This article is Part 1 of The Airbnb Series. When you’re done, check out Part 2, Part 3, and Part 4.
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“I wonder if …”
The greatest adventures of my life usually begin with that phrase.
When I say “greatest,” I don’t necessarily mean “best.” Sometimes I mean “weirdest-smelling” or “insanely-profitable” or “almost-gave-me-malaria.”
- “I wonder if I could start my own business …”
- “I wonder if I can really resist ever working for someone else …”
- “I wonder if I can eat this??”
(I say that last line way too often, usually accompanied by: “Hey, smell this. It hasn’t spoiled yet … right? Riiight?“)
The latest “I wonder,” however, is relatively mild — all things considered.
It won’t involve cross-country trips or cross-contamination or even cross-dressing. It won’t land me on the nightly news. And it won’t hold any potential for billionaire profits, but it also offers limited downside.
You see, I’m a landlord. I recently finished renovating one of my apartment units.
Pre-renovation, it rented for $700 per month. Post-renovation, I can rent it for about $1,100/month.
But then I started thinking, “I wonder if …”
“… I could boost my profits by becoming an Airbnb host?”
And that’s how The Airbnb Experiment began.
How I ‘Accidentally’ Started a Vacation Rental Business
(Brief background for new readers: My partner and I own seven rental units across five buildings. You can read about them here, here, here, here and here.)
As soon as “I wonder if …” popped into my mind, my knee-jerk reaction was to focus on the drawbacks of managing a vacation rental business.
- More turnover.
- Higher vacancy.
- Extra management.
- Upfront costs of furnishing.
- Higher guest expectations (full-service).
I observed those objections arising. And then I asked myself, “How can I battle these?”
#1: Separate “Investor Paula” from “Manager Paula.”
I’ll track my hours and ‘pay myself’ for this position.
This is crucial. Many people think they own an investment, when they really own a job.
The only way to successfully invest in real estate is to make a profit after paying yourself (or paying someone else).
#2: Commit.
I’ll commit to this experiment for at least 6 months, if not a year. This way, I can measure vacancy and turnover across the span of several seasons.
#3: Budget.
I’ll furnish the apartment on a $2,000 budget – including paying myself for my labor. (I’m not giving my time away for free!)
Here’s what happened next:
Step 1: Shopping Spree!
I’m shocked at how much stuff – lots and lots of stuff – is needed to furnish an apartment.
Yeah, there’s the obvious furniture:
- Mattress/boxspring
- Bed frame / headboard
- Sheets, comforter, pillows, duvet
- Dresser
- Couch, slipcover
- Window treatments
- Coffee table
- Bedside end table
- Reading lamp
- Kitchen table and dining-room chairs
- Plates, bowls, spoons, forks, knifes
- Pots, pans
- Mugs, glasses
- Coffeemaker
But after I began furnishing the space, I realized there was a LONG list of things that I hadn’t considered –
- Trash cans for kitchen/bath
- Hangers
- Dish towels
- Baking trays
- Placemats, potholders, can opener. (Who buys a can opener? Isn’t that something everyone just has?)
- Bath mats, towels
- Cable TV! *Forehead slap!* I forgot that most people expect a TV …
- … along with a TV stand (that’s a furnishing category?), cable box, remote control …
- Oh yeah, and wireless internet!! Doh!
I set up the apartment with all of the “Consumer Disposables” that create a good customer experience in a vacation rental, such as:
- Toilet paper
- Hand soap for kitchen/bath
- Shampoo, conditioner, body soap
- Coffee, tea
- Dishwashing detergent
- Sponges and paper towels
- Laundry detergent and fabric softener
- Salt, pepper, cooking oil
- Iron / Ironing board
- Hairdryer
And after all of this, after 5 solid days of carefully thinking through every possibility, my first few guests began requesting items that I still hadn’t considered, such as a plunger and toilet brush.
Bottom line: It takes a TON of stuff — especially small stuff — to create a home-away-from-home experience.
Step #2: Photograph the Space.
I have a new appreciation for interior photographers. After lots of trial-and-error, here’s what I came up with:
Pro tip: Close the toilet lid before taking a photo of the bathroom. It gives the image a more pulled-together look.
Step #3: List the Space.
Although I’m referring to this as the “AirBnb Experiment,” I’m actually offering the apartment on two websites – AirBnb.com and VRBO.com.
Because I’m slightly a perfectionist, I scanned the neighborhood competition and wrote a listing that could compete head-to-head with the best of them.
I also added a map with pinpoints at all major restaurants, bars, shops, salons, gyms, etc., within easy walking distance. (Which are a LOT.)
Step 4: Develop Procedures
Next, I developed a checklist of check-in, check-out and turnover/vacancy procedures.
I don’t have to rely on my (unreliable) memory. I can just follow my checklist.
The checklists are too long to reprint in full here, but they include:
- Walking through the unit after check-out to make sure nothing is damaged/stolen. (My checklist features an inventory of all the stuff within the apartment.)
- Refilling any “consumer disposables” that are low. (Coffee? Sponges? Soap?)
- Washing the linens, vacuuming, mopping, emptying the trash, and overall cleaning up the unit after check-out. (I’m thinking of hiring a company that will handle this step.)
Step 5: Create a Standard Guest Greeting
I created a page that welcomes guests and highlights the amenities of the apartment.
I tried to anticipate any FAQ’s, and answer all of these on a pre-written page. (Here’s where you’ll find the remote. Here’s the wireless internet password. Here’s how the ceiling fan works.)
This step is more for my benefit than the guests.
You see, I want to run a business – not have a business than runs me. The best way to execute that is to automate, by creating checklists and procedures that I can give to anyone who steps in to fill my shoes while I’m traveling.
When I create an FAQ page, I’m automatically giving my guests one fewer reason to call me.
Less work and more money? Yes, please. 🙂
6 Lessons I Learned as an Airbnb Host
After all this, what lessons or conclusions have I learned?
#1: Holy moly, humans need a lot of crap.
Like seriously, when/why/how did we as a society get to the point in which we need so much CRAP to maintain our existence?
I’m not finger-pointing, as I’m as equally guilty of this as anyone. I maintain a spatula and dish towels and sponges and dishwashing detergent in my own home.
But can we just take a moment to reflect on the sheer volume of possessions that we need in order to have a functioning home? It’s kinda astounding, when you step back and think about it.
I’m not moralizing; I’m just … shocked, really.
It’s not something you think about, until you have to buy all of this junk at the same time.
#2: Know the difference between a commodity business vs. a service business.
Running a vacation rental business is waaayyyyyy different than simply offering a rental property.
I had long suspected this to be true, but the experience of going through the motions really brought that lesson home.
When you invest in rental properties, you’re offering a commodity. I renovate old fixer-upper homes (manufacturing) and sell it in bulk, one-year time increments (wholesale).
When you run a vacation rental, you’re offering a service. If someone wants more towels, they’ll call you.
#3: Competitive pressures skew the market.
When you’re offering a rental property, you’re competing against other investors.
But many of the other hosts on Airbnb aren’t investors. They’re owner-occupants (or renter-occupants) who list their personal home, and spend the night at a friend’s house, to make some extra cash.
Because they’re not concerned with their ROI, they can under-price the competition. This exerts downward pressure on the prices.
It’s great for guests, but it limits the upside for hosts – especially those of us who are full-time investors.
#4: Taxes suck.
When you offer a short-term rental, you need to pay the city 8 percent sales tax and an additional 8 percent occupancy tax (the same types of taxes that hotels charge.) That’s a 16 percent additional bite from your profits. Wowza!
(Tax rates vary from city-to-city, but suffice to say that it’s a LOT.)
****
I hope those conclusions don’t sound too negative. There’s a huge upside to vacation-rental hosting, as well:
#5: It’s super-fun.
Most of my money-making efforts happen in front of a laptop, and sometimes, I just want to tear myself away from a computer screen.
Managing a vacation rental (and rental properties in general) give me awesome variety. I can interact with flesh-and-blood people, rather than stare at pixels.
And it’s not like I’m in traditional “customer service,” interacting with grumpy people. I’m hanging out with people while they’re on vacation. They’re relaxed, they’re in a great mood, and there’s here to have fun.
#6: It’s the best of global travel … under my own roof.
One of my favorite aspects of traveling is meeting people from around the world.
By running a vacation rental, I can capture that same experience – in my own building.
My first guest, for example, was born in Jamaica and shares my love for exploring the Caribbean islands. She and I chatted at length about our travels in that region, swapping notes about our favorite off-the-beaten-path coves and beaches.
It’s the same type of conversation that I’d have with a random traveler at a hostel or a cafe … the type of international human connection that I love most about travel.
And I dig that it happens under my own roof, and that I get paid for doing it.
****
But that said, a business is a business, and it needs to turn a profit.
How lucrative has this been so far?
First, let’s set an income goal:
Price on a One-Year Lease: $1,100/mo
(Less vacancy projection for long-term rental: $100/mo)
Benchmark for Comparison: $1,000/month
Vacation Rental Additional Expenses:
$100/mo utilities (including electricity, gas, cable, internet)
$40/mo consumer disposables (refilling the sponges, soap, shampoo, etc.)
$160/mo management (8 hrs/month at $20/hr)
$250/mo sales and occupancy tax (rough ballpark)
Projected minimum revenue needed to break-even: $1,550/mo.
In other words – unless we hit that base rate, it’s more sensible to rent this unit to a long-term tenant on a one-year lease.
____
In the month of March, I’ve earned $1,619. That’s a total “profit” of $69 for the first month (after paying myself for my time).
But as you can see, these are all estimated numbers. The REAL data will come over the span of the next few months, as I:
• Track REAL hours
• Track REAL receipts
• Pay REAL utility bills
So – Is a vacation rental more (or less) lucrative than a long-term lease?
Stay tuned. ☺
Update: Check out Part 2 of The Airbnb Series here, followed by Part 3 and Part 4. Or download all 4 parts in this FREE guide, below!
~~~~ P.S. Use this link for a $20 Airbnb coupon, plus a list of top resources for Airbnb hosts.
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Those photos aren’t half bad! I thought Airbnb offered a free photography service though? Who would ever have thought closing a toilet lid could make such a difference.
Every time we move house I marvel at how much stuff one needs.
I’d love to become a host when we own our own place. Not just for the $$ but as you point out meeting travellers – one of my favourite parts about Couchsurfing.
@NZ Muse — They do offer a free professional photography service; I’m on the waiting list. 🙂
I really like that you are doing this experiment and can’t wait to read about the outcome! Another positive to having a vacation rental is that you can exchange it for a place to stay when you travel. Homeexchange.com is a great site for this.
In my experience of renting places for myself for a week (all VRBO, so far), the FAQ says that there is enough of certain items (toilet paper, for example) “to get you started” and you are expected to supply any extra that you need during your stay. That’s something you might consider doing for longer-stay clients to at least try to plant the idea that they are on their own after the first couple of days, so you don’t get a call saying “we are out of coffee.” Obviously, one person will use less than two people, but unless you are charging extra for the second person, little costs can add up.
@Janet — When I’ve stayed at VRBO/AirBnb places as a guest, that’s the approach that I’ve taken: If something runs out, I’ll replace it. I think that will help account for some of the ‘consumer disposables.’
But that said, I’ve already had a guest steal my supply of toilet paper. (Like seriously, who steals 4 rolls of toilet paper?!?!) So I think, on balance, the “contributions” from some guests will even out the “thefts” from other guests. 😛
Very curious to hear about your results. Down here, there’s a big element of seasonality in the vacation rentals, so you have to be okay with long vacancies throughout the summer. That, and the effort from cleaning and being on call is one reason that we’ve never wanted to deal with vacation rentals. We know friends who either pay an arm and a leg to outsource these services, or curse their guests under their breath after they leave.
I would *love* to do the AirBnB with my apartment but the conditions of the lease prevent me. (Weird, ultra-controlling CityofLondon thang:http://www.barbicantalk.com/forum/viewtopic.php?f=2&t=11996&start=15&hilit=short+lets see the angst)
My partner though is an Inventory Clerk, who specialises in checking-in , out, and general inventory. The key words are: clean, clean, and very clean – nobody wants to move into a rental that has toilet stains.
Too much furniture is a trouble too, especially if its a fabric sofa – they get smelly and manky very quickly (when was the last time you looked under your cushions?)
Plants will generally die, unless you love them so much that they’re in the lease agreement.
“Quirky thrift shop ornaments” – who are you kidding.
I love the idea of this and am totally following along. I live right near a beach town have always wondered what all was involved in renting out a property short term. Do you plan on calculating return based on how much money you could make doing something else with the same time? (I’m sure it is more than $20/hr) Will the furnishings significantly reduce your return as well?
@Lance – Great questions. The furnishings are part of the upfront cost (as opposed to the ongoing monthly cost). If I continue to average $70/mo in profits, then the furnishings would pay themselves off in about 2 years.
As for how much I make doing this vs. doing something else — Nope. The key to evaluating returns is to make it individual-agnostic. In other words, take “Paula” out of the equation, and focus on “How much does this job position pay on the free market?” — and then evaluate the returns based on the labor costs of that position. This way, I can replace myself (with someone else) at any point, and the numbers remain the same.
Great point with the replacing yourself. I need to have that mindset of being able to outsource more 🙂
…AND you have to calculate the upfront cost of doing it yourself as either “tuition” or “early startup” cost. I love having a “tuition” line in a P&L similar to R&D costs, etc… you can convert some of that to deferred income and carry it on a balance sheet as well FWIW depending on your business structure
Very cool Paula! Looking forward to seeing how this thing develops over time! Any restrictions from your state/city on turning a property into a vacation rental? I know a lot of places restrict short term rentals. I’ve often thought of turning my “Cobain Houses” (the 2 house I accidentally bought that Kurt Cobain lived in as a baby) into a Vacation Rental but my area, being slightly rural, probably wouldn’t work, despite the celeb history.
@Brandon — That’s such an interesting slice of history about your house!! Haha!! I used to live in Boulder, Colo., and the house where JonBenet Ramsey was murdered absolutely won’t sell. It’s a beautiful house that just sits on the market, with no buyers. (At least, that was the case when I lived there … it might have found a buyer after I left.)
There are no restrictions from the city/state on vacation rentals, as long as you pay the egregious taxes. 🙂 And since I own the entire building, there are no HOA restrictions, either. 🙂
Great post! My husband and I started renting a room in our home on Airbnb and have loved the flexibility and extra income – but the taxes are no joke! I bet the professional photos will make a great difference in peoples’ interest, too. Are those your earnings thus far for March (and the month isn’t even over yet)? Best of luck! Fun experiment.
@Jennifer — Yeah, the taxes are incredible! 16 percent — in addition to “normal” income taxes! Yikes.
As for the earnings: That’s the payout for the entire month (through the end of the month.) SO that’s my official income for the entire Month One of The AirBnb Experiment.
I thought about doing this with one of my rental home in the Pocono Mountains in PA…and then I thought better of it. There’s a TON of work involved and an even greater investment, as you’ve pointed out. Also, those occupancy taxes are killer. Thanks for experimenting for us. I’ll be following along.
Thanks Sandy!! 🙂
I definitely wouldn’t be doing this unless I also lived in the same building. I’m on-site, 24/7, unless I’m traveling. That makes the management a lot easier and less time-consuming.
I know that you live in New York, and I can’t imagine driving from NY to Pennsylvania in order to facilitate the management. That’s way too much work.
Very interesting article, and great to see the actual numbers in your calculations. Also very smart that you always include staff time in the budget, even if that time is yours!
I have to say, though, that some of your photos are what I refer to as “corner shots”, where you cut out a lot of the room to focus on a pretty corner. I avoid listings with those kinds of pics, as they don’t give you a sense of what the entire space looks like. I don’t expect places to be palaces, but I do expect to know what I’m renting.
@imelda — I totally understand what you’re saying about the corner shots. I need a wide-angle camera lens in order to capture an entire room. With a “normal” lens, it’s hard to get anything better than the types of images that I have. AirBnb will send a professional photographer to snap photos of your space, and I’m on the waiting list for that service. So — fingers crossed — I’ll get better images soon. 🙂
Maybe I missed it….but where is the link to the property?…or did you leave it out of the article so as not to skew the results? Great advice contained in the article ! Wishing you the best with the ‘experiment’ 🙂
@Walt — I’ll email you the link privately. (Yep, I don’t want to skew the results … I want to keep this educational, so that any Afford Anything blog reader can get a good idea of what to expect if they rent out their own property.) 🙂
Loving the experiment. I’ve been toying with the idea of buying a $35-40k condo a block down the street from me. Fix it up, a little TLC, then airbnb that bad boy. I figure I could gross $10k at 50% vacancy ($50/nt). But all the management and other costs involved make me think it might not be as profitable compared to a passive investment like a REIT fund.
I’ll be curious how your experiment turns out (versus an annual lease).
@Justin – Does the condo association allow you to rent it out? Read the fine print carefully. Many landlords (and AirBnb hosts) have gotten cease-and-desist letters from their condo associations and homeowner associations.
What city would that be in mate
I have started renting a few rooms in my house and it has been going well, but people sure are needy. And they expect hotel quality even when you are just on Airbnb. As I don’t have many places to eat around I also do dinners and breakfasts which is more of a public service than anything since it takes about two hours of my time between preparing serving and cleaning, but I am happy with the room rate, surely higher than if I rented the whole place long term.
You really did a good job! Your place is pretty awesome! I’m looking forward to your experiments.
I love AirBnB and I love rentals! I’d be very interested to see how this turns out for you. I have a feeling you’d do better renting it out long term. Anyone up for setting up a betting pool? 😉
Wow….excellent blog post. If I were thinking about doing something like this right now, this post would certainly provide enough guidance to know whether to move forward. I will look forward to seeing how this works for you because I live in an area that does periodically have large conventions and golf tournaments, etc. when people rent out their houses. I think we have to grow a little more into a destination city to make short-term rentals work here, but it probably is something that will pay off down the road.
Yes, we do own a lot of crap – at least most Americans do. I have two daughters in college. The oldest got her first apartment this year and the youngest is getting an apartment next year. Fortunately, having roommates helps, but we still have had to buy a lot of little things.
As an owner of a bunch of long term rentals, and a nearly non-stop user of AirBnB, this was enlightening! I don’t think I’ll walk into our next AirBnB rental with as much of a critical eye, knowing what’s involved. I’m not sure I’m ready to move into the service industry, yet, either. 🙂 Looking forward to seeing your long term results!
We’ll be staying at our first VRBO/AirBnB places in April and I’m looking forward to it. It sounds like your listing is quite good. The one place we’ve booked so far sent us two gigantic, extremely, extremely useful emails, covering everything from transportation, to key handoff to water usage (Caribbean), phone line availability and more.
My Dad has furnished two different work apartments for himself and it takes a lot of time to go out and buy all of that stuff! The ladies that worked at the Zellers by him got to know him, as he went every evening for a week or so, getting a huge basket of stuff each time. It’s a lot of work when all you’re starting with is a toothbrush and your own clothes.
I am very curious about how this experiment works out for you, keep us posted!
Love the reminder to pay yourself (or a company) to calculate true ROI. Like you said, when someone skips that step what an investor is doing is buying himself a job. Maybe it’s a job he loves and that’s still the right move. But the distinction is critical.
Thanks! I can’t over-emphasize the importance of being able to take yourself out of the equation, while having the numbers stay the same. That’s critical to evaluating ANY investment … especially ones that are intended to create freedom!
I think this is a very unique and innovative way to try to earn better income from your apartment. I own a few rentals, but not locally, so this isn’t an option for me. It will be interesting to see how the results will look after a year has passed to gauge how the seasons affect vacancy.
It can be silly with the upfront costs for furninshing a unit. I don’t do an AirBnB but I do rent out furnished rooms at one of my properties to long-term tenants who do not want the hassle of a house lease. (I am located by the college here so most of my tenants are students rotating in and out). If you check in with your accountant, most of the costs can be written off but not all. And some are depreciable. Even your sofa. But I do not know how these expenses applies from a service point of view.
However, it sounds like you could always fall back to a furnished rental if the AirBnB doesn’t work out.
What’s the average number of nights your guests stay at?
@Mark — Regarding the average number of nights: Most of my requests have fallen into two categories: “Long weekends” (4-5 nights) and “long-term stays” (people in town for a few weeks due to work).
That’s pretty good. Long weekends and in-town work stays. You are onto something. Have you considered reaching out to nearby businesses who have people in town for work? Meaning a company flies in an IT guy for two weeks or something and needs a place within driving distance?
Thanks for sharing your experiment, especially the numbers. I don’t see insurance in the budget though, or maybe I missed it?
@Norma — You can find all the numbers about the rental property (the building) in this article. In the “AirBnb” post, I’m specifically concentrating on the comparison between long-term renting vs. short-term renting, so insurance doesn’t play a role (it’s the same cost, regardless of the length of the tenant’s stay.)
That is quite a lot in costs to furnish and buy those little things; I can imagine that it was difficult to complete your shopping trip as you are right, there are a lot of things that us humans “need”. I don’t know if I would be up for the short-term vacation rental type of gig. I am a set it and forget it type of person and it wouldn’t provide that flexibility, but I think it’s admirable that you are doing this!
Very nice discussion and analysis of the financial viability of this type of venture. Loved the point about so much stuff people need or want. I will check back to see if this is really a profitable way to go but March’s results look really promising.
Awesome Post!
I just finished my first airbnb experience as a host and it was great!
I live 2 blocks from Ebay in silicon valley…
thniking about airbnb.
a litttle nervous, but sounds like a possibility!
Fill me in on your thoughts if you have a moment.
Thanks,
Diane
I think the best thing about this experiment, from a reader’s standpoint, is how honest you’ll be in terms of calculating returns. I feel like a lot of people would “forget” to add in a silly thing like a coffee maker.
Very interesting, indeed! I look forward to future updates with the REAL details. 🙂
It has me thinking about the 2 one-bedroom, furnished apartments in our house. Usually they’re rented to law students (who could potentially stay for 3 years), but I wonder if we’d make more soon something like Airbnb. Hmmm. I’d have to run the numbers. And maybe do a trial run this summer, when it looks like they’ll both be empty. We’ll see!
(My guess is that there’s not nearly enough demand in our area. There’s only one airbnb listing in our town right now.)
We live near a NASCAR race track and are planning on renting our 4BR 2BA home out for the 2 weekends the race is in town. If we get a sleeper sofa for each of the two living rooms, the house will comfortably sleep 12 & should command $3k per race weekend. For a group of 12 that’s only $250 pp and way cheaper than a hotel. After expenses, were looking at clearing a little over $5k per year. We originally planned to rent the house and buy a new property, but after crunching the numbers and assuming a 3 month vacancy/year to be conservative, renting it out for the 2 race weekends will net us $3k+ more per year! Amazing! Thanks for the idea!
How did you arrive at your “conservative” 3 mos/yr vacancy figure? That’s way more pessimistic than anything I’ve read or personally encountered. We’ve been landlords for 6-7 years now, and we’ve probably averaged less than 1 month/yr vacancy in all of our houses/units. We have 1 house and 2 apartments becoming vacant this May, and I’ll be surprised if any of them are still vacant one month later.
Every situation is different, of course. You may have good reasons for your estimate. That’s why I’m asking, so I can learn. 🙂
I’ll be fascinated to hear how it turns out Paula. We ran a vacation rental in Dana Point, California, complete with City Hall battles. It was our primary residence. We rented it out during holidays and then we traveled. We spent a summer in Costa Rica, Santa Barbara, Christmas in Colorado and Yosemite. In the end, it was too much to run the vacation rental and my business as well as move in and move out with 3 kids multiple times a year. However, we did make money on the deal as we chilled on the beach all summer. I plan to do it again when the kids are all up and out.
@Emily — Wow, that’s really interesting! Did you have one tenant stay in your home for the entire time that you were in Costa Rica / Santa Barbara / Yosemite? Or did you process “turnover” from out-of-town? One of the toughest challenges that I’ve encountered so far is trying to manage while I’m away. It’s easier to do this with tenants (call the plumber, call the contractor) but harder to do this when I have to check people in and out, so I’m curious about how people manage turnover.
Short-term rentals are actually prohibited by city ordinance in my town, which is a heavily touristed burg with a powerful hotel lobby. So make sure to also investigate whether it’s technically permissible where you live.
Even so, after we came into partial ownership of a condo that no one could decide whether to sell or keep, we used Airbnb when we couldn’t find any suitable long-term tenants. Many months we made more than we had listed it for rent, some quite a bit more depending on what was happening. Almost without fail we had great experiences with the visitors who usually did great work cleaning up, so mush so that I was retroactively embarrassed how we had left a previous Airbnb stay. If we didn’t have to split the profits with other who lived out of town we probably would’ve hustled a little more in those other months and made even more money. However, it was just far enough away from our house that I was starting to get annoyed with regular trips out there after doing it for over one year.
I was originally on another page but this is more my thing.I think its great that your able to think outside the box and accomplish this type of thing. Keep the great posts coming, enjoyed this one very much.
I’ve been renting out a very large bedroom in my house through Airbnb for just over six months and have had nothing but good experiences so far. My house is too large for me (long story as to why I have it) and a few years ago I had a roommate that occupied that room. When my partner moved into the house with me he didn’t feel comfortable with a permanent roommate. He did agree that we could rent the room through Airbnb, though, so after a bit of fixing up we listed it. So far I’ve made at least as much as I rented the room for, and for the past two months I’ve made about double that. My current guest is here for a longer-term stay. He’s a European here to work on getting an essential credential so he can do his medical residency in the US. For people who live in cities with large hospitals, this is a great source of short term rentals. He’s been a super guest who is either working or studying most of the time, so very easy to have around.
You really did a excellent job! Your position is fairly awesome! I’m getting excited about your tests. Thanks for sharing.
Thanks for this great article. I have a beach house I considered renting short term but I figured it would be too much work. It seems from reading your article, I was right! I rent it out long term and even then it’s hard to find renters. I just got one that I hope will last after having the place sit empty for 4 months.
I’m surprised you earned so much in your 1st month. Do you think you just got lucky with the occupancy? Or is it that easy to find tenents through airbnb?
@Jill — My neighborhood is a high-demand spot, so I’m confident that I can get occupancy. The only question is, at what price point? I’ve set the AirBnb rate to that “sweet spot” that I think is high enough to justify the added work, but low enough to encourage full or near-full occupancy.
After I initially left a comment I appear to have clicked on the -Notify
me when new comments are added- checkbox and now every time a comment is added I recieve 4 emails with the same comment.
Is there a means you can remove me from that service?
Cheers!
There’s an “Unsubscribe” box at the bottom of every email. Just click that link. Thanks!
Thank you for this valuable information I really need this. I am starting this kind of venture in Philippines. I am doing a lot of research to get some ideas because I am new to this field. The condo that i purchased is already fully furnish and just to purchase small things such as linen, coffee maker, soap utensils. Any insights or information that I can get is greatly appreciated.
I’m so happy to have found this post! I’m bookmarking it for future reference. I built a treehouse in Hawaii over the winter months and have to rent my place for 100 days to make back my investment. I figured that if I can rent the place it might make me some side income and pay for itself and if not than my family and friends just have a really cool vacation spot.
Thanks for the through post it’s much appreciated!
I love how you go through the process of analyzing being an Airbnb host as a business. So many people rent their space but don’t use a business approach to actually analyze whether their expenses (especially after paying themselves for their time) are less than their revenue so they actually generate a profit. One tip for other hosts: Airbnb does indeed offer a free professional photography service so be sure to take advantage of this! Bonus: because the photos are taken by an Airbnb contracted photographer, your photos will be Airbnb verified (watermark on photos) and you will likely get more inquiries/bookings because guests will see that your place has been verified and actually looks like the pictures.
For anyone looking for more tips on being a great Airbnb host, visit our forum: http://airhostsforum.com/. We’ve also got other great resources on property management and cleaning services for Airbnb, cool tools to make your life as a host easier and much more!
Thanks for commenting! Yes, AirBnb does offer a free professional photo service, but be prepared to wait for a very long time … I registered for an appointment several months ago and still haven’t heard back. Bummer. Thanks again for reading and being part of the Afford Anything tribe!
Years have passed since that Winter I discovered the AirBnB revolution of happy people sharing homes. I’ve seen hundreds of AirBnB guests, and now, they really sound different, sometimes really annoying, making you feel like your appartment is a Deluxe hotel for 40$/night. Expectations increased for lowered prices, as the platform became really popular. But the whole point of AirbBnB wasn’t business at all. It was meant for home sharing. We may even have contributed to make AirBnB more commercial, as hosts. But popularity killed the simplicity in the end….
I read the post and your experimentation is awesome,..
In a few years, Airbnb became one of the most successful startups of the decade. I’ve heard that on a given night, more people sleep in an Airbnb-rented apartment in New York than in the biggest hotel of the city. There has even been some similar sites taking off like the european Housetrip.
But to me the problem with Airbnb is something else. It’s just money.
The thing that got me excited in vacation rentals in the beginning was great returns. By putting a little more work to rent your place to foreigners several times a year, you’d get a better return on average than if you rent it to locals. And it was all the more true at the beginning where there was a lot of demand from Americans visiting Paris and not many offers.
But this is merely the case anymore. As more and more people started to rent their apartment on Airbnb, the market became more efficient, and the prices almost similar to a “normal” rent, just with more hassle of having to manage the whole process. In some cases, the prices are even lower than a normal rent !
Been wanting to start this in Atlanta myself. Do you have any suggestions for resources to help navigate the business licensing, taxing, potential zoning requirements? I can tell that you’ve registered for the occupancy tax, but what else?
@Emilee — There are two routes that you can choose from:
1) If you already work with a CPA and an attorney, tap them for help. They already know the landscape of your business and tax situation (e.g. your other businesses, other rental properties, etc.)
2) If you don’t have a CPA and attorney yet, hire one. Your attorney will handle the licensure requirements and business filings, and your CPA can handle the quarterly tax reporting, etc. Email me at paula [at] affordanything [dot] com if you want an introduction to my CPA.
In Atlanta, and in any other major U.S. city, your requirements will change based on whether you’re inside/outside of city limits (or located within one of the other metro area municipalities like Brookhaven), and also by which country you’re in (Fulton, DeKalb, Cobb, etc).
Thanks for the great article. Where is it located? that makes a big difference. Do you have a schedule for replacement of furnishings, appliances, and other household items? How do you project those expenses?
It’s located in Atlanta. Appliances typically have a 10-year lifespan (refrigerator, dishwasher, stove, washer/dryer, etc.) You might get lucky and make it to 15+ years, but typically my expectation is 10, and anything extra is a bonus. The same is true for furnishings like a couch, coffeetable, etc. — you’d probably want to replace these in 10 years so it’s not outdated, if you’re still an Airbnb host a decade into the future.
Thank you so much on sharing your experiment. Great questions and feedback. You’ve motivated me to finally get involved in my wish to be a rental property owner.
I started Airbnb a month ago, just on a whim because my last month to month renter did so much damage and I wanted to have a lot of time to stay at the place myself. It’s a house we inherited and stay in part time. I had no goals for how much to make, but I had a nagging suspicion that if I added up projected tax costs, flood insurance, house insurance, new roof and other improvement costs, it would be more than I could make on a full time renter and I would get to stay there. I jumped in at the tail end of summer and have been astounded at how busy the place is. Also, I have done a ton of home improvements. Before my first guests I had a realtor friend come and give her evaluation of the space, then got some really good feedback from the first few guests. It’s been great. My big drawbacks are that I live 300 miles away and depend on a sweet tenant downstairs to do the greeting and cleaning. She happens to be a part time hotel cleaner anyway, so she’s good at it. Anyway, so far, I love the interactions with people, even if it is mainly via text and internet. It’s been fun for my family and the house gets lived in, which really is what it is for!
My wife and I are wanting to start a vacation rental management business. We have one home in Florida that we are managing at the time but are looking for more. Do you have any experience marketing towards home owners that need management for their property? We are trying to build our business in the same area and then expand slowly from there. Is there a better way than word of mouth that we are looking to manage more properties other than our own?
Hello, Thanks for that useful article.
I also use Airbnb myself to rent several flat in Barcelona, Spain, but you forgot to mentioned one point: how to managed/sync your calendars when your start publishing on several platform?
I use Vreasy, that saved me huge amount of time, automatic messages+staff management is great. The webapp + option to make extra $ on guest services=Fantastic!
Have a look property managers, I highly recommend.
Very interesting information. My husband and I own 3 water front vacation rentals in Northern Micigan for 30 years. We love our life style and have been profitable.as our town has becomes vacation meccawith more big chain hotels coming in, suddenly our township decided to make a “small” change to zoning that bans any rental for less than 30dYs. Every vacation owner received a cease and desist order, last summer. Giving us 10 days to stop renting unless it is more than30 days. This is devistating financially. We as a group fought city hall, but lost. We did a FOIA for police complaints on any of the rentals in our area in the last 10 years, there was one for a barking dog and one for a medical emergency. All of our neighbors have been supportive and have written letters to the township boards, the township did a survey and the results were in our favor. There area few new retirees that moved into the area and want a “Golden Pond” experience on a public lake. It isn’t working for them, so they are the ones complaining and blaming. Va action rentals only make up 7% of the homes on the lake, but we are blamed for all issues. We feel the hotel industry has a hand in this along with our new zoning official. Any suggestions?
Cities all over the country with a hotel lobby and affordable housing folks who have become strange bed partners are attacking the entire cottage industry of vacation rentals. They get their union housekeepers out there towing the line for them and a few brown nose folks who sometimes fairly, perhaps, have been victims of party houses or poorly managed vacation rentals put the pressure on the city officials. Whether we like it or not politicians vote in the direction where their “consulting” jobs or their “campaign” funds come from. Many of us have caught the airbnb bug; loving the revenue and freedom and the feeling that we are offering something quite needed and appreciated, especially after the country is still reeling from the greatest “recession” since the Great Depression, with another one on the horizon.
Like all industries we need to gather in numbers and fight and probably pay off the politicians.
Los Angeles Short Term Rental Alliance is trying to make a difference and a National Advocacy group for hosts cannot be that far off in the future. (the industry does have one, with the listing sites FlipKey, VRBO, AIRBNB, Homeaway but I have not been asked to join so I don’t know what they are doing exactly) Los Angeles is trying to reduce the days one can share their primary residence to 120 days a year. Pitiful. As one host testified at the hearing ” Can I tell my bank I can only pay them 120 days a year?” I watched 5 hours of testimony from beleaguered hosts and the union workers, who gathered in uniforms with translating devices. The city called the meeting for 10am – noon and after arriving hours earlier and taking over the hall and using personal items to take up the seats so hosts had to gather outside, exactly at noon all 300 union workers stood up and chanted in unison and left the hall, presumably no longer on the clock. Hosts waited until after 3 pm to tell their stories. I was moved to tears on many occasions. Meanwhile many of our housekeepers are being laid off as the city swoops in. Hermosa beach legislators are trying to pass laws that put both hosts and guests in jail for 6 days. They are using new apps to monitor sites and report on the “criminal” activity and they book rooms in sting operations and ask neighbors to report on neighbors, same in Santa Monica. Santa Monica calls for 6 months in jail for repeat offenders, although to Santa Monica’s credit they made home sharing legal; the monster mansion folks can legally “share” their large homes, entire floors, some with guest cottages, effectively creating true defacto hotels for the elite. While those with one bedroom units are left in the cold, never being able to “share” for any decent money or practical purposes.
It’s a slaughterhouse for the most part, however the Arizona governor, I believe, made it legal at a state level. It’s a war, many battles are being lost….a few are not. Glad to hear that GA is in the land of the fair…….as is Malibu, CA where no hotels and no so called “affordable” housing folks exist……vacation rentals are perfectly legal.
Sorry, needed to spell check – less than 30 days not 30dYs,
Hi Mary
I’m also from north EASTERN Michigan. I would support the hotel aspect as well, summer is short, 12 weekends.
Will a petition care any weight with the township? I’d ;ove to hear from you and your results.
Good Luck
Carla
I was curious if you ever thought of changing the structure of your website?
Its very well written; I love what youve got
to say. But maybe you could a little more in the way of content so people could connect with
it better. Youve got an awful lot of text for only having 1 or 2 images.
Maybe you could space it out better?
Anyone knows how to get higher on the Booking ranking? I’ve been in this business for 6 months, I’m on several sites such as Airbnb, Booking, Homeway etc. On Airbnb i’m pretty high in the ranking, maybe also because i’m a superhost and I got the maximum score, but on Booking although I have and unbelievable score (10 out of 10 based on 36 reviews), I tried everything to get in the first three or four pages but I can’t. In addition to that i’ve the right price, wonderful photos, and great location! I’ve implemented every advice the Booking call center gave me but still with no results. They always say the same things and They’re not capable to give me real pratical stuff. Seems like it works randomly sometimes. No one is capable to give me explanations on it. Someone has done it? What strategies did you implement? Looking forward to an answer.
Thank you very much
How do you handle abuse of internet? Should there be internet available?
Hey Paula! This series is amazing! I am eating it up. Question for you – did you have any problems renting your place on AirBnb without an investment mortgage? I assume you had a conventional loan since you “accidentally” became an investor! I’m in the same boat and would love to hear your opinion on this. Thanks!
Hi, I just hosted our first VRBO guests. Went well, very nice people. However, I learned not to leave any thing extra around, even in the fridge. It leaves with the guest. Have you tried offering extra snacks and bottled water with a price list next to it, similar to the hotel mini bar?
Thank you for the bit about discounting, I have had several requests. My fist reaction is no, I offer the best experience possible and I don’t discount or reduce the work I do or the aminities, it all has to be 5 star. So why would I discount the price! Love your response. I see your point in answering to their needs.
interesting topic – one question though is vacation rental sites seem to charge a big cleaning fee – some are $75 – if someone rents a place for the weekend 2 or 3 nights at $100 per night and then pays $75 in addition – seems like people wouldn’t go for that. isn’t the security deposit for excessive damage/cleaning?
Your journey is very inspiring! I’m looking into starting a vacation rental home business, would you recommend applying for an investment property loan or a business loan? Ideally, I would like to have my location in the mountains, I wanted to purchase land and build the rental home. That being said, it would basically be starting from scratch. Any information is appreciated! Just looking to be pointed in the right direction! 🙂