If you’ve found yourself here it’s likely you’ve not yet started your Airbnb hosting journey.
Anyone exploring the idea of making money in real estate should consider including Airbnb properties in their real estate portfolio, but you might be wondering “Can you make money with Airbnb?”
Well, the simple answer is yes you can. Short-term rental services like Airbnb are becoming more popular each year among travelers. Rather than booking a standard hotel room, many travelers are looking for more affordable places where they can feel more at home and enjoy better and more comfortable surroundings during their vacation.
In this post, we’re going to put your mind at rest and show you how to make money on Airbnb. We’re going to share some useful tips and introduce some helpful tools that will help you on your journey to becoming a successful Airbnb host.
Top Tips on How to Make Money from Airbnb
Scour the internet and you’ll come across lots of advice when it comes to how to make money on Airbnb. To save you some time, this post contains those tips we consider the most important.
1. Do Your Market Research and Take Advantage of All the Relevant Tools
Before you can think about how to make money on Airbnb you first need to do some market research. When it comes to real estate investment it’s all about the location. The same applies to vacation rentals such as an Airbnb. In fact, it’s more relevant when it comes to finding a profitable Airbnb property.
But where do you start looking? Mashvisor is a reliable source of information and will help you find the best Airbnb investment location. In addition, there are tools available that take all the guesswork out of the process and help you see how any location will rank on Airbnb.
The tools available include the following:
The Real Estate Heatmap
You can use this tool to conduct neighborhood analysis and zero-in on profitable markets to invest in. For example, the Real Estate Heatmap identifies areas with the most affordable listing prices, the highest rental income, Airbnb demand, cash on cash return, and Airbnb occupancy rate.
The Property Finder
Once you’ve found yourself a profitable location, you can use the Property Finder to help you find top-performing properties for sale in your market of choice. It allows you to filter your search according to your criteria and preferences. It only takes a few minutes and is much easier than scouring the local newspapers or visiting countless real estate agents.
You simply key in a few basic filters, and the Property Finder tool provides a list of high-ranking Airbnb properties available for sale. They will match your budget and meet other criteria such as:
- Location. You can search in multiple cities in the US housing market simultaneously
- Airbnb rental strategy
- Property type
- Budget
- Number of bathrooms and bedrooms
The Mashvisor Property Marketplace
There’s more than one place to look for potential properties, and any savvy investor will know that buying off-market homes can be a very lucrative real estate investment.
Off-market homes are typically cheap properties with immense potential as rental properties such as Airbnb. The tricky part, however, is finding them. The Mashvisor tool can solve this problem.
It allows you to find off-market deals by searching in the Property Marketplace. Using this property search tool, you’ll find a vast supply of non-MLS, off-market properties include foreclosures, short sales, auctioned homes, and bank-owned properties.
Again, you can sort and narrow down listings by zip code, town, and city, as well as use filters such as budget, number of bedrooms and bathrooms, and rental strategy.
You can use a lot of the data from the Mashvisor tools to help you set your rates. You need to consider how much similar properties near yours are charging.
2. Identify Your Target Tenant
Marketing your Airbnb is key to knowing how to make money on Airbnb. But to market your Airbnb effectively, you must identify the type of person who wants to rent your property.
If you want to attract better-paying customers, you need to provide a luxury experience. However, if you want your competitive advantage to be the daily rate of your property, you’ll need to be prepared to do a lot of demanding work because you’ll have a constant turnover of tenants.
3. Create a Listing that Catches the Eye
One of the most powerful tools you can have when you’re starting out is a quality listing. You must make it stand out from the crowd and encourage potential guests to book a stay in your short-term rental rather than look elsewhere.
Learning how to make money on Airbnb involves creating an eye-catching listing, and here are some tips:
- Write a captivating headline to entice a potential Airbnb user. Include positive features and as many amenities as you can.
- Take some great photos as these will convince most people to book with you. If your budget allows, consider calling in a professional photographer.
- The property description should include as many details as possible. For example, include amenities, benefits that aren’t obvious from the photos, whether you can offer an airport pick-up and drop-off service, and much more.
- Honesty is the best policy. Mention any potentially negative aspects of the property and be transparent about any fees you charge. It’s better to be upfront than run the risk of a negative review later because you weren’t honest.
4. Set your Sights on Becoming an Airbnb Superhost
Being an Airbnb Superhost is something to set your sights on. With a Superhost label, your listing will be given increased visibility, thanks to Airbnb’s algorithm. You can also expect to earn more rental income because your listing will be seen more often when an Airbnb traveler is looking to book a stay.
Being a Superhost isn’t a badge you get without putting in some effort. So here are some tips on how to do it.
- Maximize your bookings: To become an Airbnb Superhost, you must book at least ten stays per calendar year or three reservations totaling at least one hundred nights. In addition, your cancellation rate must be below 1%.
- Communication should be often and early: Your response rate much be 90% if you want to become a Superhost. An effective way to make the communication process more manageable is to download the Airbnb app.
- Working on getting stellar reviews: Guest reviews hold weight in Airbnb’s ranking process. So aim to get as many five-star reviews as possible.
5. Calculate Your Operating Costs
Part of learning how to make money on Airbnb is about calculating how much your operating costs will be. A big part of being a real estate investor and having a real estate portfolio is making sure you account for the costs and fees when you’re calculating cash flow.
No two Airbnb properties are the same, but generally, you’ll need to cover the following costs:
- Host fee: Airbnb charges a 3% host fee for payment processing
- Cleaning service: If you decide to use a cleaning service to help keep your rental property clean, you should include their fees in your operating costs
- Turnover fees: These include things such as toilet paper or soap and other basic amenities
- Maintenance fees: The regular upkeep of your Airbnb property must be considered. You also need to consider the cost of repairing any damage caused by guests.
- Regulatory licensing fee: This depends on the location of your property. Some municipalities insist on Airbnb hosts having a business license, which means there’s a fee to pay.
- Insurances: Airbnb hosts in the US can take advantage of Airbnb’s $1 million insurance for property damage and $1 million in liability insurance coverage.
- Taxes: Any rental income you earn will be subject to tax. At the end of each year, you’ll receive a 1099. In some cases, you might also have to pay state and local taxes, like an occupancy tax, on the rental money you earn
There are plenty of online tools that can help you determine your cash flow and profits and play a vital role in your Airbnb rental property analysis. One of these is Mashvisor’s Airbnb calculator.
Using their investment property calculator, you can determine the cash flow and profits that different income properties can generate. This online tool uses the most up-to-date data and trends for its investment property analysis. It also allows you to input data to generate highly accurate estimates.
6. Be Aware of Potential Safety and Legal Issues
Before you start renting out your spare bedroom or purchase your first Airbnb rental property, you must check with your local municipality.
An Airbnb income property is a wonderful way to generate passive income, but many cities and towns have ordinances in place that limit or regulate short-term rentals. If you violate those ordinances, you’ll be facing a hefty fine, so check out the limitations of an Airbnb property first.
If you’re not the owner of the property, you’ll also have to check that your landlord is OK with you starting an Airbnb business. They might not agree to you renting out your extra space as they’d be taking on all the liability while you got to keep the income.
It’s only natural that you want to prioritize guests’ safety and security before your own, but your safety as a host is equally important. Make sure any valuable personal belongings are secured.
In addition, reviews of guests from their previous hosts can also serve as reassurance, and don’t be afraid to turn down or drop a booking as you wish. However, keep in mind that in some cases, Airbnb can issue penalties for canceling bookings, depending on the circumstances.
You should also follow Airbnb’s guidelines to ensure your Airbnb property is safe for guests. Preventing safety risks minimizes your chance of being sued by a guest who is harmed on your property. It will also help to reduce the number of guests giving you negative reviews.
Negative reviews lower your host rating. In turn, this will mean lower customer acquisition and retention, which could decrease your passive income.
7. Understand Airbnb’s Payment Guarantees
Guests pay for their stay using the Airbnb platform. What this means is that Airbnb oversees releasing the payment for a guest’s stay. The Airbnb website proudly states that if there are no issues, you can expect to get paid within one business day of the guest’s check-in date. However, they also mention that if you choose to be paid by a third-party service such as PayPal or by check, the process could take longer.
All that aside, Airbnb does offer some payment guarantees to its customers. It’s important that you make yourself aware of them so you’ll understand when your payment might be at risk. For example, Airbnb insists that you issue a refund to your guests if you violate their hospitality standards. You could do this if you cancel at the last minute, forget to leave a key, or otherwise be unavailable when your guests arrive.
In addition, guests have up to 24 hours after the start of their booking to make a note of any problems with their stay that could warrant a refund. Failure to communicate with your guests about these issues could mean you have to issue a partial refund for their stay.
Final Thoughts
Airbnb rental properties can be very profitable, especially if you’re patient and willing to do the job of attracting tenants and keeping them happy. However, operating costs can sometimes be higher than a traditional rental property, and the regulations have made it difficult or even illegal to invest in Airbnb in many places. So make sure you do your homework before you start investing in Airbnb.
However, at the end of the day, knowing how to make money on Airbnb is all about being honest in what you offer potential guests and making sure your guests have the best experience, both online and in-person.