Renting out a house on Airbnb (as a form of short-term rentals) is one of the best ways you can make easy money from real estate. So, how do you actually do that?
In order for you to make money renting out a house on Airbnb, you must have three things:
- Available space (it could be a house, an apartment or even an empty room).
- The receptiveness to deal with people.
- And, most importantly, the will to make some extra cash in the business.
Related: These Are the Best Cities for Airbnb Investment 2018
Of course, we do have a lot to share with you regarding making money from renting out a house on Airbnb. Therefore, stick around to find out how it works and what contributes to your success as an Airbnb host.
Before we get to the factors that will help you make money when renting out a house on Airbnb, let us tell you what to expect and take into account when doing so:
Airbnb Service Charge:
Sure enough, when you are renting out a house on Airbnb you are to expect to pay some service fees for Airbnb. It is a small fee, but it will still be a part of your expenses that you must keep track of. Same goes for Airbnb guests. These fees are in exchange for listing your rental property and providing you with exposure to Airbnb guests.
The Airbnb Insurance Policy:
The Airbnb insurance policy might be one of its best features. It was created to cover any damages a guest causes to the rental property. There have been many cases where Airbnb guests hosted parties that led to severe damages to the investment property. This led Airbnb to create an insurance policy that covers for up to one million dollars in damages. Therefore, we do not think that there is anything you, as an Airbnb host, should be worried about.
Airbnb Property Management:
You might have heard about professional property management that applies to traditional rental properties. However, Airbnb has added a new feature that allows for Airbnb investors to hire professional Airbnb property management. The only difference is that, in the case of Airbnb rentals, the management is performed by super hosts. These are Airbnb hosts who have met high standards on Airbnb and know what it means to make money from renting out a house on Airbnb.
However, unless you plan on managing your rental yourself, you can expect to spend a little extra on Airbnb professional property management. As a result, you are giving up a portion of your cash flow towards that matter.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
Unfortunately, in some states and cities, renting out a house on Airbnb is illegal. Therefore, what you need to do is to check with your state/country’s regulations regarding that matter. Find out where Airbnb is legal. Moreover, avoid places with so many Airbnb legal issues. Furthermore, if you do not own the rental property yourself, make sure to get approval from your landlord. Unless you get the ‘OK’ from him/her, you should expect to face some legal issues that might cost you a lot!
Finally, one thing we feel we are obligated to talk about is privacy terms. With Airbnb rentals, the only thing you cannot play with is the matter of privacy. That is, in fact, like the holy grail of the business. You must provide Airbnb guests with privacy no matter what. After all, that is the very reason why they choose to rent a house through Airbnb. For example, if you have security cameras all around your property, make sure your guests know about that. Otherwise, you can expect to get in some serious trouble.
So, now you want to know how to make money renting out a house on Airbnb, right?
OK. We will tell you one thing; it all comes down to three major aspects: Airbnb profitability measures, Airbnb reviews, and Airbnb occupancy rate. However, they are all connected in one way or another. Therefore, keep in mind, unless you manage to handle them all together, you can’t expect to make money from renting out a house on Airbnb. Here are some more details on these factors:
Airbnb Profitability Measures:
Making money in real estate depends heavily on proper calculations. Moreover, owning an Airbnb rental also comes with some profit calculations before you even buy it. Therefore, when we are talking about Airbnb profitability measure, we are talking about the following:
The return on investment: The return on investment is basically the amount of money you can expect to make in return for what you have invested on an annual basis. Sure enough, it takes the following two measures into account.
The Airbnb cap rate: The cap rate is another measure that is important. Simply put, it is the property price divided by the net operating income (the annual cash flow). One thing to keep in mind is that you calculate the Airbnb cap rate regardless of the financing strategy you choose to go with.
The Airbnb cash on cash return: The cash on cash return is very similar to the cap rate. However, the only difference is that you take into account the financing strategy. Therefore, when you calculate it, you only consider the cash you have invested rather than the whole property price.
Why is it all important when renting out a house on Airbnb?
First and foremost, it will help you determine your Airbnb pricing strategy. This has a huge impact on your Airbnb rental income. When buying Airbnb rental properties, you will probably get a loan to finance it. Therefore, you want to know exactly what it takes to repay that loan with the rental income you receive.
Another benefit is to analyze a location in which you intend to purchase Airbnb rentals. A huge part of a property’s profitability is the location. So, if you want to determine where to invest in real estate, you want to make sure you perform due diligence.
How to perform profitability calculations when renting out a house on Airbnb
One way we can help you perform all the previously mentioned calculations is introducing the Airbnb profitability calculator. This tool has revolutionized the real estate business. Thus, making money in real estate has never been easier. Besides analyzing the property, the Airbnb profitability calculator will also perform the neighborhood analysis. It will help you decide on the suitability of a certain area for Airbnb rentals. Therefore, you will be able to decide whether renting out a house on Airbnb in that area is the optimal rental strategy.
Using the Airbnb profitability calculator is also helpful in terms of deciding how much to charge for rent. It will tell you that based on all the data that you provide.
Here is a blog to help you understand what the Airbnb profitability calculator is: The Airbnb Profitability Calculator: The Best Friend of the Short-Term Rentals Investor.
Airbnb Reviews & Airbnb Occupancy Rate:
Let’s face it, your short-term rentals business is all dependant on the Airbnb reviews you get. The better they are, the higher rates of occupancy you are to expect. Therefore, there are a few things that you can do to sustain high Airbnb occupancy rates throughout the year:
First, make your calendar as organized as possible. Make sure it is up-to-date at all times. This will make it easier for Airbnb guests to view it and make reservations on the days it is available for rent.
Second, you must get your rental property ready for each guest’s stay. This includes cleaning the property, replacing used items such as bed sheets and towels, and fixing hazards.
Third, be real. Do not fool guests by saying it has an ocean view when it doesn’t. Airbnb guests are not so foolish, and you cannot possibly risk any bad reviews as they are the key to high occupancy rates. In reality, renting out a house on Airbnb requires that you describe the investment property as it is with a little bit of excitement. You do not have to come up with features that do not exist. Rather, you can use the features that already exist and put it in a way that sells your guest an experience.
Related: Buying a Short-Term Rental Property? Invest in The Most Airbnb Friendly Cities
Renting out a house on Airbnb is a very lucrative investment strategy. Mashvisor is full of real estate blogs that will guide you throughout the process of renting your property on Airbnb. With our guidance, you will be able to determine a good deal and work towards expanding your business in no time! So, what are you waiting for, subscribe to our services!