How to Start an Airbnb: 11 Steps for Beginners
By Julija A.
June 19, 2023
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.
Why Should You Start an Airbnb Business?
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:
- It allows you to earn an extra income on the side for minimal effort on your part.
- You can list properties for free. You only pay Airbnb when you make a successful rental.
- You give guests a more personalized experience compared to hotels. Many travelers want a home-away-from-home-style stay when they visit another country.
- You get protection. Airbnb provides up to $1 million in property damage protection to its clients.
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.
What Responsibilities Do You Have as an Airbnb Host?
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.
How to Start an Airbnb
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.
Step 1: Find Your Property
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:
- What do I want my rental market to be?
- What type of customers would enjoy staying in this accommodation?
- Is the accommodation close to any important landmarks, historical sites, tourist traps, or business hubs?
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.
Step 2: Set Up Your LLC for Airbnb
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.
Step 3: Talk To Your Accountant
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).
Step 4: Get Your Business License
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:
- TOT certificate
- Lodgers Tax License
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.
Step 5: Set Up Your Accommodation to Receive Guests
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.
Step 6: Open a New Business Bank Account
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.
Step 7: Get Rental Insurance
Insurance is a part of Airbnb startup costs. Here’s what you’ll need as a minimum:
- Homeowners insurance: Homeowners insurance covers damage to the property on vacant days.
- Airbnb damages insurance: Airbnb provides up to $1 million in coverage for damages caused by guests to your property while it is being rented.
- Workers compensation insurance: You’ll need to take out this insurance if you hire workers to manage your Airbnb, such as cleaners. This insurance protects you against liability suits.
- Business insurance: Business insurance protects you against a range of legal risks associated with running your Airbnb operations. General liability and property and casualty insurance protect you if you’re found legally liable for injuries incurred in the accommodation you own.
Don’t skip on insurance. If you do, you could be putting your livelihood at risk and may face hefty fines for non-compliance.
Step 8: Put Together Your Airbnb Dream Team
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:
- Photographers to take photos of your accommodation that appeal to users
- Cleaners to change bedding and prepare accommodation for the next guests
- Interior designer to create attractive spaces that encourage guests to stay and return
- Handyman for odd jobs around the property
- Accountants to help you keep track of your business revenues and expenses
- Emergency contacts – people who can step in and help if you’re not there
- Property management company to welcome guests on your behalf
Many Airbnb owners do all of this work themselves. However, some prefer a hands-off approach.
Step 9: Check Your Business Plan
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:
- Who is in charge?
- Who will you hire to help you manage or run the property?
- Who will handle customer complaints?
- Who will interact with customers via the Airbnb platform?
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.
Step 10: List Your Airbnb Property
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:
- How much you’ll charge guests to stay per night.
- How many people you can comfortably fit in your accommodation.
- You’d like to attract (i.e., families, businesspeople, backpackers, etc.)
- Whether you’ll allow guests to book immediately.
- The details of your cancellation policy.
- The title of your property listing.
- The photos you’ll include, and in which order you will present them.
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.
Step 11: Collect Feedback
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:
- Specify your location clearly so that guests can easily find you. If you’re off the beaten track, experiment with different location instructions to see which your guests find easiest to understand.
- Provide guests with a check-in message, providing them with details about their stay.
- Send a check-up message after a few hours, asking if everything is to their liking.
- Send a check-out message, thanking the guests for using your accommodation for their trip.
- Leave a welcome note.
- Write a house manual that explains how to use everything.
- Make sure that you always follow your cleaning checklist.
- Allow guests to book instantly.
- Supply goodies for children and pets.
Wrapping Up
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.
Further Reading