*Are you looking to earn a passive income? * Did you know an asset you own can serve as an additional income, such as your home?
Yes, you heard right! Turning your property into profit has never been easier. Using Airbnb, you can list out your property or spare room and start making money! This income will, of course, vary widely depending on where you're located, how often you rent out your place, and the quality of your home.
If you're considering becoming an Airbnb host, start here and follow the guide to maximize your success. To start, make sure you know exactly what you're signing up for:
##Airbnb Ownership: Benefits and Challenges
Before making a serious investment in a vacation rental property, it is wise to explore all the pros and cons involved. Let’s take a closer look at the benefits and challenges that come with hosting on Airbnb.
An Airbnb short-term rental that has a steady queue of occupants may be more profitable than leasing the same property to someone on a long-term basis. The reason is that Airbnb nightly rates are usually higher. For example, according to a recent analysis, Airbnb hosts have an average monthly income of $924. Several host earnings exceeded $12,000 per month, while some fell below $200. An added advantage is that a host has the freedom to set his or her pricing on Airbnb. This is a routine practice, and guests will pay more to rent through Airbnb, allowing hosts to earn more than landlords.
Note: Gross revenues indicate what you might receive: If your property gains value, your actual revenues might increase as well. Due to the different costs of managing and owning properties, your net revenue could also be lower.
In order to find out if your rental space is in high demand, you should research the market in your area first. Unless you live near a major Airbnb hub, you may be at a disadvantage from the start. Many aspiring hosts are unaware of how location, as well as the demand for Airbnb travel, influences the earning potential of their properties. Find out what you could earn.
The following are expenses you'll need to bear if you are a start-up considering this idea for the first time
*Pro tip: To furnish a space, start from scratch and then accessorize! *
Food: Maintaining a few simple food items in the fridge can contribute to keeping your guests happy. Providing fresh eggs, coffee, or alcoholic beverages are all possible options. You can also keep ready-to-eat snacks on hand as well as pantry staples such as salt, pepper, and condiments.
Smart TV, Cable, Wi-Fi, and more: These are a few of the amenities that guests expect from Airbnbs, so ensuring they are available and up-to-date is your responsibility.
Added Amenities: Extra Towels, bed sheets, pillows, an iron with ironing board help create a great experience for your guests
As a host for Airbnb, you should realize everything should be furnished and fairly new since you are competing with other hosts in your locality. You should offer distinctly superior features to stay ahead of the competition!
Think ahead and ensure your insurance covers your new venture! It might be a wise move to purchase short-term rental insurance for your vacation rental. But before you begin accepting guests, make sure you read the fine print in your policy completely. Airbnb also offers a liability insurance policy that covers up to $1 million, but there are restrictions and it can be difficult to submit claims. However, you could also opt to request a security deposit from guests during the reservation process.
When becoming a host on Airbnb, your job will be more challenging, because you will be required to keep the property in impeccable condition all of the time. You might be able to hire a cleaning and property management company to do these tasks for you, but this would also increase your operating costs.
Airbnb bookings are largely based on your reputation as a host. Initially, you may have very few reviews, and you may need to maintain a low rental rate or offer incentives to attract guests. Despite a great rental unit in a prime location, you shouldn't expect to reap the rewards right away. In general, the higher your rating from guests, the more likely you are to attract new guests. Remember, though, that it takes time to rise through the ranks!
You may encounter inconsistency when renting an Airbnb. While you can theoretically rent out a property all year round, you will likely have many vacant dates on your calendar. To compensate, you could charge more than you would for a typical rental unit, but this isn't guaranteed to work.
Note: If you live in a locality that limits the number of days an Airbnb unit can be rented out, the problem of vacant dates can be exacerbated
Develop a hosting business plan that outlines every aspect of the business creation process. Indicate your short- and long-term goals, as well as potential setbacks and obstacles.
1. Evaluate the market - This will require some market research. If you fail to look at current market rates, your chances of starting a profitable Airbnb business will be up for grabs. Take a look at your competitors. What amenities do they offer? What is their pricing structure?
2. Identify your USP - What are the key features that make your property unique? What attracts guests to your property? Do you offer special services? For example, you could offer cooked meals or a locally guided tour. Do you have a stunning view? Think about what makes your property stand out from the rest.
3. Develop your marketing strategy - How do you plan to grow your Airbnb business? Advertising your property and managing it are important factors to consider. What mediums will you use to promote your property? For example, social media platforms, other booking platforms, etc.
4. Management Structure -Will you be running the business on your own? Will you be getting a co-host to help you out? It's important to understand how you'll manage your business both now and in the future.
5. Operations Plan - How you execute your daily activities will be determined by your operations plan. Bookings are not the only part of managing an Airbnb! When you list out the day-to-day operations, you might find that you need to hire extra staff after all.
6. Comprehensive financial plan - Starting a business requires a substantial investment, and you cannot underestimate your costs. Include your projections for the next 365 days at least. In addition, you will need to include a financial projection, cost analysis, and pricing strategies that will determine the profitability of your Airbnb business.
Break it down into components such as Upfront costs, Ongoing costs & Management costs. Calculate the occupancy rate you will need to cover monthly expenditure and generate profit. How much you will need to keep the business going during slow periods and low seasons?
Note: 10% to 15% of every booking goes toward repairs and ongoing maintenance. Overall operating expenses can range from as little as 25% to as much as 75% of income.
Click here for a free business plan template
Now that you have developed a business plan it will help you to identify the kind of investment capital you need and what type of costs you need to incur. The next step is to develop a viable pricing strategy
Look at your property’s specifics and local vacation rental market trends. Evaluate the rates charged by your competition. Decide on a price that you think is right for you and set it as your base price.
Pro Tip: Your estimated rates can be validated by comparing them to those of smaller and larger properties in the same region to make sure it’s spot on!
For new hosts, Airbnb recommends starting below the suggested rate to begin a steady flow of bookings. You should, however, remember to pay for your basic expenses along the way, such as utility bills, insurance, taxes, as well as the cost of your time.
Airbnb smart pricing tool is an excellent option to explore and be able to get a hold of what works best for you.
Listing is free, and you can individually approve potential guests using the user-friendly platform. Follow these tips to create the perfect listing on Airbnb
Also, see 5 Easy Steps to Starting an Airbnb
So the million-dollar answer to your question about whether or not becoming an Airbnb host is profitable is that the Airbnb platform can be very lucrative, especially if you are patient and willing to do the work. Make sure you do your research before committing to Airbnb investing. Based on a survey carried out on 1,000 people, “54% of those who own their own home said they’d consider renting it out through a service like Airbnb, and 82% believe this is a good money-making strategy”. So the decision is now in your hands!
We believe with hard work, dedication, and the willingness to take on the risks, you could make thousands of extra dollars a year and make it a booming success!