Got a spare room, house portion/wing, or condo that you want to put to good use? The sharing economy, of which Airbnb is a large part, enables you to make a hefty profit by renting spaces you’re not using.
This sharing economy isn’t just restricted to real estate like spare rooms and properties via Airbnb—you can rent out your pool using Swimply, and your car through Turo. Instead of shutting up your space and leaving it unoccupied, you could become part of the sharing economy and convert your spare room or property into an Airbnb service.
However, is it worth the trouble? What are your profits and costs going to look like? How exactly does an Airbnb make you money? Read on to find out.
What is Airbnb
Airbnb is an online service that allows you to post your free spaces such as rooms, apartments, and houses for rent to potential consumers. As an Airbnb host, you and your customer both have leeway to decide whether or not to go ahead with the arrangement.
The review system, where you rate your customers, shows how tidy/respectful they have been of your space. This is also where they rate you on how accommodating a host you have been, and can give you an avenue to vet out people who may trash your place or waste your time.
How to make money on Airbnb
Your particular business strategies determine how much money you can make on Airbnb.
Firstly, you need spare property, even if it’s as simple as an extra room in a house you are sharing with your friends/roommates. However, many people invest in real estate in order to short-term rent the unit(s) on Airbnb, making it a full-time hustle instead of a side hobby.
However, you have to keep in mind that the more properties you have, the higher your maintenance costs and the more care you will have to exercise with catering to multiple customers at one time.
Some might think you have to be something of a real estate mogul to make serious money on Airbnb. That is very much not the case—you can transform any spare property you are not using and turn it into a creative Airbnb.
An empty backyard, a farm pool you haven’t used in ages, office space for rent, a guest bedroom, a house portion, even yurts and tents for camping and star-gazing all make fantastic Airbnbs!
The money moves
Potential customers are more likely to find you and rent your place if your host profile is well-curated and seamless. Dingy photographs, no mention of the amenities with a hefty price tag attached—things like this will deter potential guests away from your Airbnb. Thankfully, Airbnb does a great job guiding you through some basic questions about your property with its smooth user interface.
First, you will have to provide basic information such as location, size of the space, amenities, and features. Next, you’ll upload clear, sharp, well-lit photos of your space. Create a schedule of availability for potential renters.
Establish some house ground rules—you don’t want hooligans smashing up your property, so place a fine or a penalty for damage done to the place. You can also establish rules like no large parties to try to prevent your place from getting trashed.
Ensure you are well-versed in local laws about rentals, so you are aware of what condition the property has to be in and what you are responsible for in terms of fire escape routes, privacy laws, short-term rental license, etc.
Voila! You’ve become an Airbnb host—the booking requests will start rolling in soon, and you should get back to them as quickly as possible. Before you do that, though, ensure that you thoroughly scan their reviews as customers.
You can also chat with the customer through the Airbnb messaging service.
How much can you make as an Airbnb host
Many factors govern how much money you can make with Airbnb, such as location, amenities, number of places you are renting out, and how effectively you are marketing them. The average nightly stay costs, or full-day renting costs, should be placed competitively, so your Airbnb remains in demand, while maximizing your profit.
In some areas in the U.S., nightly stay costs can sky-rocket upwards of $170 a night. These are usually in desirable locations, and have good reviews, features and amenities.
Keeping your expectations realistic and capitalizing on what you have is essential when running an Airbnb business. Starting off under $50 a night may be advisable until you’ve gotten some good reviews and could start charging more. Over $100 a night after you’ve gotten the ball rolling is good earnings. Don’t expect to be fully booked all the time—find a good balance between occupancy and your nightly rate.
In fact, depending on how quickly you can have the space cleaned, it may be better for you to space out your bookings. These small actions make a world of difference for the comfort of your customers. Monthly earnings of more than $1,000 in your first month of operations are unlikely, but could be something you can work toward.
Cost considerations & conclusion
As with any business, you have to spend money on your Airbnb to make money off it. There are some cost considerations you must keep in mind regarding renting out your properties as Airbnbs.
The first and the most important is Airbnb’s service fee. The advantage is that the fee is straightforward—3% on every booking. This isn’t your most expensive cost, but it will certainly take a chunk out of your earnings in the long run.
You need to have a good insurance policy for your place. This is to cover any potential damages and litigation costs should something go wrong. Do your taxes! The money you make on Airbnb is liable for tax if you are operational for more than two weeks per year. Maximize your write-offs, talk to a professional and file your taxes.
Next, make sure all your utility bills are in order and accounted for in the rent you are charging. Devise a routine clean-up of your place—you can even include a separate cleaning fee per booking, above the regular nightly rate.