I have personally been interested in the airbnb business model for some time now. It seems great to me to have customers find my properties easily and rent the property for a short or long period of time. But is airbnb truly passive income?
Dave B. with www.affordeverything.com has used airbnb and is here to share with us what he has learned with his airbnb business. Check out his guest post below?
What is an Airbnb Business?
Unless you've been living under a rock for the past few years, I'm pretty sure you've heard of Airbnb. Airbnb is an online marketplace to list or find vacation rentals. They currently have 1.5 million listings that span over 191 countries. For many millennials, this is what sharing economy is all about. Airbnb provides convenient accommodations for traveling, but it is also a fantastic way to generate great returns on real estate.
Converting A Rental to Airbnb Business
Converting an rental property to an Airbnb business is not difficult, and can be super profitable. Disclaimer, I think in all fairness I think it's important to tell you that Airbnb is not passive income. Alot of the processes can be automated but if you don't have the time to respond to guest, or this would be a hassle, this may not be fore you.
Before taking the plunge it's a good idea to run the numbers to make sure it makes since. You will need to know, what rates are realistic in your area. To do this head over to Airbnb and enter your city in to the search, leave the dates open and click search.
Select entire home, then enter the amount of bedrooms and bathrooms your property has, then Enter the amount of beds you plan to use, then click apply filters.
In the example below, we used a 2 bedroom, 1 bath property. It appears average 2/1's in this are have an average range of $125-185. Use the map on the side to see if there are any rentals that are operating in your neighborhood. Look through pictures and analyze listing. Decide which amenities similar Airbnb host are offering in your area.
Check their calendars, how far out are they booked? How many free days are left for the month? What's their occupancy rate like? You want to find properties with at least a 75% occupancy rate, and model your rental like these. Over priced rentals can sit dormant, and not be profitable.
After determining a good monthly rental rate, and average occupancy rate for you area do the math for yourself.
At the low end of the spectrum If you listed your home for $125 per night and were able to book atleast half a month you would be grossing $1875 before bills.
Decorating Your airbnb Rental
It's time to really channel your inner Martha Stuart here. You don't have to be a 5 star interior designer to make your place look good. Look at other rentals get some ideas, wall decor can go a long way. Walmart, IKEA and Target are everything here. I'm also an advocate of Craigslist, lots of good stuff. Somebody else's trash can really be your treasure here. Craigslist is also a great place to find furniture for good prices.
When furnishing your airbnb business rental, DO NOT go cheap. While you can find great deals, you want to aim for higher end stuff. I made the mistake of buying cheap things, that I ended up going back to upgrade later. Your guest want to feel comfortable. Get comfortable sofas, and mattresses, with comfortable mattress pads(mattress pads have saved my mattress more than once).
While I LOVE Wally World, stay away from here for your towels and linens. Make sure your colors come together well and if you really want to impress, grab a paint brush and add an accent wall.
Airbnb Host Check List
Now that you have your place furnished, and decorated, let's go over some items you'll want to make sure you have before you host your first guest.
- Coffee maker
- tea pot and pans
- dish tray
- oven mitt
- cutting board
- cork screw
- bottle opener
- can opener
How to Maximize Your Profit On Your airbnb Businsess
- Detail - Have a well decorated space, go all out on the decor and make your space cozy and comfortable without being cluttered, you will be able to rent at the higher end of your range.
- Price - set a competitive price, see what price range is best for your area. Listing too high will leave your house collecting dust.
- Photos - Photos get bookings, have no less than 20 photos for your listing. Be as artistic as possible. Airbnb offers host a free photography session. You only get one so make sure your house has everything you want displayed when you schedule this.I made the mistake of jumping the gun and calling out the photographer as soon as I had my place listed. I've since upgraded a lot of things to improve to decor, so the pictures from the photographer are now outdated.
- Clean - Make sure your house is clean for guest, no one wants to sleep in a room with stained carpets or or dusty decor. If you don't like cleaning and you know it, outsource this. Its reasonable for a guest to want to make sure linens are properly washed and that the home is reasonably clean.We currently clean all are own rentals, when we first started the airbnb experiment, it took my wife and I 5 hours to turnover the home. As we learned and began to create a standard routine, we now find that we can clean the whole house after guest in under 2 hours.
Make sure that you charge a cleaning fee enough to cover your time for cleaning. I charge $60 for all my properties.
- Max Out Sleeping Arrangements - The more people that you can host, the more you can reasonably up charge. I've found the best way to this is to have one bed in the master bedroom, for every other bedroom I make sure to have at least 2 twin beds, although you could stretch this by having a dual bunk bed set up.If you can manage to find a sleeper sofa, that's equally stylish and comfortable, you can stretch this a little bit further and if you really want to squeeze out every penny, get an air mattress. Don't forget to get extra linens for these as well.
- Get 5 Star Reviews - A big part of what makes Airbnb work is the trust factor. Guest rate your accommodations after departure. It will be advantageous to work on your customer service etiquette. Unlike traditional rentals, there is a partial customer service aspect to Airbnb. Being polite or having things like extra toilet paper or hand soap at your house can go a long way with guest. If they have a question be there to address concerns.
Pros and Cons of Becoming An Airbnb Business Host
- More income - host generally are able to clear double the local rental rate.
- Meet interesting people - I've met some interesting people from all walks of life through Airbnb. The average guest is really nice.
- Less wear on house - because your house is getting cleaned consistently on a weekly basis, your house is better preserved.
- Responsible for utilities - Paying for utilities are a must. Consider the cost of electric, gas, water, cable and Internet
- Not passive - this is NOT passive income. In return for awesome monthly profits, you will have to respond prospective travelers, accept or decline bookings, and be available to answer guest questions as they arrive during their stay.
- Guest can be needy - while in my experience 95% of guest are complete rock stars, their is a small group of people who complain about everything. Chalk this up as cost of doing business.
There Are Laws You Need to Know About With Your Airbnb Business
Laws about Airbnb vary from state to star, so it's important to your research before you decide to if this is right for you. Some cities have laws that restrict the ability to host paying guest for short periods of time . These laws are generally the result of a city's zoning or administrative codes.
In some cities you must get permits in licensing before becoming a host. I have also noticed that some areas automatically collect and pay taxes on your behalf, while others leave this responsibility to the host. You can double check you area by checking other listing in the area.
There Are Other Vacation Rental Websites for Your Rental Business
The Airbnb business model can help you pay off your properties almost twice as fast if done right. This is my second year as an Airbnb host and I love. To find out how I made $19,500 last year with my Airbnb experiment click here.