“How much should I charge for rent?” is one of the first things Airbnb investors ask themselves when starting out in the vacation rental business. Whether you’re renting out a room or an entire property, forming an Airbnb pricing strategy is crucial when investing in short term rental properties.
To figure out how to list your property on Airbnb, check out our guide on becoming an Airbnb host.
The Simple Formula
There’s a simple formula that’ll help you determine the minimum nightly rate to charge for your Airbnb property. Calculate your monthly costs (such as mortgage payments), and add utilities (such as gas, water, cable, Wi-Fi, cleaning fees, etc.), and divide that by 30 days of the month – this is your average daily cost.
Say you got $80, this is the very least you should charge per night, the absolute minimum. Your goal, however, should be to maximize Airbnb cash flow and your Airbnb profit margin, not just to break even. Moreover, you’re going to have nights where your rental property is vacant, so you want the revenue from other nights to help you cover that.
Other Factors to Consider When Pricing Your Airbnb
The simple formula gives you the minimum rate to charge to break even, but there are several other factors to consider when deciding how much to charge for Airbnb so that you can turn a profit. Check them out below.
1. Similar or Comparable Properties
What are other rental properties, i.e. your competition, in your neighborhood going for? Looking at similar properties in your neighborhood will aid you in determining a range for a basic Airbnb price.
A simple search of your city or neighborhood on Airbnb will give you a good range of properties and prices to look at. For example, if you see that similar properties are listed at $60 – $90 in your area, that’s the range you want to price your own Airbnb listing at.
An easier way to calculate your neighborhood’s average rental rate is through Mashvisor’s Airbnb profit calculator– the best Airbnb pricing tool. Using the tool’s heatmap feature, you can obtain Airbnb data on the average rental income for a neighborhood. You will also be able to view Airbnb listings in the same neighborhood as yours along with their current rates.
Furthermore, you can add your own Airbnb rental to Mashvisor’s database and it will automatically pull up the expected monthly rental income as well as a list of Airbnb comps specific to your property. This can give you an idea of what to charge per night for your Airbnb investment property.
2. Airbnb Occupancy Rate
Mashvisor’s rental property calculator not only gives you access to Airbnb analytics and comps as mentioned before, but it also tells you what Airbnb occupancy rate you can expect from your property, among other important data that will help you with your Airbnb pricing (see below).
Another way to find out what to charge based on Airbnb occupancy rate is through current listings. You can do this by going to a specific similar property in the neighborhood on Mashvisor to see its occupancy rate and compare it to its current nightly rate. That’ll give you an estimate of what Airbnb occupancy to expect for a certain price.
3. Airbnb Reviews
Generally speaking, and if you are just starting out on Airbnb, you should start with a lower price for your listing. When you first start with Airbnb real estate investing, you won’t accumulate a lot of positive Airbnb reviews right away.
So, to encourage your first few bookings, your Airbnb pricing should be lower. Once you have established yourself as a host and your property through good reviews, you can up the price of your listing. The better your reviews are, the more flexibility with price you have.
4. Cleaning Fees
This is another thing to keep in mind when setting a price for Airbnb rentals. Even if you take care of the cleaning yourself, you should still add a cleaning fee. After all, your time (and whatever supplies you use) are worth money, no?
At the same time, make sure that your cleaning fees are not so high that they deter guests. This is especially the case for guests who are staying for solely a night or two. Cleaning fees usually range anywhere between $20 – $50, sometimes more.
5. Charging for Extra Guests
This is something quite common among Airbnb hosts. If you can manage to fit an extra person in your short term rental property, you can charge extra Airbnb fees. If you have a futon or an extra bed, you can add the extra cost to the night’s base minimum for the number of guests.
Read more on how you can do this here. This is quite common, you’ll see it on multiple property listings, and it is a really good opportunity to increase your Airbnb cash flow.
6. Seasonal Pricing
Airbnb listings can have dynamic pricing, depending on peak or off seasons. Look out for seasonal events in your area. If there’s a huge concert, festival, or a major football game happening in your area, you can increase the price of your listing and guests would still be willing to pay because of the occasion. During slower seasons, you can decrease the Airbnb price to motivate guests to book the rental property.
What About Airbnb Smart Pricing?
Airbnb Smart Pricing is a tool on the Airbnb website which collects and analyzes data about Airbnb demand and supply, tourist activity, availability of similar listings, among other market trends and factors. The tool then provides a suggested price for hosts or investors to adopt. Not many hosts, however, use the Airbnb Smart Pricing.
Several report that the tool provides them with prices lower than that of the market average, and thus forgo a good chunk of profit when using it. Instead, real estate investors are opting for other methods for Airbnb pricing, including the ones discussed above.
Final Words on Airbnb Pricing
So when asking yourself “How much can I rent my house for on Airbnb?” you need to calculate your daily cost, then consider all extra variables that go into the equation. But ultimately, the most important thing to keep in mind for Airbnb pricing is your expected Airbnb return on investment. Airbnb can be a really profitable investment if you make savvy choices when it comes to pricing.
Do you have any hacks that help you with Airbnb pricing? Let us know below!