It’s no secret that I’m taking a hiatus from house flipping, and I’ve jumped head first into a new adventure of vacation rental hosting. I swear, I’ve been talking about Airbnb non-stop lately, and yet, I’m still shocked when people tell me “I’ve never heard of Airbnb.” I explain the premise, and once I say vacation rental most people get it. And then they follow up with, “So how does that work?” To become an Airbnb host is really pretty easy if you know what you’re doing!
And if I’m still being asked how it works then it means there’s still a population of people that are missing out on a new income producing opportunity!
How to Become an Airbnb Host
Maybe you aren’t looking to purchase a property just to use as a vacation rental. But what about utilizing what you already have to get someone else to pay your mortgage? Sounds good, right? If you’re wanting to get your feet wet into the world of vacation rentals, start small with little overhead. To become an Airbnb Host, you have two options to choose from.
Option 1: Rent out a bedroom/loft/detached space in your own home.
Did you know that Airbnb started because some guys had a spare bedroom and an air mattress, and they started renting out that room to travelers? They quickly realized they were on to something. That same concept is still relevant to you. If you scroll VRBO or Airbnb (or any of the other hosting sites), you’ll see some of the listings that are “single bedroom.” Meaning the guests are renting a bedroom, but they do potentially have access to common areas like the patio, the kitchen, or living rooms.
Some of the best set-ups I’ve seen for this is people that have “garage apartments” that they aren’t utilizing. The guests aren’t staying in the actual home with the guests, but they are on the same property. Each party then feels like they have their “own space.” But renting out a bedroom in your home, even just 50% of the time, can pay your mortgage! I personally didn’t choose this option for one very obvious reason: I’m a single girl living alone. It’s out of my comfort zone– at least for now.
But let’s take a look at the math…in case I haven’t convinced you yet.
If you have nothing in the room at all currently, you might spend maybe $500 getting a bed, good mattress, dresser, and chair. Some people that don’t allow access to the kitchen, do set up a coffee station or microwave in the bedroom for the guests. If you shell out $500, you have a pretty low overhead, right?
Let’s say you choose to rent out the bedroom for $30/night. That’s way cheaper than a hotel, and that’s what makes Airbnb appealing to travelers. This is especially true if your home is in a very desirable area (like downtown, near parks, by the airport, etc). If you were able to rent out the room for 50% of a month, you’re grossing over $500. So in the first month, you’ve broke even!
Option 2: Rent out an entire house or apartment.
Before you choose this option to become an Airbnb host, there is a very important question you need to answer: do you own the home you’re renting out? If the answer is no, and you are actually the renter, you MUST get permission from the owner/landlord. Depending on your lease, you could be in violation of your lease and subject to immediate eviction.
Assuming you own the property (or have been granted written permission from the owner), you can rent out an entire house…for more than you could if you chose a long-term lease option. So what’s the catch? Well, this option requires way more skin in the game. For example, unless you’ve inherited the property or you have already paid it off, you have a mortgage payment that has to be covered every month. In addition, you have insurance, taxes, and utilities. The overhead is substantially more than $500 from option 1.
In addition to your initial overhead, you have to furnish an entire house. And I mean furnish everything. Toilet paper? Yep. Couches? Yep. Soap? Yep. Refrigerator? Yep. Sheets? Yep. Detergent? Yep. From big things to little things, you have to purchase all of these before you’ve ever earned a dollar. I am not going to lie, the initial out-of-pocket expense for Option 2 can be steep. For me, it was just over $6,000. So for the first several months, I’m still working in the negative in my mind until I’ve generated at least $6,000 in net revenue.
Again, let’s run some numbers. My cheapest rate for the house is $75/night. As you can see, I’m getting way more than Option 1. If we use the same equation of renting it 50% of the month, I’m grossing just over $1,100/month. My rates, however, fluctuate. I tend to charge more than $75 on the weekends, and I’ve especially spiked my rates for peak weekends. I have learned that the summer will be my peak season since this house is so close to the lake. I opened for business in the middle of summer, so I missed half of my peak season. I’ll be doing a separate post that recaps how I did during my first month of business. The numbers of fascinating!
Sign-up for an Airbnb and VRBO account.
Once you’ve chosen which option works for you and you’re ready for your first guest, you need to create a hosting account on both VRBO and Airbnb. My advice is not to put all of your eggs into one basket. I get bookings from both sites; however, VRBO owns multiple sites, so I get the majority of my listings via VRBO/HomeAway.
Some tips for creating a good listing:
- Take great photos. I can’t stress this one enough. You don’t have to hire a photographer (but if you can, do!). Make sure the pictures are honest and reflective of the actual space. Dark spaces are not inviting, so open the blinds, turn on the lights, and make sure it looks inviting and clean. The more photos you can provide, the better!
- Create an eye-catching title that clearly markets what your property has to offer. Since it’s summer right now, my title includes “…near the lake.” As lake season dies down and Razorback football season picks up, I will change my title to something similar to “nestled just 15 miles from Razorback Stadium.” Find out what events, what location, what perks are ideal for your property & include it in the title!
- Make sure you’re honest in your listing. Is your house in an urban area that is walkable to coffee shops, restaurants and bars….but it’s also right next to the train tracks? Disclose the good and the bad before guests ever get the chance to leave a negative review. For example, you can say something like “This modern studio loft provides the complete urban lifestyle! No need to rent a car! You can walk to restaurants, bars, coffee shops, and even local boutiques! As part of the real-life urban lifestyle, the loft is situated in close proximity to the train, so the noise of the train can be heard at times.” You’ve given them several positives, but also let them know about the noise. For some, that may be a deal breaker, and you want them to pass over your listing if that’s the case rather than book it, be annoyed at the noise, and then leave a negative review.
- Be specific in what they can expect. I list exactly what amenities I provide and don’t provide. For example, I provide a hair dryer and iron/ironing board, but I do not provide cable or a dishwasher. If they’re planning to stay for several weeks, then I certainly want them to know they’ll be hand washing several dishes or eating off paper plates. If you don’t provide WiFi, then that needs to be in your listing. Before I ever created my listing, I scoped out several in my area to see what they did and didn’t provide. I used that as a model for what is “normal,” and I keep my listing up to date. For example, initially I didn’t provide coffee, but I have since started providing that, so I now put that in my listing (and providing coffee has even earned me a great review!).
Find a system & get ready for your guests!
I will be very honest, it took me a few guests to really nail-down what system worked best for me. Through trial & error, I learned same-day check-outs and check-ins don’t work with my schedule, and I try very hard to avoid them. For me, at least at this point in the venture, I’m functioning as the cleaning lady and lawn person. Until I’ve reached a point where I’ve paid off my initial investment, I don’t want to add to my overhead, so I’m doing those services myself.
But a different system might work for you. Before your first guest, you need to decide if you are going to do the cleaning, what time is the best check-out, how many quests can safely stay in your property, how are you going to provide access to your guests, who is going to take care of the maintenance, how much contact do you want with your guests, can guests check-in the same day a different guest checked out, etc. Again, I’ll be honest, a lot of this is trial & error. I didn’t know the answers to many of these questions when I first started because I didn’t even know to think of those questions!
The best advice I read was to think ahead. The question I constantly asked myself is “what would cause a guest to leave a negative review?” Then I try to prevent that negative review by providing whatever it is. For example, I know that hand-washing dishes is a pain, and I could see people complaining about that since the house doesn’t have a dishwasher. So I provide initial paper plates & disposable cups & flatware for them to use so they could avoid washing dishes altogether.
To become an Airbnb host, the most important thing you have to understand is that this is a service industry. Yes, your goal is to make money, but it requires upfront costs, continual effort & attention, and a desire to create an oasis for strangers. Keeping those things in mind, and constantly improving your business & strategy, you will reach your goal of passive income, paying off your mortgage, or building wealth!
Have I convinced you yet? If so, sign up to host here!