If you landed here because you’re considering starting to host on Airbnb, investing in a new short-term rental property, converting a long term rental into a short-term rental, or even simply improving your existing short term rental operation - you’re in the right place.In this comprehensive guide, we’ll go through all of the key aspects of what hosting on Airbnb and other short-term rental platforms can be like, what to expect, and how to run things like a pro.Feel free to post any questions below and we’ll be happy to address them just as soon as we are able to.
There are many reasons why becoming an Airbnb host can be appealing. Some people have a spare bedroom that they want to rent out. Others want to get into real estate and look to short-term rentals as an option to generate higher income. And for some -- especially those who have used Airbnb as a guest in the past -- hosting can simply be appealing on a personal level as it allows you to meet and interact with people all over the world (at least during pre-COVID times!).
Regardless of what the motivation is, getting into short-term rentals as an Airbnb host can be a very lucrative and rewarding path. It can supplement your existing income, help you get started as a real estate investor, or even replace your income altogether by becoming a full-grown business.
In our view, Airbnb can also be a game-changer for anyone thinking of getting into real estate and building personal wealth as it encompasses all of the benefits that real estate traditionally offers while also supercharging your cashflow in the short-term.
However, while it’s simple in theory, there are a lot of nuances that determine whether it will work well for you and if you’ll even enjoy it.
There are thousands of hosts out there with varying levels of success. Some rent out a spare bedroom and host a few guests per year, others treat this as a full time business and treat it as such as well.
We firmly believe that there is no single right way to do Airbnb, as it means different things to different people. As with anything else, however, there is a learning curve and lots of small things that you need to know and master along the way.
In this guide, we’ll do our best to provide you with the step-by-step framework that would allow you to get started and succeed.
We are Boris & Susan and we have built a short-term rental business over the last few years where we currently host nearly 10,000 guests per year among our own short-term rental portfolio spread out in 5 different cities around the country.
We’ve started doing it from scratch and, over the years, fine-tuned our processes and operations that allowed us to run and manage short-term rental properties all over the country remotely.
It has been a lot of hard work and trial and error, but it does highlight that you can do it successfully and you can manage it from virtually anywhere if you set up the systems and your team properly.
When the pandemic broke out in March 2020, travel around the world ceased and many hosts saw their income and reservations vanish overnight. It has certainly been an unprecedented and uncomfortable time - for a variety of reasons.
Amazingly, within less than 2 months, reservations and bookings have started to come back. In fact, many of the markets - especially those that are closer to nature and outdoors - have exceeded their prior year’s performance.
The short-term rental market proved to be quite resilient, but there were changes. For one, there were fewer international travelers than before (largely due to the closed borders). However, to offset that, there was a large uptick in domestic regional travel - as people would hop into a car and explore areas within a few hours drive of them.
Properties focusing on business travelers certainly saw a temporary decline, as companies instituted a work from home and a freeze on business travel. However, listings and areas focusing on leisure, families and small groups actually saw an increase in activity as people looked for safe, convenient and local ways to vacation and get out there.
Things are definitely going to evolve over the next few years as we learn to live with COVID. That said, Airbnb, and short-term rentals in general, remain a powerful and lucrative strategy as the demand is still there. The only caveat is that the pandemic may affect the type of properties that may do better and the sort of a guest that you may want to target.
At the same time, we should point out that especially at times of uncertainty, depending on your personal long-term outlook and risk tolerance, there may be more opportunities available in the real estate market today than we’ve had in the past few years.
Oftentimes people are trying to determine for themselves whether short-term rentals are worth the hassle or if they should just focus on getting long-term, traditional tenants.
In our opinion, you can think of it as follows:
Long-Term Rentals will be less work but also significantly less revenue and profit. In fact, with today’s real estate prices, in many hot coastal markets, it will be practically impossible to even generate any profit with a long-term rental.
You have to manage the property but there’s generally less interaction with the tenants, so it can be less of a hassle. However, your risk is a bit higher because if you end up with a tenant who decides not to pay, you will have limited recourse and no revenue coming in for a period of time. Also, if you have a large unexpected repair, you can oftentimes wipe out months of profit overnight.
Short-Term Rentals will be more work, but significantly more profitable - both in terms of top line revenue and take home profit. They can perform equally well in large and small markets. Counterintuitively, they are also less risky because guests pay upfront and usually stay a shorter period of time so the potential for trouble is less likely. Moreover, in our experience, short-term rentals can actually have less wear and tear on your property and preserve it better in the long run.
It’s worth noting that when you run a short-term rental, it’s closer to running a small business rather than just being a landlord. You have to focus on guest (customer) interaction, coordinating with the housekeeper, managing supplies, and so on. So, there’s definitely extra work involved - but depending on your goals, the pay off can be well worth it.
At this juncture, it’s also worth discussing whether you should plan to manage the property yourself or outsource it. With the former, you keep a higher level of profit. With the latter, you will typically pay anywhere from 10% to 25% management fee but will have less hassle to deal with.
Think of it as follows:
If your objective is to maximize profitability and you have a bit of flexibility with your existing work and scheduling that would allow you to deal with small issues as they come up, then self management is absolutely fine. There are some fantastic tools out there that can help automate 90% of your day-to-day operations so it doesn’t become a 2nd full time job.
If you have a high commitment, high pressure job that leaves you with little extra time and flexibility or the very thought of dealing with guests and household issues is not particularly appealing, you can consider outsourcing the operation.
There is a range of services available from outsourced virtual management for short-term rentals to a fully managed solution by 3rd parties.
With the former, you’d spend up to 10% of your revenue on outsourcing the day-to-day and just be involved with the big-ticket issues and with the latter (full management), you could be looking at giving away as much as 25% of your revenue for a full peace of mind. Whatever you decide to do, make sure to calculate this fee into your financial forecasts and see if it still makes sense.
When you begin to consider hosting guests on Airbnb, it’s worth giving a bit of thought to the strategy that you want to pursue. This means deciding what kind of guests you want to target, how upscale or not you want to go, and what your general objective would be.
Keep in mind that every market is different and the property should cater to the types of visitors that come there. You can think of a few elements here:
1. General location - will you be in a city or a non-urban area? The types of guests and types of properties would be different for both. Even hiring a housekeeper would be a different level of difficulty depending on where you are.
2. Do you want to focus on larger groups of people or smaller groups? Larger groups can be more profitable but you need to expect to deal with more noise, parties, and so on.
3. Do you prefer short-term stays or mid-term? The short stays are usually most profitable, but these days there is also a lot of demand for mid-term (1-3 months) furnished accommodations that can be quite profitable and easier to handle.
4. Do you want to focus on high occupancy or do you just want to host occasionally? This would depend on whether you’re renting out spare space in your current residence or if you have an investment property that you want to use to generate a higher profit.
In our particular case, we generally prefer focusing on urban areas that have a mix of visitors - travelers, medical, educational, business and so on. The way we see it, it helps make things consistent and less risky for us.
This strategy survived the COVID-19 as well. Even though travel stopped, we saw a lot of demand from essential workers, locals, medical professionals, displaced students and other individuals who needed a place to stay for 2 weeks to 2 months and we were able to accommodate them well.
At the same time, these days, there’s also tremendous demand for larger vacation properties that are located in more rural, outdoorsy areas a few hours away from major cities. As people are looking for a “local” escape or a way to get away from the cities, many hosts in these areas are seeing record-breaking numbers and demand for vacation rentals.
Once you have a general hosting strategy in mind and begin to look at various markets, there are a few other factors to consider.
Everything starts with this - you want to ensure that you can legally operate your short-term rental, so check the regulations and ordinances in your city first. You can use our Where to Invest Database as a shortcut that will provide a summary of regulations in every major U.S. city over 100,000 people, as well as the top 150 vacation markets.
There are two broad types of Airbnb regulations in cities.
Many, if not most, cities permit some sort of owner-occupied hosting. In other words, if it’s your primary residence, you can rent it out - either when you’re not there or just rent out some spare space that you may have.
Fewer cities, but also plenty of them, permit non-owner occupied rentals. This is more applicable to investors, which is a significant group of readers on this site. In these cities, it is easier to get a property as an investment and rent it out legally through Airbnb and other platforms.
Which direction you pursue largely depends on your current situation, what your financial goals are, and how big you want to grow this.
Many people think about starting their first property in the city or town where they live. That does make perfect sense, but it can also be limiting.
The reality is that if you’re looking to do a non-owner occupied Airbnb rental and your local city has an ordinance that prohibits this, you almost have to look elsewhere.
That said, it’s not a bad idea to get comfortable with setting up and managing an Airbnb elsewhere anyway because it forces you to make decisions that are more scalable.
Even if you do have a property in your own town, you still want to develop systems that allow you to manage most issues remotely. The last thing you want is to be in a position where every situation requires you to drop everything and go to the property to fix it.
As such, local or not, your general approach should be focused on getting a handyman and a housekeeper in place that will help manage things on the ground, so you can just focus on everything else.
Many of our readers who are just starting out are in a process of looking for a new property that would then be used for short-term rentals. That’s not the case for everyone, but we still wanted to address the key factors. If you already have a property in mind, you can skip to the next section right away.When searching for a new property, there are a few things we always take into account:
The condition of the property is an important topic. Get a turnkey property, and you’re likely going to pay a premium. Get a fixer-upper, and you have to be ready to put in the time and expense to get it ready.
This really does depend on your abilities, budget and how far away from home the property is. In our case, we typically prefer to focus on properties that are largely ready to go, but could benefit from a paint job, new appliances, and some cosmetic improvements. Since we do most of our houses all over the country, it is logistically difficult to do improvements that will take more than 2 weeks to get done.
Personally, we prefer larger spaces - with at least 3 or 4 bedrooms.With a larger space, we don’t compete as much with hotels and can better focus on groups, which typically are willing to pay a premium for a nice space where they can all stay together and have better common facilities.
That’s not to say that a smaller 1-2 bedroom can’t work. It certainly can -- but you just have to consider that the amount of time that you’ll spend managing a place is likely going to be the same whether it’s smaller or larger, but the revenue potential will be better from a larger place.
Stand alone homes are better than an apartment building. There are multiple reasons for that:
It’s easier to automate check ins and check outs with a digital lock. Otherwise, if you have an apartment in a building, you also have to consider how to solve the question of the main entrance since you don’t have control over that lock and your neighbors will not love the idea of you sharing the key with strangers.
There are fewer potential issues with neighbors next door. Of course, even if you have a single family standalone house, you still have to consider the relationship with your nearby neighbors. But it is easier to manage.
No HOA. This helps because it lowers your costs a bit, but also reduces the risk that the HOA will suddenly ban short-term rentals in your buildings.
Understanding how much it will cost to fully furnish and setup a new property is critical to the success of your short-term rental. If you’re able to budget properly upfront, you can reduce surprises down the road and make sure that you have enough funds to see the project through.
It’s worth mentioning that the costs can vary wildly - depending on the type of property, target guest audience, and your personal style and preferences. So simply consider the below as a template and feel free to tweak to your own needs.
In our experience, a typical 4-bedroom, 2-bathroom property costs between $12,000 to $14,000 to furnish and set up from start to finish. This number has been surprisingly consistent across multiple properties.
To better understand the economics of setting up a property, let’s look at individual components:
Bedroom Furniture
This can range anywhere from $1,000 to $2,000 per bedroom, depending on where you shop. A bedroom would typically include a bedframe, mattress, nightstand, desk, desk chair, another sitting surface, lighting and some decorative art. So, with a 4-bedroom property, you would typically spend around $6,000 on bedroom furnitures (plus or minus $2K).
Living Room Furniture - this can also add up quickly, so you can plan for $2,000 to cover the couch, coffee table, lighting and decorative art.
Kitchen
With a dining table and chairs, you can usually plan for $500 to $1,000.
Supplies
These begin to add up quickly due to volume. For example, for each bedroom, you would typically need to get at least 3 sets of sheets, 12 towels, 4 pillows, 1-2 blankets and a throw. This can easily end up being $300 per bedroom. Once you account for kitchen supplies and a never-ending list of small things around the house, you can easily allocate $2,000 to the overall supplies category.
Appliances
If you’re lucky, your property already comes with everything included. If not, keep in mind that a washer and dryer will set you back between $1,000 to $1,500.
Security
This typically includes things like outdoor web cams, new digital locks on the front doors, and perhaps keyed locks on the bedrooms. This can be between $500 to $1,000 depending on the brands you choose.
Labor
If you’re treating this as an investment, you may want to hire a couple of people to help you move everything in and put all of the furniture together. On average, you’d need about $500 there.
Once you properly account for all of the things involved in setting up a new property, you can see where the $14,000 comes from.
Of course, if your property is smaller or you’re thrifty and have a bit of time to look for better deals, you could get it done for less. However, be careful not to underestimate it when you’re planning out your budget - it’s better to come in less than expected than over.
We recommend to avoid doing the standard Ikea furnishing, as it makes your property very similar to everything else that’s on the market. People know Ikea and they can feel that it was done cheaply. There are plenty of other options that are also inexpensive but allow you to make the property a bit more unique.
For every bedroom, make sure to pay extra attention to: lighting, carpet, wall art and sitting areas. If you make these a little unique, it’ll make the whole room pop in photos.
Our favorites stores are:
Furniture: Wayfair, Cost Plus World Market, Home Goods, Amazon
Beds & Linens: Zinus Mattresses, Amazon Sheets
Random Things Around the House: Ikea or Target are good for these.
To run a short-term rental smoothly, you need to build out your team on the ground. Typically, this will consist of a housekeeper and a handyman.
The housekeeper is one of the most important team members because they will ensure that the guests have a good experience and that you don’t have to leave your other work or commitments to do the turnovers themselves.
Handyman will be your first go-to for any minor maintenance issues and problems -- be it a stuck toilet, broken piece of furniture, or even installing an A/C in the units in the Spring.
How to find these people? We can share how we usually do this:
How to find and train housekeeper
For the housekeeper, we usually begin by posting an ad on Craigslist and we outline that we’re looking for someone who is available 5-6 days a week. We’ll typically offer between $18-20 per hour, depending on the market, with the expectation that a ~3-4 bedroom place would typically take about 2-3 hours to complete.
Once we get a few candidates to apply, we’ll typically reach out to the top ones for a quick phone screen and then invite 2-3 people to come to do a test turnover (fully paid, of course).
When they arrive, we’ll provide them with a detailed checklist and photos of what we want them to do and then give them 2-3 hours to complete their job. Afterwards, we look for overall cleanliness, attention to detail, and whether they fit within the time allotted.
There’s always a bit of trial and error, but once we find a strong housekeeper, we usually do everything we can do maintain that relationship for years to come. If you need any additional guidance on how to find a housekeeper, you can check out the guide to How to Hire & Train a Local Housekeeper here.
How to find and train handyman
For handyman, the process also oftentimes begins on Craigslist. Usually, as we’re setting up a property, we have a lot of miscellaneous tasks that need to be done - from small paint jobs to furniture assemblies to everything in between.
We’ll usually get folks from Craigslist to come out and to help out with various tasks and, as they do, we look for the ones that we think we can maintain a long-term relationship with and keep track of their contact info. After that, we usually just stay in touch and eventually a single individual emerges that becomes out go-to handyman.
If you’re having trouble finding a handyman, you can also rely on a service like TaskRabbit.com. This site is fantastic at finding reliable, reviewed individuals for any kinds of tasks. You can coordinate the work and pay them directly through the site which makes it easier too.
Once you get up and running, you’ll quickly notice that there are a lot of little things involved in the day to day -- communicating with guests, coordinating with the housekeeper, handling the maintenance issues. This can become a tad overwhelming and frustrating if you attempt to do it all manually. Fortunately, you don’t have to!
There are a number of amazing tools available on the market that can help you automate a lot of the processes, so that you only have to focus on larger issues if they come up.At the heart of it all, this is probably the single most important thing we can tell you. If you’re running Airbnb, automate all of the routine processes, so it doesn’t become a 2nd full time job for you to manage it.
Some of the tools that should be on your radar are:
Automating guest communication - Smartbnb
Automating pricing management - Pricelabs or Beyond Pricing
Automating cross promotion on VRBO and Booking.com - Uplisting
Some people believe that automation takes away from the spirit of Airbnb and hospitality, but we see it differently. You can automate mundane tasks, such as sending check in and check out instructions, and then have the time to manually check in with guests if you want to see how they are doing. You can automate pricing management to maximize revenue potential and still have the ability to manually check in and make adjustments as you deem best.
All in all, the tools mentioned above can easily cut the workload from 10 hours a week to 20 minutes a day, which will allow you to have less stress and give you the time to focus on areas you enjoy the most.
Airbnb is certainly a massive force in the market and it can easily provide more business than you can handle. However, as you begin to grow and expand, it’s worth knowing that there are other platforms out there too that can help you maximize your potential.
For example, VRBO/HomeAway is also a significant player that focuses on group and family travel. So if you have a property that caters to that audience, you can do well there and improve your overall occupancy and average daily rates.
Another one would be Booking.com. This one is actually the world’s largest hotel and accommodations booking platform. It tends to be slightly more popular in Europe, but it is also fairly well known in the U.S. You can also list a vacation rental there and do fairly well.
In the long run, it’s worth experimenting with all of these platforms, so that you’re never 100% reliant on a single one. Even if Airbnb continues to fill in 80% of your availability, you can do even better if VRBO/HomeAway and Booking.com help fill in the rest.
There are a couple of thing you will want to keep in mind, though:
1. You’ll definitely need to use a channel management tool like Uplisting to manage your calendar and pricing across all of the platforms.
2. You should be aware that the pricing structure is a bit different for all of the platforms. For example, Airbnb will typically charge the host 3% transaction fee, VRBO/HomeAway will charge around 8%, and Booking.com will charge around 15%. You can always adjust (automatically) your prices to be higher on the other platforms to offset the extra fees, but it’s something you should plan for before starting.
Before you even start working on your Airbnb listing, it’s a good exercise to forecast your potential expenses and revenues.. This will help you predict how well your potential property would perform and set your expectations.
Let’s take a look at the various costs you’ll encounter:
Principal and Interest
Assuming that you’re financing the property, this would be your debt service. If you’re renting it, then this would be your rent.
Property Taxes
If you own a property. If you rent, you wouldn’t have to pay this, as the landlord would typically handle it.
Insurance
While getting traditional property insurance is easy, getting coverage for a short-term rental property is a tad more involved. Two of the most known options in the market are Proper Insurance and CBIZ. In any case, you should budget on average $2,000 to $4,000 per year for comprehensive property and short-term rental insurance that adequately protects you.
Internet
Whether you have a single-family house, a condo or a multi-family, you can typically just sign up for a single internet service account and then use signal extenders to ensure there is solid coverage throughout. This can range between $70 to $140 or more per month, depending on the speed that you opt for.
Electricity, Gas, Water & Sewer
Unlike with a long-term rental where landlords rarely cover the cost of electricity, here you are responsible for all of the utilities. The actual amount will vary, of course, but if you need a ballpark estimate, put down $150 per month per each utility.
Airbnb Host Fee
If you’re listing your property on Airbnb, they will automatically deduct a 3% transaction fee of your gross revenues. Other platforms, such as VRBO/HomeAway and Booking.com, have even higher fees — although there are ways to offset them.
Supplies Cost
This category will include everything from cleaning supplies to any disposables (e.g. shampoo, toilet paper, paper towels, etc.) to any snacks or complementary items you may choose to provide (e.g. coffee, tea, snacks). It’ll also cover the occasional replacement of other items, such as towels, linens and — every once in a while — a piece of furniture that needs to be replaced. This can vary a lot depending on your audience, your style and the size of your property. However, you can generally allocate $75 per month per every room in your house.
Monthly Cleaning Fee
As an investor, you are going to be hiring a housekeeper to handle all of the turnovers for your property. On average, we pay between $18 to $22 per hour, although it does depend on each individual market. You can typically expect to spend about $200–250 per month per room that you have available. So if you have a 3–4 bedroom property, lean towards the higher range and plan for $750–1,000 per month. If you have 6 or more bedrooms, you can lean towards the lower range.
Software & Web Services
To effectively run and streamline your short-term rental operations, you’ll typically have to lean on at least a guest communication software, like Smartbnb, and on price optimization software, like PriceLabs or BeyondPricing. They aren’t too expensive typically, so you can just allocate $100–150 per month towards their cost.
Landscape Maintenance
Depending on your location, you may have snow shoveling to deal with in the winter and landscaping during the warmer seasons. You can budget $100–150 per month towards this and expect it to average out during the year.
Repairs & Improvements
If you own a property, this is something that you’ll need to account for. This category will vary widely depending on the property itself and the amount of deferred maintenance you have. With the assumption that when you bought the property, you took care of all of the pressing issues, you can typically set aside about $150 per month towards regular maintenance.
Monthly Reserve For Capital Expenses
Similar to the above, but with the focus of saving up towards larger expenses, we typically recommend that you set aside about 2% of your revenues towards future larger expenses. Be it a large appliance, sewer line issue or a roof repair or replacement, this will build up a fund that you can use towards those expenses.
Airbnb / Property Management Fee
Some investors manage their properties themselves and others choose to outsource that task. For the latter, the Airbnb/Property management fees will vary but typically range between 15–25% of gross revenues.
Occupancy Taxes
Many of the markets require the hosts to collect and remit occupancy taxes. Fortunately, in most areas, Airbnb can automatically do that for you. Since the taxes are paid by the guests and added on top of their fees, we consider this a pass-through expense and do not assign a value to it.
Estimating revenue for your property can be a little trickier. However, there is one tool out there that can help you with that - it’s called Airdna. This service looks at all of the short-term rental listings in every single market, analyzes their revenue, occupancy, and rates and can provide you - as a host - with a wealth of information and data.
They have one tool that we really like and that is actually available for free to every user - Rentalize.
It allows you to put in an address for any property and see what the likely average daily rates, occupancy rates and overall annual revenue would likely be. It does that by actually extracting the data from other similar listings nearby, so it ends up being fairly accurate - plus or minus 15%. You can then tweak the data to account for different number of bedrooms, bathrooms and allowable guests.
We suggest that you start off by signing up for a free account with Airdna. Then check out this comprehensive review to learn how to use it properly. Afterwards, you can use Rentalizer or their other data (some of it is paid) to get a better understanding of how other properties in the market are doing and what you can expect to generate for yours.
Once you get fully set up and running, you’ll likely begin to consider all the ways that you can improve your Airbnb rankings, get better reviews, and ultimately maximize the profitability of your property.
We wanted to share a couple of tips and best practices that have worked well for us and may work well for you as well!
This is really a critical component of your listing. Potential guests spend a few seconds per listing before they make a decision to explore it further and good photography will pay for itself many times over. Get at least 12 professional photos done and put special emphasis on the first 5 that you list. First one will show on the search page and first five will be maximized on your listing page.
Surprising and delighting your guests with some free snacks will go a long way to improving your reviews. It doesn’t have to be expensive either -- you can generally spend as little as $2 per guest and still offer some goodies!
Your listing is somewhat of a perishable good. In other words, if it’s vacant tonight and no one books it, that revenue will never be recovered. However, you can use the Last Minute discounts to automatically lower your pricing if no one has booked your listing and the vacancy is fast approaching. In our view, it’s usually better to have a guest at 50% of the regular rate than at 0%.
You should be thinking about how to automate mundane processes as soon as you launch. Make sure to sign up and use a tool like Smartbnb from day. Use the Last Minute Discounts functionality above so you don’t need to manually adjust your pricing and so on.
Airbnb is an extremely powerful channel, but it’s not the only one. Depending on your type of a property and your target audience, you may also find success with other channels such as VRBO (great for families and groups) or Booking.com.
In this guide, we’ve wanted to touch on various aspects of getting started and succeeding as an Airbnb host and we hope that this has been a helpful resource for you.
Where to go next?
- Check out other free content on our site.
- Learn more about various tools and services that can help you improve your operations.
- Check out the Where To Invest Database to find and compare markets for short-term rentals.
If you have any additional questions, please don’t hesitate to reach out to us at any time. You can book a private 1-on-1 consulting with us to get all of your questions answered or feel free to reach out to us via email and we’ll be glad to assist!
