More and more people today are making the decision to become hosts for Airbnb. Welcoming strangers into your home can be intrusive and stressful, but also rewarding. For driven hosts, it can be profitable enough to supplement or even replace more traditional revenue streams.
Hosts can list their entire home or apartment or a private or shared room. Whether you own real estate, rent an apartment, or are looking to acquire new property, becoming an Airbnb host can be an excellent way to generate another source of income. The short-term home rental service has been around for eight years and is valued at $31 billion. This number is likely to grow, as short-term rentals become increasingly popular. According to Inside Airbnb, Colorado hosts earned nearly $124 million in 2016, with an estimated 3,000 active listings in Denver alone.
There are many financial advantages to Airbnb hosting, however, it is certainly not a no effort investment. There are many factors to consider before joining the hosting community. Additionally, as any good host knows, it’s not about you, it’s about the guests. In order for your property to be lucrative, you must be willing to cater to the needs of your paying guests.
Here are six things to understand before committing, and tips for ensuring you make the most of your time and money:
1. Know the laws in your state or city.
Jumping into Airbnb hosting too quickly risks offending state or city regulations, many of which prohibit short-term rentals of fewer than 30 days if a host is not present in the house or apartment. Airbnb’s platform offers some information to help hosts better understand the relevant laws and regulations in their prospective cities. For instance, Denver requires hosts to obtain a valid short-term rental license, imposes a 10.75% Lodger’s Tax on reservations of fewer than 30 days, among other rules and restrictions. Being aware of the short-term rental laws in your area beforehand will tell you what necessary legal steps you need to take.
2. Approach your landlord.
Unless you are a homeowner, you’ll need your landlord’s approval before offering your space on Airbnb. Hosting without your landlord’s permission will only end badly for you and your Airbnb business. Guests shouldn’t have to witness an angry landlord interaction. Instead, communicate your short-term rental intentions and ensure it won’t be a disruption to the landlord or other tenants.
3. Research your market.
Research the supply and demand of Airbnb in your area. For example, AirDNA offers extensive data and insights for all major Airbnb markets that can provide you with a realistic expectation of how much you can earn hosting with your specific listing. If you live in an ideal area, the demand for your listing will obviously be higher and you will make more money. This is especially important if you are looking at acquiring property for the sole purpose of Airbnb hosting, because you want to ensure the area in which you are buying has a demand that will maximize your return. In this situation, be sure you can rent your property for more than your mortgage payment, while also factoring in your down payment. Knowing if you live in an Airbnb hot spot or dead zone will help you decide if hosting will be a profitable effort.
4. Listing favorability.
In order for your property to be successful, it needs to outshine your competition. In other words, why would a guest want to book your listing over another in the area? This is especially true in places with an abundance of Airbnb hosts. Ensuring your listing is favorable compared to your competition requires professional pictures that showcase the best features of the property accompanied by a well-written description. Additionally, you’ll want to establish an appropriate price for your listing.
5. Extra costs.
Creating and maintaining an Airbnb property will certainly require extra costs that you should be aware of before deciding to become a host. For example, the property needs to be stocked with plenty of toiletries, sheets, and extra towels. You also might need to purchase items that guests expect to have, such as a coffeemaker. Even if you aren’t a coffee drinker, items like this will make guests feel comfortable and more likely to leave you a great review.
6. Time commitment and technology skills.
Lastly, running a successful Airbnb relies heavily on one’s ability to operate online through the Airbnb platform. You need to be somewhat tech savvy and enjoy spending lots of time online. With that said, Airbnb hosting can be a bigger time commitment than people expect, especially in the beginning. In order for your property to be a fruitful investment, you need to ensure you have the time to respond immediately to potential and current guests’ requests.
Whether you are considering Airbnb for a current property or acquiring dedicated real estate to rent out, Airbnb hosting can be a great way to invest your money. However, keep these six tips in mind before committing to ensure your returns are profitable.
Holly Morphew is an award winning financial coach, entrepreneur, and speaker. She is a Certified Financial Health Counselor, Certified Student Loan Counselor, and Accredited Financial Counselor ®. Her unique background in business, corporate America, and real estate give her a broad perspective to help her clients create wealth, stop living paycheck to paycheck, and eliminate debt. View client testimonials here!
Holly began teaching personal finance in 2006 to young adults as a service project with Rotary International. Her workshops were so popular she decided to teach personal finance full-time so she could help more people. She created The Financial Impact System, a step by step guide to master your money, streamline spending, protect your money, and create multiple streams of income.
Holly is originally from Boulder, Colorado. She received the prestigious “Rotarian of the Year” award in 2007/08 for her work in financial literacy. Holly served as Treasurer of the Erie Rotary Club from 2006–2009. She has a B.A. in International Business & Japanese from the University of Colorado. She now resides in Denver, Colorado. Holly also plays competitive beach volleyball year-round, practices yoga, and loves to hike with her two dogs.