Are you planning to invest in vacation rentals but don’t know how to begin? Check out the article below for important Airbnb information to help you get started.
Table of Contents
- What Is Airbnb?
- How Does Airbnb Work?
- Airbnb Fees Hosts Should Know About
- How Airbnb Protect Hosts, Their Properties, and Their Guests
- How to Create an Account as an Airbnb Host
- How to Find a Profitable Airbnb Rental
The US tourism industry is slowly getting back on its feet this year. With many people getting vaccinated against the COVID-19 virus, travel restrictions across the country are being lifted. According to a recent CNBC article, around 82% of Americans are ready to travel in 2022. The relaxation of the travel restrictions creates more demand for vacation rentals, especially in the most-visited states. If you’re a real estate investor, investing in Airbnb rentals this year may be a wise decision.
What Is Airbnb?
Airbnb, short for “Air Bed and Breakfast,” is an online platform for short term rentals. California residents Joe Gebbia, Brian Chesky, and Nathan Blecharczyk founded the company in 2008. It started when the three individuals offered their own extra space to paying travelers who needed a place to stay. With their newfound venture, they made extra money that helped them pay their rent. When they realized the income potential of the rental business, they developed their first website called airbedandbreakfast.com.
The company went through several launches and finally became Airbnb in 2009 after receiving $600,000 in funding from Sequoia Capital. Airbnb is headquartered in San Francisco, California, and can now be accessed worldwide through its website and mobile app. It aims to help property owners make additional money by renting out their extra room or spare home to people in need of a temporary place to stay within their area.
Both hosts and guests can create a free Airbnb account. The role of Airbnb is to manage the platform and help short-term rental owners advertise their investment property. It also connects hosts and guests and collects and transfers payments. Airbnb also offers an innovative messaging system so property owners and renters can easily communicate. The company makes money by charging commissions from every booking.
How Does Airbnb Work?
The Airbnb platform serves as an online marketplace that allows vacation rental owners to list their spaces for rent. It mainly connects people who want to rent out their properties with those looking for short-term accommodations. In general, Airbnb offers alternative accommodations for short-term renters who do not want to stay in expensive hotels or hostels.
An important Airbnb information that everyone should know is that Airbnb only acts as an intermediary between hosts and guests. The company does not own the vacation rental properties listed on its platform. Instead, Airbnb offers an online space for vacation rental owners to advertise their properties for rent to would-be renters worldwide. By providing more exposure for your rental property, you are more likely to get your property booked and enjoy a better return on investment. It also provides a booking and messaging platform, handles payments, and offers support to hosts.
Similarly, Airbnb makes it easier for guests to find a place to stay in a specific area based on their preferences. Guests can find accommodations that are as homey as possible, along with the amenities they need. If guests want to rent a bigger place for the whole family, Airbnb can connect them to hosts that offer their entire home for rent, including kitchen and cooking tools. In addition, most of these vacation rentals charge a lower nightly rate compared to hotels.
Airbnb Fees Hosts Should Know About
Airbnb makes money by receiving commissions every time a reservation is made. Knowing the relevant Airbnb information on fees and other possible charges is vital if you plan to invest in vacation rental properties and list them on the Airbnb platform. The fees can significantly impact your Airbnb business. You must know how much they cost and understand what they are for so you can set your pricing accurately.
Hosts Pay a 3% Flat Service Fee
Airbnb hosts are charged a flat service fee equivalent to 3% of the booking subtotal. The booking subtotal includes the nightly rate, cleaning fee, and additional guest fee (if applicable). It does not include taxes and other Airbnb fees.
For example, if you’re charging $500 for a five-night stay and a $50 cleaning fee, your booking subtotal is $550. You need to pay the host service fee, which is 3% of the booking subtitle. Based on our example, Airbnb will deduct $16.50 from your earnings. You’d earn $533.50 from the guest booking.
If, for instance, you charge an additional guest fee of $200 for five nights, your booking subtotal is $750. Three percent (3%) of the subtotal amount, which is $22.50, will be deducted from your earnings as a host service fee. You’d earn $727.50 from the booking.
Guests Pay a 14% Service Fee.
According to the Airbnb information found on its website, Airbnb also charges guests a service fee of 14% of the booking subtotal. Based on our first example with a booking subtotal of $550, guests need to pay an additional $77 as an Airbnb service fee, which is included in the total amount. From the second example, with a booking subtotal of $750, an Airbnb service fee of $105 is charged to guests.
Guests will see a breakdown of the fees charged to them before they proceed with their booking. Also, local taxes are calculated during checkout. Airbnb hosts will see a price breakdown in the booking details once the reservation is confirmed.
The host will get a summary of the fees and taxes collected by Airbnb and any additional fees charged to guests (like cleaning fees and additional guest fees). Airbnb owners will also see the total price charged to guests and the net earnings the host will receive from the booking. By knowing the full breakdown of the cost, Airbnb investors can keep their pricing competitive.
What Are Airbnb Fees For?
Airbnb charges service fees to help the company run the platform smoothly. The fees cover the costs of maintaining the website and mobile app, as well as the cost of providing educational resources for hosts. It also helps pay for services such as 24/7 customer support and online marketing via Google and other social media sites. It also allows the platform to verify personal profiles and listings to provide protection for you, your place, and your guests.
Keep in mind that Airbnb doesn’t charge for payment processing. It lets vacation rental owners keep more profit from their short term rental investment. To maximize your profits, it’s crucial to choose a property that is more likely to be booked even during non-peak seasons. If you’re ready to invest in Airbnb rentals, Mashvisor can help you find the perfect investment property.
How Airbnb Protect Hosts, Their Properties, and Their Guests
Renting out your space to strangers may seem daunting, especially for new vacation rental investors. While property damage and safety incidents are rare, short-term rental owners need to ensure that hosts, their property, and guests receive adequate protection. Fortunately, Airbnb provides peace of mind to both vacation rental owners and guests by putting several protections in place.
Check out our video below to see how to protect yourself from bad Airbnb guests:
Based on the Airbnb information on its website, here are a few ways Airbnb protects hosts, their Airbnb rental properties, and guests:
1. Airbnb collects guests’ identification data and other important requirements.
Upon creating an account with Airbnb, guests are required to provide their identification, including their full name, date of birth, email address, and phone number. Airbnb also requires guests to provide their payment information prior to booking. Hosts can opt to ask guests to provide a government ID before they can book a stay on Airbnb.
2. Airbnb allows you to set your own house rules.
To protect your property from unnecessary damage, you’re allowed to set your own house rules. You can set restrictions on the number of guests and indicate whether you allow pets or not. Renters need to agree on your house rules before they can book a stay at your property.
3. You can access guests’ profiles and reviews before you confirm their booking.
You can get to know your guests before you confirm their booking by checking out their profiles and reading reviews from their previous hosts. The feedback from reviews is based on actual experience before Airbnb only allows hosts and guests to write reviews of each other after the reservation is consummated. You can also directly and securely get in touch with the renters by using Airbnb’s smart messaging tool. The messaging tool allows you to ask questions, set expectations, and reinforce house rules before confirming the booking.
4. Airbnb provides damage protection through AirCover.
AirCover provides hosts with $1 million damage protection in case their rental property or belongings are damaged by Airbnb guests during their stay. The coverage includes pet damage, deep cleaning, and income loss protection. Airbnb owners are given 14 days to file for reimbursement after the guests who are responsible for the damage check out. It will take around nine days on average for hosts to receive their payouts for guest damages.
5. Airbnb provides a secured online platform.
There are several security measures put in place by Airbnb to ensure that your account is safe. For instance, it requires extra authentication when a login is attempted from a new device. Airbnb will also notify you when changes are made to your account.
6. Airbnb provides 24/7 support.
Airbnb employs a global team that offers round-the-clock support to both vacation rental investors and renters. Customer support can assist with rebooking, refund requests, damage protection reimbursement requests, disputes, and mediation.
Did you know that Airbnb does not only list vacation rentals? You can also list your properties for long-term rentals. Airbnb monthly rentals allow you to rent out your property for 28 days or longer. It means the platform not only helps short-term rental investors, but it is also good for traditional rental owners.
How to Create an Account as an Airbnb Host
When you’re ready to invest in rental properties, an important Airbnb information that you need to know is how to create an account as an Airbnb host. First, you need to go to Airbnb’s website or mobile app to create an account for free.
Here’s how to create an Airbnb account:
Step 1: Log in to Airbnb.com on your desktop, or open the Airbnb mobile app on your phone or tablet.
Step 2: Click “Sign Up.”
Step 3: Create an account using any of the following:
- Your email address or phone number. You need to create a unique, secure password for your Airbnb account.
- Connect your existing Facebook, Google, or Apple accounts. You won’t need a unique password for Airbnb.
Step 4: Verify your account. Check your email and click the link on your email. If you signed up using your phone number, check the text verification code sent on to your phone.
Step 5: Create your first listing.
What Information Does Airbnb Require?
As part of Airbnb security and protection, it requires both hosts and guests to provide their personal information and proof of identification. Basically, you’ll be asked to provide the following information:
- Full name
- Phone number
- Email address
- Location of your rental property
- Property type
- Number of bedrooms and bathrooms guests can access
- Your tax information
Airbnb may also ask for your photo identification and documentation of your primary address. If you only rent the space that you plan to list on the platform as Airbnb arbitrage, Airbnb will require you to submit a written and signed consent from the property owner. You may also be required to submit a notarized affidavit from your landlord stating that they allow you to list the unit on Airbnb.
Why Is Airbnb Asking for My Tax Information?
One of the most crucial Airbnb information that you need to provide is your US taxpayer details. Airbnb is requesting your tax information because it is a requirement from the IRS. The US federal tax agency needs to regulate the Airbnb business and determine if your Airbnb income is subject to US tax information reporting. If your earnings are subject to reporting, Airbnb will use your tax information to complete your Form 1099/Form 1042-S or your annual US information form.
Since a short-term rental investment is a business and you’re earning from your Airbnb rentals, you face tax responsibilities. Fortunately, the tax responsibilities also mean you’re eligible for Airbnb tax deductions, and you can deduct your property expenses from your tax return.
How Do I Get My Tax Information From Airbnb?
The amount of your Airbnb earnings is essential Airbnb information that you need to access, especially during tax season. You can view your Airbnb earnings from your Airbnb account and use the information for tax purposes. You can get a detailed breakdown of your income for a specific transaction or view a detailed report of your earnings in a particular period. It’s the host’s responsibility to determine what to report as taxable income. If you’re unsure which income is taxable and which isn’t, it’s best to consult a tax advisor.
Airbnb allows you to view your transaction history. You can view your transactions by payout method, listing, and date. Transaction history includes completed transactions and future bookings.
You can also view your gross earnings. Airbnb provides a summary of year-end earnings, which includes both net and gross earnings. Gross earnings include any withholdings or adjustments throughout the year, and it is useful for income tax reporting purposes.
As an Airbnb host, you are responsible for calculating the taxable income from your guest bookings and filing the requisite tax returns with the IRS.
How to Find a Profitable Airbnb Rental
If you want a profitable Airbnb investment, it’s crucial to choose a rental property that can attract guests all year round. Here are a few tips for finding the right Airbnb rental property:
1. Choose a location that’s good for Airbnb investing.
Location is a very important factor that can affect the success of your Airbnb investment. Most people who stay at Airbnb properties are those who go to a place for vacation. When choosing a location for your short-term rentals, learn about the local tourism in that area and find out how often guests visit the place for vacation. It’s also critical to choose a neighborhood with the basic amenities, is close to public transport, and is near most tourist attractions.
2. Know the local short-term rental laws and taxes.
The short-term rental rules and regulations and tax laws vary depending on the state and city—knowing such Airbnb information is very crucial. When deciding to buy an Airbnb property in a particular location, make sure to research the local laws that govern short-term rentals and abide by the relevant rules. In some cases, the regulations include fees and taxes unique to the city, and they can affect your overall income potential.
3. Understand the Airbnb analysis of a property.
You need to consider a few important metrics when deciding if a property is good for Airbnb rentals or not. Before you buy an investment property, make sure to know its Airbnb data, such as the average daily rate, occupancy rate, cash on cash return, and Airbnb cap rate. Through your Airbnb analysis, you can determine whether a property will be a profitable short-term rental investment or not.
4. Use a real estate data analytics platform like Mashvisor.
Finding the Airbnb data and analytics of a property can be tedious and time-consuming. If you want to save time and maximize your profitability, it’s best to use a data analytics platform that can help you meet your investing goals. Mashvisor can help you find the best Airbnb property based on your specific requirements. If you are not sure how to invest in real estate, you can use Mashvisor’s data analytics to help you decide on the best rental strategy for a particular property.
When it comes to real estate investing, it’s crucial to make an informed decision. Mashvisor can help you by providing in-depth and comprehensive real estate market data and Airbnb information about a particular property. Our database contains thousands of properties for sale—just type your preferred city or neighborhood, and you’ll see a list of properties available in that area. Find out more the profitability of certain short term rental properties using our Airbnb calculator.
You can sign up for a free trial to find out what Mashvisor can do for you.