Airbnb Properties: How Does Airbnb Work for Owners?

How does Airbnb work for owners? It is a question that’s constantly on the minds of both beginner and experienced Airbnb real estate investors.

Most real estate investors consider Airbnb investment properties. It always is a question of how much effort is put into such investments vs the high rental income. To be exact, talking about Airbnb rental homes is a lot different than owning one. So, how does Airbnb work for owners? And, how does one become one of the best Airbnb rental property owners?

Table of Contents

1. What Is Airbnb?
2. How Does Airbnb Work for Owners?
3. How Does Airbnb Work for Owners: Next Steps
4. Other Things to Keep in Mind

Of course, being an Airbnb guest is different from being on the other end of the line with Airbnb property owners. 

In this article, we’ll discuss how to make Airbnb work for owners, from listing a property to managing bookings and payments as a host. We’ll also talk about the benefits and challenges of being an Airbnb host. You’ll also learn how to maximize rental income and ensure a smooth experience.

Furthermore, we’ll discover how to fund and finance the property, how to analyze the property, and also how to fix it up to make it enjoyable for your renters. You’ll also be shown how to navigate the rules and regulations of each Airbnb location as a host to stay on the right side of the law.

What Is Airbnb?

Airbnb is an online marketplace that allows hosts to rent out their homes to travelers and tourists. The company was founded in 2008. It is now a massive global platform with over four million listings in more than 220 countries and regions worldwide.

Airbnb provides a unique and affordable accommodation option for travelers looking for a more authentic and local experience. By renting out their spaces, property owners can earn extra income and make use of their unused or underutilized homes. The platform offers a range of different types of accommodations, giving travelers options that work.

Now, let’s answer the question, how does Airbnb work for owners?

How Does Airbnb Work for Owners?

To dive deeply into the process, here is a detailed plan that most real estate investors follow with Airbnb rentals:

Financing

Airbnb financing refers to the different funding options Airbnb hosts can use to finance the purchase and renovation of their Airbnb homes. The financing options can be helpful for investors who want to invest in short term rentals but lack the upfront cash to purchase a property.

Therefore, before you ask, “how does Airbnb work for owners?”, you must take the first step that property owners need to take: how to finance their homes. A potential Airbnb host must go through the inevitable financing details. You’ll most likely be going for a mortgage or loan. Make sure you know how mortgages work, and consult a mortgage broker who does not mind explaining all the details to you.

How Investors Can Get Financing to Buy an Airbnb Investment Property

While there isn’t a specific loan type for Airbnb financing, there are financing options available that work for property owners. To qualify for financing, Airbnb owners may need to provide proof of profitability because of the risks associated with Airbnb rentals.

Some financing options available for Airbnb hosts include stated-income loans, no-income loans, traditional mortgages, and loans specifically designed for rental property homeowners. Such financing options offer flexible loan terms, low down payments, and fast loan processing times, making it easier to acquire and manage homes on Airbnb.

Related: 7 Best Loans for Investment Property in 2023

Finding the Property

It’s easy to find a property if you know how to spread your search. You might end up looking at a hundred investment properties but only place an offer on a couple. It’s a funnel that filters through the possible real estate investments and the sure ones. Additionally, it’s not a bad idea to look at Craigslist, online forums, foreclosures, and even local newspapers.

But before you spend countless hours scouring the internet, use one of Mashvisor’s tools to find a profitable property in 15 minutes.

Mashvisor provides Airbnb home owners with the tools to find profitable homes. It helps both experienced and novice investors find lucrative homes in areas with high demand.

Mashvisor’s Property Finder Tool

Mashvisor’s Property Finder is designed to help real estate investors find lucrative traditional or Airbnb investment properties. The tool allows investors to customize their search based on various criteria using filters on the Property Finder page. You can filter the homes based on location, budget, property type, rental strategy, and number of bedrooms and bathrooms. 

The Property Finder tool is a search engine for investment properties and its main purpose is to replace the need for investors to manually search for properties. 

The tool can help investors save time and effort and increase their chances of finding a profitable investment home.

Start your 7-day free trial to learn how Mashvisor can help you make 2023 your most profitable year yet.

Analyzing the Property

Knowing how to conduct a real estate market analysis and an investment property analysis is a must for real estate investors. You might be asking, “how does Airbnb work for owners?” As for all journeys, it begins with risk calculation.

Analyzing a short term rental property involves looking at various factors to determine its profitability. One important metric you should know how to analyze is the average daily rate. It is the average price a guest pays for a night in the property.

Another factor to consider is the property’s location, which affects demand and profitability. Research the local short term rental market to determine if the property does sit in a prime location.

Through an investment property calculator, you can run a real estate market analysis to tell you all the real estate comps and measurable units that can make or break a real estate investment property. With Mashvisor’s investment property calculator, you will know how to calculate the cap rate, cash on cash return, and Airbnb occupancy rate for any property.

How Can Mashvisor’s Calculator Help Analyze a Property?

Mashvisor’s calculator helps investors know how to conduct comprehensive investment property analysis.

The calculator gives investors accurate data and estimations that are useful in determining the profitability of the property. Plus, the tool is easy to use and does not waste investors’ valuable time.

For more information about running a real estate market analysis, read this blog post: The Real Estate Market Analysis Tools That Every Investor Needs.

Fixing Up the Property

With any investment property you purchase, you are bound to fix a few things. In many cases, the floors will need refurbishing or a kitchen update and a bathroom update will be a must. The refurbishments will drive up your property’s value in your local housing market and on Airbnb.

How to Fix Up a Property

Here are some ways to fix up a rental property:

• Pressure washing: Knowing how to pressure wash the exterior of the rental property can make a huge difference in how it looks. It helps remove mold, mildew, or weathered materials and is an affordable option for keeping up your property.
• DIY fixes: For minor issues like a tripped circuit breaker, you, as a short term Airbnb host, can try to fix it yourself. Turn off the appliance, locate the breaker box, and flip the switch back into the on position. It is a short term solution that works and does not require contacting an electrician and spending money. 
• Renovations: If the rental property does need more significant repairs, renovations can help maintain and improve the long term return on investment of the rental property.

Furnishing

As for the case of all short term rentals, you will need to provide a furnished space. The furnishings do not exclude kitchen gadgets and bathroom towels.

How to Improve the Furnishings in Your Property as an Airbnb Host

As an Airbnb host, there are several ways to improve the furnishings in your property. One way is to make small updates such as adding a fresh coat of paint or new sheets.

Another way is to consider the value that a piece of furniture does provide to your property versus the cost. You don’t need to spend a lot of money on furniture, but you want your property to stand out. 

Listing on Airbnb

Listing on Airbnb requires high-definition photos and a beautiful-looking space in them. Describe your space well so that Airbnb guests will be aware of the space they’re booking. Also, a good Airbnb host does not hesitate to set their own rules.

How to List a Property on Airbnb

Follow the general steps below to list your property on Airbnb:

1. Create an account on Airbnb.
2. Click on “Airbnb your Home” on the top right-hand corner of the page.
3. A new page will be shown to you, click on the “Get Started/Airbnb Setup” button.
4. Click on “Get Started.”
5. Follow the prompts and enter the necessary information, including setting the price.
6. When you are done, your listing will be reviewed and listed if accepted.

However, it is important to note that laws and regulations regarding renting out a property on Airbnb may vary depending on the city or country you are located in. For instance, some cities require hosts to pay an occupancy tax. Additionally, hosting on Airbnb comes with expenses such as stocking your place with essentials, cleaning costs, and potential increases in utility bills.

If you are a new host on Airbnb, you can also seek guidance from experienced hosts through Airbnb’s Superhost program.

How to Make Your Airbnb Listing Attractive to Potential Guests

Making your Airbnb listing attractive to guests is crucial for success as a host. Here are some tips you should implement:

1. Update your Airbnb listing: Keep your listing up to date with accurate information, amenities, and photos to attract potential guests. 
2. Make your listing visually appealing: Use good lighting and declutter your space before taking photos. Use photo editing tools to enhance your images.
3. Complete every section of your listing: Make sure to fill out every section of your listing, including the description, amenities, and rules of the home.
4. Offer special amenities: Provide your guests with a welcome pack, airport pickup, or free passes to local attractions. Make sure to provide essential items like toilet paper, linens, pillows, towels, and soap. Also, ensure that all appliances that are in your home are working. 
5. Be a local guide: Share your knowledge of the local area with your guests, including family-friendly attractions and places to eat. 
6. Cater to special events: Offer special packages or amenities for events like weddings or family reunions. 
7. Show personality, not personal items: Add personal touches to your space, such as a cookbook on the counter or a carafe of water and a novel by the bed. However, avoid cluttering your space with personal items. 
8. Be responsive: Respond quickly to guest inquiries and provide helpful information to potential guests. This helps build trust and can lead to positive reviews. 

By implementing the above tips, you can make your Airbnb listing more attractive and increase your chances of success as a host.

Fill Out Payment Information

After listing your home on Airbnb, update your payment information. Airbnb accepts all kinds of cards. If you live in the US or Canada, you can receive your payment through check or online payment service providers.

How to Fill Out Payment Information on Airbnb

To add or update your payment information on Airbnb, follow the steps below:

1. Go to Airbnb’s website or mobile app and log in to your account.
2. On the top right hand corner of the page, Click on your profile icon. 
3. Then click on “Account.”
4. Next, click on “Payments and Payouts.”
5. Click on the “Payout” tab.
6. Next, click on “Setup Payouts.”
7. Enter your payout information as prompted.
8. Click “Save” to add your payout information to your Airbnb account.

It’s important to note that Airbnb may withhold taxes from your payouts, depending on your location and existing tax regulations. As a host, it is your responsibility to submit, pay, and report all taxes related to your bookings to the relevant tax authorities.

If you earn a certain amount from Airbnb, you may also receive a 1099-K form and need to report your earnings on your taxes. Additionally, you can consider using AirCover for Hosts, which includes damage protection, liability insurance, and safety features for hosts. The coverage is always free to use when hosting on Airbnb.

Related: Everything Airbnb Hosts Need to Know About Filing Taxes for Their Short Term Rentals

Figure Out Property Management

While being a full-time Airbnb host may be the best full-time job for some, it may not work for others. With today’s rising economy, there are plenty of property management companies to go around. Many real estate investors hire professional property management companies to take care of the day-to-day operations, while they cash the rent checks and enjoy the rental income.

When it comes to managing your Airbnb property as a host, you have two options: managing it on your own or hiring a property manager. Here are some of the pros and cons to managing your Airbnb on your own and hiring a management company:

Managing Your Airbnb on Your Own

Here are the pros and cons of managing your Airbnb on your own:

Pros

• More control over your Airbnb rental property. If you prefer to be in control, managing your Airbnb on your own might be a better choice for you. This way, you can control all aspects of your Airbnb investment property.
• Potential to maximize your income. As you will be renting out your property at a higher nightly rate, you can make more money if you have a good occupancy rate.
• Communication with guests. Managing your Airbnb on your own allows you to communicate directly with your guests.

Cons

• Time-consuming. Managing an Airbnb property on your own can be a lot of work, from cleaning and maintaining the property to communicating with guests and handling bookings.
• Potential for burnout. If you are managing multiple homes or have a full-time job, managing your Airbnb on your own can lead to burnout.
• Guest screening. Sometimes, busy Airbnb hosts do not have the time to research potential guests.

Hiring a Property Manager

Pros and cons of hiring a property manager to run your Airbnb home:

Pros

• More free time. By hiring a property manager, you can free up time to focus on other aspects of your life or business.
• 24/7 guest support. A good investment property management company can provide support to all your guests every single time. 
• Less responsibility. With a property manager, you won’t have to worry about cleaning, maintenance, or communication with guests.

Cons

• Fees can be costly. The typical costs of Airbnb property management range between 20%-40% of the rental income. However, you can find rates as low as 5% and as high as 50%.
• No final say: You lose autonomy in running day-to-day operations and making decisions for your business.
• Tied hands: If the manager underperforms, you won’t be able to do much unless you terminate your contract with them.

Ultimately, it’s up to you if you choose to manage your Airbnb on your own. By weighing the pros and cons of each option, you can make an informed decision that will work best for you and your Airbnb investment property.

Start Your Airbnb Investment Journey

After everything, you can sit back and enjoy your Airbnb rental property. Of course, you will need to attend to your property more than a long term rental.

If you follow the above steps, you will be a good Airbnb host. Even so, the probability that your property will be profitable will be even higher. 

A quick reminder before you start your journey as an Airbnb host; understand why you want to become an Airbnb host and determine your budget. Then, use Mashvisor’s Property Finder tool to choose the most profitable location for your short term rental. Finally, optimize your listing to ensure that it is attractive to potential guests.

Also, do not forget to familiarize yourself with the rules and regulations of the location you plan to invest in so that you don’t have to face the long arm of the law.

Related: How Is Mashvisor’s Property Finder Helping Real Estate Investors?

How Does Airbnb Work for Owners: Next Steps

Assuming you’ve done all the previous steps and gotten this far, how does Airbnb work for owners?

After listing your property on Airbnb as a host, potential guests can go to the website and look for rental properties at any time of day. Airbnb guests must have a personal profile on the platform to book any property, and they can link it to their Facebook account to verify. After that, the guest can message the host and book any potential Airbnb investment property accordingly.

Airbnb adds a varying percentage between 6%-12% on top of the reservation value as customer support. When processing payments, Airbnb accepts all types of electronic cards and guarantees the guest that they won’t be charged until the reservation is confirmed.

After the reservation is confirmed and the payment is processed, Airbnb holds the payment up to 24 hours after the check-in and then posts the funds into the Airbnb host’s account.

Of course, there’s a service fee of 3% on every reservation that’s deducted from the host. The 3% fee is separate from the previous customer support fees.

If you’re still wondering how does Airbnb work for owners, read this blog: How Does Airbnb Work? Learn Here.

How Much Do Airbnb Owners Get Paid?

The total amount Airbnb hosts earn varies due to factors like location, size, and quality of the property, as well as the demand from guests.

The amount that Airbnb hosts make can vary widely based on many factors. According to ZipRecruiter, the average annual income for an Airbnb host ranges from $125,000 to $257,000, with some owners earning as much as $190,999 per year. 

However, it’s important to note that the said figures likely include individuals who rent out multiple homes and may not be representative of the typical earnings of property owners with just one home.

If you’re thinking about becoming an Airbnb host, it’s worth noting that starting an Airbnb business can be relatively inexpensive compared to other types of businesses. According to Airbnb, a host can start with just $10 and an idea.

Other Things to Keep in Mind

The information you’ve received above should adequately answer the question: how does Airbnb work for owners? But, here are other things to keep in mind as an Airbnb host:

Laws and Regulations in Your City

Cities and states have different regulations regarding short term rentals, and you should know how they work before you host guests. For instance, in Los Angeles, hosts must register as a business and a short term rental, be permanent residents, and are allowed to rent for up to 90 nights a year without hosts. The license fee is $250, and hosts are subject to fines of up to $484 per day for non-compliance. 

Also, New York City has strict laws and regulations in place that hosts must abide by, including obtaining consent to share their hosting and listing data with the City. In contrast, some cities in Arizona only require transaction privilege tax and county excise tax for stays of up to 29 nights.

Airbnb regulations require hosts to comply with the homeowner or neighborhood association by-laws. Such rules may cover the use of amenities such as pools or playgrounds.

If you’re a real estate investor and thinking of going for Airbnb rental homes as an investment strategy, make sure to be well aware of your city’s regulations before purchasing a property. Some cities are trying to regulate Airbnb rentals and trying to mark legal grounds to impose taxes on them.

To know more about the laws and regulations in your city, check out Mashvisor’s short term rental regulations page.

The page allows you to be conversant with Airbnb’s laws and regulations of the city you are looking to invest in. All you need to do is select the state and the city you want to invest in. Then, it will show you the laws and regulations in that city.

Taxes

Taxes might vary from one state to another in this case. Airbnb collects information to provide you at the end of the year with the income you generated through the platform. Not to forget that in many states, the income generated by Airbnb rental homes is taxable rental income.

How to File Taxes for Your Airbnb

If you are an Airbnb host, you must pay taxes on the income you earn from your rental property. Here are some tips on how to file taxes for your Airbnb:

1. Determine Your Filing Status

Depending on your situation, you may need to file as a self-employed individual or as a rental property owner. If you are not sure which, consult a tax professional or use tax preparation software to guide you through the process.

2. Keep Accurate Records

It is important to keep detailed records of your Airbnb income and expenses throughout the year. They include all rental income, cleaning fees, and any other payments you receive from guests. You should also keep receipts and records of any expenses related to your rental property, such as repairs, maintenance, and utilities. 

3. Understand 1099 Forms

If your Airbnb business earns more than $20,000 in sales and receives 200 or more reservations during a calendar year, Airbnb will send you a Form 1099-K. If you make $600 or more from Airbnb’s service providers section, you will receive a Form 1099-NEC, previously known as the 1099-MISC. Make sure to keep these forms and use them when filing your taxes. 

4. Take Advantage of Deductions

As an Airbnb host, you may be eligible for various tax deductions related to your rental property. The include deductions for expenses such as cleaning fees, supplies, repairs, and maintenance. You may also be able to deduct a portion of your mortgage interest and property taxes. Make sure to keep accurate records and consult with a tax professional to determine which deductions apply to your situation.

5. File Your Taxes on Time

As with any other type of income, it is important to file your taxes on time to avoid penalties and interest charges. If you are unsure about how to file your taxes or have questions about your tax obligations as an Airbnb host, consult with a tax professional. 

Conclusion

Airbnb rentals are becoming more and more popular nowadays. With high rental income and occupied properties most of the year, it drives real estate investors to this type of investment. And if you want to become an Airbnb host, you must know how it works for owners.

So, how does Airbnb work for owners? In this article, you discovered what Airbnb is and how Airbnb works for owners. You learned how to finance your property, how to find a good property, and how to furnish it and fix it up as a host so it will be attractive to potential guests.

Also, you came to know about how to deal with the laws and regulations of the city you want to invest in with Mashvisor’s laws and regulations page. Finally, you learned how to file your taxes in order not to be found wanting in the eyes of the law. 

Schedule a demo with Mashvisor today to accurately answer the question about how does Airbnb work for owners,