As short-term rentals become ever more popular, starting an Airbnb business has become an effective way to boost your income. Whether you own a spare room or an entire property, the vacation rental market is a lucrative side hustle.
However, a successful Airbnb business does require a bit of know-how. Luckily, our experts at Blue Coast Property Management can tell you everything you need to know about how to become an Airbnb host. From adherence to local laws to setting up your listing, we’ll explore the key steps to starting a successful Airbnb business.
1. Research Your Local Laws:
From the state level to each individual neighborhood, you may encounter laws that complicate the Airbnb rental process. It’s important to familiarize yourself with your local regulations to avoid legal issues down the road. You may come across:
- Lease laws that have a provision about subletting.
- Homeowners Association (HOA) restrictions
- State and local zoning laws
- State and local tax obligations for Airbnb businesses
- Business license requirements
2. Determine Your Airbnb Space
Once you’ve researched local laws, you can go ahead with your plan to start an Airbnb business. First, you’ll want to determine what you’re offering. For example, you might choose between offering the entire property, or a single room in your home.
Understanding the unique features and limitations of your space is crucial. Consider who your potential guests will be, then think about the ideal size, amenities, and overall ambiance that those guests will find appealing.
3. Develop a Business Plan
Like any other small business owner, you should develop a comprehensive business plan before you start your Airbnb venture. This plan will serve as your roadmap, helping you make informed decisions and navigate potential challenges, and should include:
- Business Goals
Start your Airbnb business plan by outlining the goal or goals you hope to achieve over a particular period of time. Maybe you want to successfully accommodate a certain number of guests, generate enough revenue to offset your mortgage payments, or earn a few 5-star reviews. Regardless of what your goals are, they’ll serve as a guiding framework for the rest of your business decisions. - Target Audience
Are you targeting business travelers or vacationers? Your desired Airbnb guests will particularly determine the amount of space you should offer, the amenities you should provide, your home policies, and more. - Start-up Costs
The average cost of starting an Airbnb business is around $6,000. However, based on the space you’re offering, amenities for your guests, and other state, local, and Airbnb fees, estimate the startup costs involved in setting up your own Airbnb business. We recommend including the cost of:- Any new furniture and decor you’ve purchased
- Cleaning supplies and maintenance costs
- Amenities like a washer and dryer, toaster oven, heater, etc.
- Utilities like electricity, WiFi, and water
- The cost of business licenses and taxes
- Professional photography services
- Additional housekeepers and hostesses
- Banking
You should also determine where your money should go. We recommend separating your Airbnb income from personal finances by opening a dedicated business bank account. That way, you can streamline the financial management of your small business and make it easier to track your income and expenses. - Pricing Strategy
To ensure you achieve an adequate return on investment (ROI), it’s crucial to create a pricing strategy. An effective strategy will be contingent on understanding your potential guests, factoring in start-up costs, general upkeep, and managing Airbnb fees.
Given that the average Airbnb frees are around 3% of the booking subtotal (unless you have a strict cancellation policy), you need to strike a balance between what you want to earn and what your guests see. Guests will always see a listing price higher than what you earn, so keep that in mind when considering prices.
Additionally, Airbnb will also compare your nightly prices to other listings in the area, as well as tell you when you should consider raising or lowering prices. Use this information as a crucial research tool when determining the best listing price.
4. Prepare The Rental Space
Before you list your Airbnb property, take the time to properly prepare the space. Including the right amenities is a key factor in satisfying guests. Here are some considerations you should make as you prepare to list your property:
- Making an extra set of keys or installing a different type of lock (e.g. Magstripe, RFID, pin code, etc.)
- Installing a fridge, microwave, Keurig, etc.
- Adding diving walls or curtains for enhanced privacy
- Adding a TV and extra furnishings
- Adding storage furniture in the form of dressers, closets, etc.
- Stocking bathrooms and bedrooms with clean tissues, towels, and toiletries
- Providing housekeeping services between reservations
- Ensuring all utilities and fees are paid prior to the booked dates
5. Create an Attractive Airbnb Listing
Airbnb is a competitive platform, making an attractive listing all the more crucial. Don’t be afraid to invest time and money into professional photos and property descriptions. We recommend:
- Take the time to write a captivating property description that highlights why your space is special. Be sure to mention accessibility features, unique amenities, and any other perks that come with your space.
- Include professional photos that show your property well-lit and allow potential guests to understand the size of the space.
- Include references to the benefits of your property’s location, such as if it’s in a quiet neighborhood or close to local attractions.
6. Outline Rules and Services
To avoid misunderstandings and costly incidents, it’s vital to establish clear and reasonable house rules for your short-term rental properties. These rules will set the expectations for your guests, so they know what renting a property from you entails
Clearly and concisely communicate your rules in your Airbnb listing, and reiterate them in person or a guidebook once guests arrive. Be sure to cover anything important to you, from check-in/check-out times to smoking policies, to any other guidelines specific to your property.
7. Consider Enlisting Extra Help
Maintaining and cleaning a popular Airbnb can easily start to feel like a full-time job. Luckily, you can always enlist extra help. Consider hiring professional cleaning services and other professionals that leave your Airbnb space spotless and fully functional before each guest’s arrival. After all, a clean and well-kept property is crucial for your reputation, guest satisfaction, and positive reviews.
If you’re interested in extra help, first determine what you need help with. It could be anything from:
- Emails and communications
- Utility and amenity repairs
- Cleaning and general maintenance
- The check-in process
Once you’ve analyzed what you need help with, you should reach out to a professional of your choosing and work with them to determine how much they’ll be paid per reservation.
Short-Term Airbnb Property Management
If you’re looking to get the absolute most out of your Airbnb rentals, consider hiring a local property management company to give you a competitive edge. These companies specialize in:
- Making Your Property Stand Out: It’s hard to stand out on Airbnb, especially when your property is located in a big city or a popular vacation destination. Local property management companies know the ins and outs of your area, giving them the expertise they need to make sure your listing stands out.
- Maximizing Your Returns: Property management companies utilize dynamic pricing tools to minimize rental vacancies and maximize your rental income. Additionally, they can also reduce your costs by connecting you with a local network of contractors and service providers.
- Hands-on Client Care: These companies can physically oversee your property, handle check-ins and check-outs, and respond to emergencies quickly. This builds a positive rapport with your clients.
8. Stay On Top of Taxes
The last step in starting a successful Airbnb business is to thoroughly understand your taxes. Keep track of important records and tax information, as at the end of the year you’ll have to pay:
- Sales tax
Depending on your city and state, you are required to collect sales tax or gross receipts tax from your guests. It’s vital that you inform guests of the exact amount before they book, so they know what to expect. - Income tax
Often, starting an Airbnb will be considered a form of small business by the IRS. That means your Airbnb income and expenses will be taxed federally and at the state level (depending on the state). Report the form 1099-K provided to you by Airbnb on your tax returns if you’ve earned more than $600 throughout the year. - Tax deductions
When filing your tax return with the IRS, remember that you can deduct any expenses associated with your vacation rentals. Common deductions include:
- Your paid mortgage or rent during the tax year
- Cost of utilities during stays
- New furniture and furniture repairs
- Other property repairs
- Property insurance
- Cleaning and maintenance
