How to Make Money with Airbnb
Renting out your home has never been as easy since the introduction of Airbnb. Many people who own multiple homes or are often away from home are figuring out how to make money with Airbnb. In this guide we’ll dig deeper into Airbnb. We’ll cover how to make money with Airbnb and what you should take into account when you become an Airbnb host.
Airbnb – the horror stories
When you mention you’re thinking of renting out your home via Airbnb, the first thing that people do is tell you a bunch of horror stories. Stories of drug induced orgies, broken furniture and brothels in Airbnb rentals have become quite famous over the last few years.
What you need to know is that these kind of horror stories are very uncommon. Millions of homes are rented out year after year with only a dozen horror stories. Not to mention that they can be easily avoided given that you take the right precautions.
However, if you rent out your home via Airbnb you’re never a hundred percent safe from damages. So be sure to take care of the proper insurances.
Where do you start?
If you want to make money with Airbnb the first place to start is by looking at the local laws and rules. Airbnb has become so popular in city centers that some cities have banned the use of Airbnb. So as a first, check if your local laws allow you to rent out your home via Airbnb. If not, I would advise you not to do it anyway as you can be fined severely for doing so.
Next to local laws you also have to deal with rules invoked by your home owner in case you don’t own the home yourself. And for those who bought a home let me remind you. As long as there’s a mortgage on the home you’re not the owner. Your mortgage provider is.
When it comes down to mortgages and Airbnb, the area becomes a bit gray. Some of the newer mortgages have an Airbnb clause. However, as Airbnb hasn’t been around for long, most of the older mortgages don’t have an Airbnb clause. Some mortgages do have a clause that forbid you or limit you from renting out your home though. Be sure to check your mortgage rules and contact your mortgage provider if you plan to rent out your home via Airbnb. Most of them find it no big deal as long as you promise not to let tenants stay for months at a time.
If your home is a rental property you’ll need to check with the landlord. Most landlords are not keen on your renting out their home to others. The odds are high that your rental agreement contains a specific clause that forbids you to do so. But, you might be lucky and have a suitable landlord. Even if your agreement has a “do not rent out” clause you should always contact your landlord and talk to him or her about it. These clauses are mostly focused on your renting out the home as a full time residence. Perhaps your landlord will be lenient considering that most Airbnb stays are for a short period of time.
What kind of host do you want to be?
When you’ve got all the rules and laws figured out you can start thinking about what kind of host you want to be. A nice thing about Airbnb is that you have a lot of flexibility in deciding what kind of host you want to be. You can set all kinds of rules for bookings. Determine minimum and maximum stay limits and block out days before and after booking.
This flexibility is very useful because different types of rental properties are suitable for different rules. If you rent out a small room then short stays become less of a problem than when you rent out your entire home. As a property owner you are in charge of cleaning up after your guests. The last thing you’d want to do is rent out your entire home for one night, earn 40 bucks and then spend half a day cleaning up after your guests. If you do it like this, you turn how to make money with Airbnb into “how to lose time with Airbnb”.
Taking care of your guests
There are people who see Airbnb as a very easy concept. Guests book your property, they arrive and find a key inside a locker. When they leave you hope the key find itself back in the locker.
If that is a conscious decision and the kind of host you want to be that’s entire fine. But don’t unconsciously make this decision because you think that this is your only option. When you start out on Airbnb, take some time to think about what kind of host you want to be. Or better so, start by thinking what kind of host you could be, given your situation.
Some people use Airbnb in the way I described above. But evidently not everyone does. There are plenty of people who take on the role of a more active host. They run their Airbnb more like a bed & breakfast and less like a hotel. They’ll offer services like breakfast, dinner, cleaning, pick up and so on. Offering extra services is a strategy you could implement to make your listing more popular among prospective guests. Especially in the off-seasons when demand is low and the amount of properties are high.
However, if you decide to offer your guests extra services you must be able to actually fulfill them. Don’t offer your guests breakfast if you have to be at work by 7.30. What kind of services you can offer your guests also depends on what kind of rental situation you have. If you’re renting out your guest room you’ll be closer to your guests than when you’re renting out your vacation home that is 200 miles away from you. Next to the usual services like breakfast, dinner and cleaning you could try to attract more guests by offering unorthodox perks as well. Perhaps you can arrange airport pick up and drop off if you happen to live close to it? Or you could give your guests a restaurant voucher or football match tickets as a welcome gift.
List your property
Once you’ve decided what kind of host you want to be it’s time to list your property. If you want to become a successful Airbnb host it’s important to get good reviews. People who are looking for a place to stay on Airbnb screen through reviews and are known to prioritize hosts with the highest reviews. Just as almost everyone does when picking a hotel to stay in.
The key to good reviews is honesty. You don’t gain anything by pulling all tricks in the book to make your property look better than it is. This will only give your guests high expectations that will result in low reviews when you don’t end up meeting their expectations. So don’t use picture of your property from ten years ago when it was freshly renovated. Don’t say you live in a super upper class neighborhood if that is not the case. Just be completely honest about your property. About the size, state and in what kind of area you live.
Create a house manual for your guests
Once you’ve listed your property it’s important to create a clear house manual for your guests. A house manual contains all the information your guest needs to have a flawless stay in your property.
Answer questions like:
- Where and at what time frame are guests allowed to check in?
- And check out?
- Whom can they contact with questions and how?
- Where can they find public transport?
- How far is it to the city center?
- Where can they go shopping?
- What sightseeing attractions are there in your city?
- Does the rental property come with a parking space?
- Which emergency numbers can they call when someone chokes on the snacks you left them?
And, if you want to avoid getting a solid 1 star review right off the bat, don’t forget the most vital piece of information for millennials and Candy Crush addicted house wives:
THE WIFI PASSWORD!
Oh by the way… make sure to create a hard copy version of your house manual and put it in the rental property along with a personalized welcome note for every guest. You’ll score extra points.
Pricing your property
After listing your property it’s time to determine the price of it. When pricing your property you basically have two options. Either you price it manually or use the Airbnb dynamic pricing algorithm. The AIRBNB smart picing algorithm takes 70 factors into account and then determines the optimal price for your property. Smart pricing is easy to use and saves you a some trouble. It saves you time from continuously comparing yourself to the ever changing marker around tou. However, as every machine algorithm has flaws so does smart pricing. A major downside is that it’s not very good at taking local events into account. Large local events like sports tournaments, concerts and so on tend to attract a lot of people. This provides you with the opportunity to increase the price of your property.
An alternative is to determine the price of your property yourself. To do so you will need to do some research into your competition though. Luckily, the price you can set is not entirely static. When you determine a price, you can add all kinds of rules to it. You can automatically increase the price for holidays seasons. You can also give people discounts for longer stays or for booking well in advance.
Whether you choose smart pricing or price your property yourself is evidently up to you. If you use smart pricing, my advice would be to set a minimum and maximum based on some research up front and then keep an eye on the algorithm. Some Airbnb users complained about their prices going through the roof or ending up way too low.
Keep your calendar up to date
One of the most important things you really don’t have to forget is to keep your calendar up to date. The last thing you’ll want is a guest booking your guest room and you realizing your aunt is supposed to come over and sleep in your guest room that weekend.
As an Airbnb host you can acquire a Superhost badge. This badge is very important for your Airbnb reputation. Airbnb describes a Superhost as an experienced host that is known to offer his guests the most pleasant experience possible. Most Airbnb guests pick hosts based on their reputation. A Superhost badge will definitely pimp your credit as an Airbnb host and land you more bookings.
But… evidently they don’t give away Superhost badges to every person who simply lists their property on Airbnb. One of the qualifications a Superhost needs to have is a cancellation rate of under 1%. This means that, if we don’t count mitigating circumstances, you can only cancel once for every 100 bookings. Next to a maximum percentage of cancellations you’ll need at least 10 bookings for the last year, an average rating of at least 4.8 and you need a 90% response rate. This means that in 90% of the cases you need to reply to questions asked by (prospective) guests within 24 hours.
So, be sure to keep your calendar updated. It would be a shame to miss out on this Superhost badge because you forgot to update your Airbnb calendar after you told your aunt she can come and visit.
Keep track of your finances
Once you got your Airbnb side business running you’ll need to keep track of your income and expenses. It would be silly if I’d teach you here how to make money with Airbnb and you end up throwing away money because you end up not taking the most out of your tax deductibles. A lot of the expenses you make being an Airbnb host can be deducted from what you earn renting out the property. So keep track of what you spend on cleaning supplies, the bed linen, towels and a lot of other supplies for your guests. I’m not going to explain you how to do your taxes though. Consult a professional for that.
How to make money with Airbnb
In this guide I’ve tried to explain you in full how to make money with Airbnb. Making money with Airbnb is relatively easy but becoming an excellent Airbnb host is not. Anyone can list his property but making sure that it gets booked frequently and ends up being an excellent source of income is different.
The key to becoming a good Airbnb host is honesty and transparency. Be completely clear and transparent about what your guests can expect from you and what you expect from them. Good ratings lead to more bookings and good ratings come from your guests receiving the experience what they expect to receive. What you guests expect to receive on itself comes from how you manage their expectations.
Don’t lie to your guests, don’t sugarcoat things and don’t offer services you can’t fulfill. That is the secret to how to make money with Airbnb!