If you own a rental property, then you are no stranger to the difficulties that arise when a tenant moves out, or worse, you get stuck with a bad tenant. While your property sits empty, your revenue stream runs dry. But, there is an easy solution to this problem, which is running an Airbnb business, which has a number of advantages that could make it a better option than running a rental property.
You may even find it easier to list your property on Airbnb (NASDAQ: ABNB) and generate revenue this way, rather than acting as landlord to an unruly tenant, and by getting into the Airbnb business, you can actually get a tenant from day one after listing your property. But, a lot of beginners, and even seasoned property owners, make a lot of mistakes when it comes to online listing and offline hosting, and this results in them making no money on Airbnb.
Here are some invaluable tips that will help you run a profitable Airbnb, as well as how to start an Airbnb business without even owning a single property.
Extra Fees in the Airbnb Business
First of all, you should know that the costs of running an Airbnb are pretty much the same as running a simple rental property, but an Airbnb can get more costly because you have to account for something like cleaning fees, as you’d need to clean the place between each visitor.
You could hire a professional house cleaner or cleaning company to do that for you, and the average cost for this would be around $250, but can go as low as $60. Of course, you can clean the place yourself to save money, but a professional cleaning job could make a lot of difference when the renters leave reviews for your property in the Airbnb app, and you’d want to aim for five-star reviews because they give your property more visibility. There’s also the extra cost of the Airbnb fee, which is approximately 3% of the amount you take in as an Airbnb host.
Tips to Run a Profitable Airbnb
Price it Right
Some people on Airbnb overvalue their properties, and some undervalue them, and those two types of people end up hurting their Airbnb business. Therefore, you’d need to figure out the exact market price for your property to know how much to charge your renters. You can do that by hiring a real estate appraisal, or by using a pricing software. Now, Airbnb already has a built-in pricing software, but it’s not very good because it might price the property way too low. Instead, you should use a third-party pricing software like Transparent and Beyond, which offer subscriptions or take a 1% fee from each booking. These tools work by scanning your areas and looking for other hotels and Airbnbs to compare pricings and demand, and then set your price based on that.
You could also try to increase your prices by little amounts every once in a while, just to test the waters and see how much money people are willing to pay for your property before they decide that it’s too expensive. That way, you’d guarantee getting the full value from renting out your property on Airbnb. But, don’t try to go for extremely high prices, because you’ll just not get any customers if you’re higher-priced than a nearby hotel or any other Airbnb business.
Take Marketing Seriously
A lot of people think they can just take some quick pictures of their properties with their phones, post it, call it a day, and then wonder why no one wants to rent from them. You need to present your property in the best possible way. You shouldn’t ignore staging, as it could make your place look really good. Do some redecorating and move the furniture around, and also showcase your property’s best assets before anything else.
You also need to create a full description of the property and fill in all the information when you make a listing and not ignore anything, because all that helps with ranking well online, and in turn with getting more bookings. A great trick is to put whatever amenities your guests would be interested in right in the listing’s title. For example, if your Airbnb has a pool, or a smart TV, or self check-in, you can include that in the title and have your Airbnb stand out. You should also use bullet points in the listing, so your guest would see very clearly what they’re getting by booking your property, and include things in the bullet points that aren’t in the pictures or the title, since if your guests are reading them, that means they’re already interested and are past looking at the pictures and want to know something new.
Take Professional Photos
After you’re satisfied with the staging, you could invest in getting professional photographs taken of your property, and preferably by a real estate photographer that has been doing this for a long time, and most professional photographers charge between $110 to $300 per project. If you check properties on Airbnb’s website, you’ll see that a lot of the best ones or guest favorites have professional photos posted, so this is a very important thing to do if you want to rent out an Airbnb. It’s important to back the good marketing you did by legitimate quality. You need to invest in good, high-quality furniture, so you don’t end up shooting yourself in the foot if you make the pictures look too good and then disappoint your guests with low quality furniture.
Be Flexible with Your Guests
When you get a guest, you need to make sure that everything is simplified for them since it could be their first time in the city or even country, they might not even speak the language. This means that you should plan everything from when they arrive to when they leave, be a very communicative host and don’t over-complicate the directions to the Airbnb by making sure you include a Google (NASDAQ: GOOG) map location in your listing.
You should also try your best to be flexible with the check-ins by having 24/7 check-ins available. This is because if your property gets specified as one with 24/7 check-ins on Airbnb, your listing could qualify to be “business ready”, and that would give it a bit of an additional boost in Airbnb searches. It’s also really important because a lot of people use Airbnb for business or work trips, so being able to check in any time would be a huge benefit for them. By doing this, you’d be creating the best experience for your guests, and this would encourage them to leave five-star reviews, or even come back to your Airbnb again.
Wishlist Saves
And speaking of ranking higher in searches and on Airbnb’s platform, a good way to do that is by having a lot of “wishlist saves” and they’re basically the little heart on top of the page that allows people browsing for Airbnbs to save a listing and come back to it later. When your listing has more wishlist saves, Airbnb pushes it more, so you could ask family and friends to create accounts and save your listing, and that way you’ll guarantee a better presence on the platform.
Create a Digital Guidebook
You should create a digital guidebook about everything your guest might need to know about, and send it to them. This will bring you and your guest comfort as they won’t have to call you all the time to ask about where they should put the trash or what’s the WiFi password.
How to Start an Airbnb Business Without a Property
If the idea of running an Airbnb business sounds appealing to you, but you don’t actually have a property to rent out, worry not. There’s a way you can turn Airbnb into a full-time business that will make you a lot of money, and you don’t even need to own a property to get started, and that’s through Airbnb rental arbitrage.
What’s Airbnb Rental Arbitrage?
Airbnb rental arbitrage is a business model that focuses on leveraging other people’s properties through sub-lease agreements, and then you use that lease to rent the property on Airbnbs. In other words, you’d be renting properties from the long-term rental market and then reselling them on the short term marketplace.
Getting an LLC for Your Airbnb Business
You’d need to set up a limited liability company or LLC before you get started, because an LLC protects its owners’ personal assets from responsibility for the LLC’s debts or liabilities. For example, if anything goes wrong in your Airbnb and you get sued by a customer, your personal assets, like your car or your house, get legal protection. It’s also useful because it makes you look better in front of the landlords that you want to rent from, making it more likely for you to get the place and build up business credit.
Of course, there are limitations to an LLC’s protection, so you might want to talk to an attorney first. You can start an LLC by going to your local Secretary of State website, and some states let you issue them for as little as $100.
Doing Market Research
You should also do a lot of market research to determine which properties will do well as an Airbnb, and you can do that for free on Airbnb’s website. Just open up the website on your desktop and search for a place in the area you want to do Airbnbs in, select any weekend for the time frame since that’s when most people use Airbnbs, and look through the results. What comes up first is the listings that Airbnb wants you to see, and if you think about that for a second, if Airbnb wants you to see these listings, then it believes that they’re its best listings, because Airbnb’s highest likelihood of getting you to book is by showing you the best it has, which is why you should seek out properties similar to the ones in those listings.
Make sure to ignore listings that have the word “new” next to them because they might not be good, but were still given a boost by Airbnb because the platform boosts new listings in their first month. Also, beware of scams and people on social media trying to sell you “arbitrage-approved” apartments and houses, because these people have no experience with Airbnbs and just want to get a brokerage fee for locating deals for landlords.
Risks of an Airbnb Business
Short-term rentals could be a big hassle, as you’d have to see people checking in and checking out more than once in the same month, and this doesn’t happen with a normal rental property. If you want to get rid of that hassle and create passive income using Airbnb, you could hire a property manager to do all the work for you, but if you can’t do that, then it’s important to keep your Airbnb close to where you live in case you need to go there a lot.
The second disadvantage is that you might need to do a lot of maintenance because you don’t know if the guests you receive will leave the property in the same condition when they entered it. You might find yourself having to replace furniture or carpets, and maybe even do multiple paint jobs. Fortunately, for some damages caused by the guests, Airbnb offers to pay you the cost of repairing or replacing what was destroyed, and sometimes the guest can be fined, if Airbnb gets involved and determines that whatever damage was the guest’s mistake.
As for the third problem with Airbnbs, it’s that some cities are now prohibiting them. Some cities even impose restrictions or fees on rentals, and the days you can rent your property. For example, New York, Paris, London, Berlin, and other major cities have all tightened their laws on Airbnbs, despite being cities with large Airbnb markets.
This is because a lot of these cities’ governments think that Airbnbs reduce the housing supply and disrupt the quality of life in some neighborhoods. A good example for this is Santa Monica in California wiping out 80% of its Airbnb listings, a decision that was driven by the overall increases in housing prices and a dwindling housing supply thanks to the rise of short-term rentals. It also added new rules that require anyone offering rentals of 30 days or less to live on the property during the renter’s stay.
Of course, you can be in an area that doesn’t have restrictions on Airbnbs, but regulations can change over time and you won’t be able to do Airbnbs anymore. Additionally, a lot of people get into the Airbnb business to create something like an “Airbnb empire” with multiple properties and locations, but this has become extremely hard to do now. So, if you’re planning on becoming an Airbnb host, you need to know the laws of your city and to keep an eye out for changes to them in the future.
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