This past week, I met with a couple who is buying a vacation home near their kids and grandkids. This real estate purchase was not part of their original retirement plan, so we had to move a few things around to make the numbers work. I think I’ve been influenced by my recent research on a timeshare company whose motto is: “We love to say yes.” The truth is I really do love to say “yes” to my clients’ most important goals and priorities. Sometimes we need to use every tool in the financial toolkit to make it possible. Fortunately, we were able to redesign the retirement income plan so that my clients with the new vacation home once again had a 90+% probability of success (not running out of money). However, almost as an afterthought, I threw out one more idea that would give them a bit more financial freedom: “What do you think about becoming an airbnb host so that you can rent out your vacation home when you’re not using it?”
I fully expected my clients to hate this idea, only because they’re very meticulous and keep their home in pristine shape. To my surprise, they were really interested. I figured I would help them (and all the readers of my blog) with the research on how to make money as an Airbnb or VRBO host.
I know a couple of people who currently rent their homes, guest homes, or vacation homes on Airbnb. The feedback I’ve gotten from my very limited sample size has been quite positive.
First Things First:
Becoming an Airbnb host is essentially starting a small business. This is so exciting! It’s not difficult, but let’s make sure you do not blow through any stop signs…so to speak. You need to dot your I’s and cross your T’s.
You first need to make sure you have the legal right to host short-term rentals. Some cities require you to get a license. Airbnb has a list of major cities and their requirements.
Property owners who are governed by a homeowner’s association may need to check that there are not restrictions that prevent short-term rentals.
If you want to be a host, but you are a renter yourself, technically you would be subletting. In this case, you need to check that your lease (and your landlord) does not prohibit this.
How Do I Get Started as an Airbnb Host?
Airbnb seems to have worked out most (if not all) of the kinks in this business model. It makes it as easy as possible to be a host or a renter, which is why only 10 years after launching its site, it has 3 million listings across 65,000 cities worldwide. The company offers several easy-to-use guides and tools to help you create a professional listing, communicate with your guests, and manage your rental before, during, and after a booking.
It also provides checklists of items you should provide (e.g., linens, towels, dishes, kitchen and bathroom supplies). You may want to think of ways to make your guest’s stay as comfortable as possible, with added benefits like Wi-Fi, coffee or tea, maps, bicycles, and lists of recommended restaurants and attractions.
Airbnb has many nice features for hosts such as 24/7 support to help you deal with any unforeseen circumstances.
How Much Money Can I Make?
The Airbnb website provides an estimate of your likely monthly income based on the type of property, location, and number of guests your property will sleep. Its estimate is based on 50% occupancy, although I have read that you can average 60-90% occupancy if you have a nice property and price it right. My cousin, who rents out her detached studio in the Los Angeles area on Airbnb, tells me she averages around 80% occupancy and earns substantially more than indicated by the Airbnb estimate.
One of the nicest features is Airbnb handles the money. Guests are charged before arrival and hosts get paid automatically (via direct deposit or PayPal) after check-in, minus a 3% service fee. Just don’t spend all the money that hits your bank account because you must pay income tax on your net rental income (after expenses).
What If I Get a Bad Tenant?
Airbnb requires that guests and hosts create profiles so that each party can leave the other a review after checkout. This keeps everyone accountable and respectful. The reviews also enable you to check out your tenant in advance, assuming he or she has rented through Airbnb before. You and your prospective guest can also send messages to each other through the website to see whether you want to do business together. There is no obligation to accept a booking.
You can also require the prospective guest to send you a copy of his driver’s license to make sure he is who he says he is.
Alternatively, you may choose to spend very little time screening travelers by setting your minimum requirements and then letting people book a stay at your place automatically.
Another nice feature for Airbnb hosts is Airbnb’s insurance policy that protects you against third-party claims (property damage or bodily injury) up to $1,000,000.
This article is about becoming an Airbnb host, but my research made me also want to be an Airbnb traveler. One article I read indicated that you can often get an entire house for the same price as a hotel room and get a better feel for the local environment. Many hosts make friends through the process just like they might if they were running a traditional bed & breakfast.
I talk to a lot of people who want to travel more, spend more, earn more, and experience more. Airbnb host is one of the few businesses that enables you to earn money using your existing assets with a modest commitment of time and resources. Airbnb hosts can just mark their property unavailable for the weeks or months they do not want to rent it. Being an Airbnb host is not for everyone, but please let me know if you try it and email me to share your experiences.