Short term rental properties such as Airbnbs can represent a profitable opportunity for investors.
Running a successful Airbnb business comes down to smart planning and effective market research.
If you are a property owner hoping to profit from short term rentals, learn how to Airbnb your house.
Airbnb has consistently grown in popularity since its creation in 2007, largely because of the benefits it offers both property owners and renters. Potential renters, called guests, are provided with unique rental properties across the globe, often at better rates than hotels. Property owners, called hosts, can operate highly profitable short term rentals by listing properties to millions of potential clients.
Real estate investors who learn how to start an Airbnb business can achieve success through this lucrative strategy, so long as their properties stand out. Keep reading for our step by step guide to starting an Airbnb business.
An Airbnb works like a short term rental property, except that they are listed on an online platform which allows potential tenants access thousands of listings at once. Property owners can list their homes on Airbnb to generate rental income as guests book their properties. In some cases, homeowners will even rent out a room in their primary residences for passive income.
One reason Airbnb is so popular is because of the convenience it offers users. The online platform allows guests to search for properties by location, availability, amenities, and price. Property owners classify rental properties using these categories in hopes of reaching a wide target of renters. There are also no fees associated with using Airbnb, meaning guests and hosts will not be charged unless someone books their properties.
10 Step Guide To Starting An Airbnb Business
Learning how to start an Airbnb business starts with planning your business and conducting market research. The online platform makes it surprisingly easy for investors to list their properties, so long as they continue to provide a positive experience for guests. Read through the steps below and learn how to build an Airbnb business today:
Set Your Expectations
Choose Your Location
Pick Your Property
Understand Associated Costs
Know The Law
Form Your LLC
Plan Your Business
Price Your Rental
List The Property
Continuously Work To Improve Your Property
1. Set Your Expectations
The first step in starting an Airbnb business is to clarify your expectations. Some investors may be looking for a little extra income, while others may be hoping to start an entire rental business. Identify your priorities going in so that you are better able to make business decisions down the line. To begin, investors should determine how many properties they hope to rent, how much income they are looking for, and an estimated time commitment they will be able to take on.
2. Choose Your Location
Location is one of the most important factors in real estate, but when it comes to short term rental properties, this factor is especially important. While investors may be able to lease long term rentals in markets across the country successfully, the success of short term rentals is greatly dependent on location. Investors should keep popular tourist areas in mind as they search Airbnb markets. Additionally, don’t be afraid to consider long distance real estate investing strategies as you choose the right location for your property.
3. Pick Your Property
After you choose the right location, you must identify your preferred property type. One of the biggest perks that come with renting an Airbnb is that there are a multitude of options when looking for homes. It is not uncommon to see listings for houses, condos, apartments, houseboats and even tree houses in some cities. As an investor, this means you need to identify which property-type will generate the results you are looking for.
Investors must also research specific neighbors in the markets where the plan to buy. Look into which areas attract the most tourists and then go from there. Will you offer a beach getaway or a city apartment? Keep your end goal in mind as you research options and pick a property that is right for your business.
4. Understand Associated Costs
While there is no cost to list a property on Airbnb, there are fees associated with booking guests. Airbnb fees can range between three and five percent of the total booking costs. Depending on your area, you may also be required to get a license to rent to tenants. As you start narrowing down a property, be sure to account for the portion of profits that will go to Airbnb and other licensing fees.
Investors should also be aware of the costs associated with furnishing and maintaining an Airbnb property. Many guests are looking for properties that are furnished with a few added amenities. From the perspective of a property owner, this means adding basic furniture, kitchenware and even entertainment options. However, while there are upfront costs that come with starting your Airbnb business, adding amenities and furniture will only make your property more competitive online.
5. Know The Law
As a property owner, you should be familiar with the laws in a given area before purchasing a property. A great place to start is by reading through Airbnb’s own use agreements and host rules. Finally, depending on the type of property you own, you will also need to consult the rules of your homeowners association, if necessary.
6. Form Your LLC
Now that you’ve done some planning for your business, it is a good idea to form a limited liability company (LLC). A real estate LLC basically allows you to operate a business and be taxed accordingly. One of the biggest benefits to starting an LLC is that it can help protect you from any legal issues that may arise with your properties. Additionally, LLC’s offer investors a number of tax-related benefits. To get started you simply need to name your business, draft an operating agreement, and then file with your state’s LLC office. Read this step by step guide on starting a real estate LLC to learn more.
7. Plan Your Business
When it comes to rental properties, marketing and advertising will be crucial for attracting tenants. As you lay out the organizational structure for your business, plan your brand and voice for future marketing strategies. This includes creating a logo, color scheme and any tag lines you want associated with your business. If you are unsure where to start, try conducting a little online research. Once you identify branding elements you like and dislike, it will be easier to plan a voice for your own company to follow.
8. Price Your Rental
Learning how to make money on Airbnb will come down to how you price your rental. If its priced too low, you risk not covering operating costs. If its priced too high, potential guests will simply book other properties. To find the perfect balance, look at the nightly rates of similar properties in the neighborhood. Additionally, do not be afraid of adjusting the price throughout the year to account for on and off seasons, holidays and more.
In addition to setting the nightly rate for your property, you also have the option to create one time fees per booking. More often than not, property owners will charge a cleaning fee on top of the nightly rate. This can help cover the costs of preparing the property for new guests. However, just like the nightly rate, you will want to set your fees in line with comparable properties in the area.
9. List The Property
Once you have created your business and decided on a property, it’s time to create an Airbnb listing. Luckily, the Airbnb website is very user friendly. First, think of a strong title for your property. Airbnb requires hosts to name a listing in 35 characters or less, so be concise. Examples include: “Charming 2BR in historic downtown” or “Cabin with a view and heated pool.”
You will then be prompted to answer questions about property type, availability, and pricing. Also tell guests whether they can expect wifi, parking, laundry and other common amenities.
The last step in creating the perfect listing will be to upload interior and exterior pictures that help the property stand out. If your unit comes with any extra features, like a pool or patio, be sure to post pictures of these as well. The final step is to double check your entire listing before posting–remember, you don’t want to leave anything out.
10. Continuously Work To Improve Your Property
Listing your property on Airbnb is only the beginning to running a successful rental business. Property owners must continue to monitor guests to ensure they have a positive experience, and leave a positive review. Guests will often use Airbnb’s public review feature to decide whether or not to stay at a given property. In order to make sure your rentals receive positive reviews, make sure your listing matches the property, ensure the check in and out processes run smoothly, and be responsive to any guest questions. It is also important to monitor the condition of the property in between visits to ensure everything stays in good condition.
If the sound of continuously improving your Airbnb sounds too time consuming, remember that you can always hire a property manager to help with the workload. They can help assist you with anything from guest communications to property upgrades. If you plan on working with a property manager, be sure to account for their fees when calculating the potential profitability of a given unit. There is no set way to run your Airbnb business, but through continuous improvement you can make sure your property is a success.
According to Airbnb, over 2 million guests are staying in an Airbnb on a given night. Given the size of this market, it only makes sense for real estate investors to want a share of the action. Luckily, learning how to start an Airbnb business comes down to a few simple steps. Investors simply need to be prepared to do their research, market their property and ensure a positive guest experience. Airbnb can be highly lucrative for investors willing to put in the work to make it happen.
Did this step by step guide show you how to start airbnb rentals? Share your experience with the platform in the comments below.