tips for getting good Airbnb reviews:
You can start an Airbnb out of your home or approach it very much as you would a conventional real estate business. The goal is to find projects that afford you the highest returns on the cash you put into the business.
If you already own a property, the cost to start an Airbnb is generally quite low. Expenses will rise if you decide to take out a mortgage, but the returns are still good. Once you learn how to start an Airbnb, it can be a real money-spinner.
Airbnb hosting is easy, but you need to do it legally. Ensure that you check short-term rental rules in your area and acquire any necessary permits and licenses. Check the tax code and comply with insurance and health and safety regulations.
Running a rental Airbnb is cheaper than you might think. Generally speaking, Airbnb takes a three-percent service fee from regular hosts. You can then expect running costs of around $1,500 per bedroom per year.
If you own an Airbnb, you can generally make more money than if you rented out the property to a regular long-term tenant, depending on the area of the rental. On average, Airbnb's monthly income is around $900 to $950.
People wondering how to start an Airbnb often ask this question. Airbnb is upfront about its service fees, including them in the price that guests pay. However, you will face additional fees if you pay for cleaning or other services. If tenancies are short (just two or three nights), the relative cost of these services will increase.
Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.
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