Starting an Airbnb is a popular side hustle.
you could buy or rent property.
it’s possible for you to run your Airbnb locally or from a city far, far away.
Be sure to check your city’s website and its short-term rental laws before becoming an Airbnb host. Tina Russell/The Penny Hoarder
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In many cities across the country, there is a homelessness crisis.
Did you know?
Is your profit worth pushing local residents out of potential housing opportunities?
Especially when youre not personally invested in the local community?
Some Airbnb hosts will turn to alternative platforms that venture to accommodate these concerns in their business structure.
Many cities have taken the ethical concerns on themselves, codifying them into law.
For example, inSan Franciscoyou must live in your Airbnb rental.
Cities and municipalities across the country have started instituting similar rules.
Be sure to do your research beforehand to check that this is something youre actually allowed to do.
The most traditional way to do this is by purchasing an investment property.
As you compare potential Airbnb properties, think about what amenities youd like access to while traveling.
Wi-Fi is likely a must.
In many markets, air conditioning will be a mandatory requirement for some guests.
Parking, access to public transit and the size of the unit are also good criteria to consider.
Many potential buyers are making concessions like skipping inspections or appraisals for put in a competitive bid.
You should not do this.
Technically, you could rent a unit and then sublet it as a short-term rental on Airbnb.
You will want to be up front and honest with the landlord about why youre interested in renting.
LLCs do provide some limited liability protection to you as a business owner.
But if youre turning a rented property into an Airbnb, the LLC designation serves another purpose.
It shows potential landlords that youre a serious business owner.
With this designation, landlords may be more likely to take you on as a tenant.
If its large enough, you may have a successful business on your hands.
Here are some of the calculations youll need to get there.
Figure Out Your Airbnb Costs
Your Airbnb business isnt going to be 100% profit.
And the actual real estate wont be your only investment.
Then multiply by 0.03.
This is the chunk of revenue Airbnb will take as a hosting fee in most situations.
You get to pick the cleaning fees charged to potential guests.
This amount should cover any costs you incur when you hire cleaning services.
This may get more people to punch your listing.
But theres a downside.
Maybe a fresh coat of paint.
On top of the initial fixes, your property will need to be maintained.
If a pipe bursts and you own the property, youll need money set aside to fix the problem.
Youll also need home furnishings like couches, a bed, and pots and pans.
Providing toiletries and towels is good practice.
As is including a coffee station and maybe even some snacks.
You dont technically need a professional photographer as an Airbnb owner.
But first impressions are important.
The prettier your place looks in the listing, the more likely it is to book.
Investing in high-quality photos can be worth the expense.
Whether you set up an LLC or not, you will need to pay taxes as an Airbnb owner.
First, youll need to pay property taxes according to your locality.
These taxes are also referred to as Transient Occupancy Taxes (TOTs) in some regions.
Youll also need to pay taxes on your profit.
This is another reason it can be helpful to have an accountant on speed dial.
As a legit legal entity, youll want to keep your personal and business finances separate.
This means youll need to open a business bank account.
Shop around for the account that best meets your needs, taking note of any fees.
It also covers any damages triggered by a guests assistance animal.
AirbnbsHost Protection Insuranceis a liability policy that also covers you up to $1M.
Examples might include business insurance, renters insurance or homeowners insurance.
Examine Your Time Budget
Becoming an Airbnb host is a super popular side hustle.
But that doesnt mean its right for everyone.
They may even be less expensive.
For example, a 2-bedroom Airbnb in Philly averaged about $180/night in the summer of 2021.
A similar-sized rental in Los Angeles averaged about $331/night.
Dont just look at averages, though.
Look at properties in similar neighborhoods in similar condition.
Also be sure to consider any amenities.
The more a property stands out as exceptional, the higher you might raise your price.
Youll also want to be sure to check the numbers throughout the year.
When demand is lower, there could be months when youre pulling in $0.
you’re gonna wanna be financially prepared for that possibility.
NOTE:Airbnb does provide acalculatorthat guesstimates your potential monthly earnings.
The number it gives you is based on a 50% occupancy rate given your Airbnbs size and location.
Calculate the ROI of Your Airbnb Business
Youve figured out all your costs.
Gotten a ballpark figure on how much you should charge.
Now its time to actually calculate your potential return on investment (ROI).
The answer to that question is going to be different for everyone.
As will the math.
Some Airbnb hosts run six-figure businesses.
A lot will depend on your investment property, though.
To get to the six-figure level, youll likely need multiple properties.
If youre just starting out with one property, dont quit your day job just yet.
This is where the fresh coat of paint, furnishings and any property maintenance come in.
Once youve got the place looking nice, youll call in your photographer.
Youll then be able to use their images to list and promote your property on Airbnb.
Take Advantage of Airbnbs New-Listing Promotion
Airbnb has always advantaged new listings in its algorithm.
This gives new hosts an opportunity to build a reputation.
This makes the first 30 to 90 days a vital period for building positive reviews and a good reputation.
Last year, Airbnb added a new feature called the new listing promotion.
This feature can get even more eyes on your property when its brand new.
Airbnb will promote your new listing to potential guests, getting it in front of more eyes.
This discount and promotion will last for the first three bookings or the first 90 days whichever comes first.
That reputation will be key for ranking higher in the algorithm after your Airbnb listing loses its new status.
check that youre attentive to all their needs.
That youll be 100% available to them during their stay.
Provide local maps, public transit schedules and any information on fun or useful local attractions.
Offer to pick them up from the airport or train station.
Ensure that the check-in and check-out process are more than fairly easy.
verify coffee and snacks are readily available, and that your place is sparkling clean.
In other words, do everything you’re free to to prove youre a great host.
Preferably a five-star review.
If youre offering a budget place to stay, your guest wont necessarily expect top-of-the-line amenities.
A good rule to follow is underpromise and overdeliver.
NOTE:Avoid canceling reservations if at all possible.
If you cancel more than three times in a year, Airbnb can remove your listing altogether.
Accommodating Remote Workers
The pandemic had a huge impact on the travel industry.
Airbnb noticed a trend and decided to capitalize on it.
That trend was that more people were booking longer stays.
In thefirst quarter of 2021, nearly a quarter of bookings were for 28 days or more.
There are a few driving factors behind this trend.
The first is that more access to remote work options have made people more mobile than ever.
Many Americans have also seriously considered permanent relocation since the beginning of the pandemic.
Theyre allowing themselves to experience a place before settling down.
Will these longer-term rental trends continue into the future?
Honestly, we dont have a crystal ball.
But Airbnb is banking on it.
It also helps to know that properties that offer weekly or monthly booking discounts get more bookings.
Making Sure Youre COVID Compliant
During the pandemic, Airbnb hasenhanced rulesfor cleaning.
In addition to enhanced cleaning rules, there are also pandemic rules about host interactions with guests.
Airbnb is encouraging contactless check-ins during this time.
If you must meet with guests, you must wear a mask and maintain a six-foot distance.
Is Starting an Airbnb Business Worth It?
If youre investing in or renting property, youre taking on significant financial risk by starting an Airbnb business.
It could even turn into a full-time job.
You could alsostart a different businessaltogether.
Ideally one with lower startup costs.
She is a regular contributor to The Penny Hoarder.
Some content from former staff writer Carson Kohler is included in this report.
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