If you’re a residential real estate investor who owns a vacation rental property, you know that your biggest challenge is keeping the home consistently occupied. You can outsource marketing and booking to a real estate agency or property manager, but the fees can often gobble up 20% or more of your rental income. Or you can manage the rental yourself—assuming you have lots and lots of time.
There’s a third and increasingly popular option: Listing your property on a website like Airbnb, an online community marketplace that connects people who want to rent their homes with travelers, and facilitates the process of listing and booking. While there are several other sites that specialize in vacation rentals, like HomeAway and VRBO, this post looks specifically at Airbnb, one of the fastest-growing “sharing economy” companies.
Here are some of the things you should consider if you’re thinking of listing your vacation rental on Airbnb and becoming, in Airbnb parlance, a “host.”
Be Realistic About Costs
While a short-term vacation rental—especially in a desirable location—can be a great way to earn extra income from your investment, be sure to do the math correctly when you’re looking at the expenses you’ll incur. Here are some costs to keep in mind:
- Booking fee: To cover the cost of processing payments, Airbnb charges hosts a 3% service fee, based on the reservation subtotal before fees and taxes, when a reservation is completed.
- Subscription fee: Airbnb doesn’t charge a subscription fee for listing your properties on its site. Other sites, like HomeAway and VRBO.com, do.
- Traveler service fee: Airbnb charges guests a service fee of 6–12% when they complete an online reservation. Travelers see this fee before they confirm the reservation, so factor in the effect it might have on your nightly rate and number of bookings.
- Taxes: You’ll need to work with a tax professional to understand the tax implications of the income you receive from your Airbnb vacation rental. Don’t try to wing it.
- Insurance: You should consult your insurance carrier to see what extra insurance you may need, like liability insurance.
Don’t forget about the costs you’ll incur furnishing, cleaning and maintaining your rental. Tools like this handy Airbnb Host Calculator can help you determine your income potential.
Managing Your Vacation Rental
One of the main advantages of using Airbnb for short-term rentals is that you handle all booking and financial transactions on Airbnb’s secure site.
Still, plan to spend some time and money managing your Airbnb vacation rental to comply with the company’s Hosting Standards. Airbnb guests have come to expect clear, near-real-time communication with their hosts, as well as smooth check-in/check-out processes and clean properties. Meeting these expectations will take time.
Here are some other considerations:
- Bookings: You’ll need to create and manage your listings, which includes deciding your rates, writing appealing descriptions, taking and uploading attractive photos, and managing the calendar. Some Airbnb hosts outsource these tasks (and more) to third-party management services like Guesty or use software like Kigo.
- Safety: It will be your responsibility to make your Airbnb property safe for guests. In addition to completing the online safety card in your listing, you’ll need to supply guests with local emergency numbers. You should also provide a first aid kit as well as functioning smoke alarms, carbon monoxide detector and fire extinguisher.
- Hazards: Plan to walk through your property periodically to identify safety hazards. Removing or minimizing them could incur some costs, especially if you decide to childproof the property. You’ll also need to make sure that your HVAC is always working properly to ensure proper ventilation.
- Neighbors: An unhappy neighbor can ruin your Airbnb listing, so make sure you and your guests know—and comply with—building and parking rules, smoking policies, and noise regulations.
- Permissions: If your vacation rental is part of a planned development, check your homeowners association (HOA) or co-op board regulations (called Covenants, Conditions and Restrictions, or CC&Rs) to make sure you can even sublet in the first place.
- Regulations: Make sure you understand local tax or business license requirements. Look up permits or registrations you may need. You’ll have to factor these into your expenses.
If you’re ready to handle the costs and time requirements of being an Airbnb host—or have the money to pay someone to do it for you—the benefits can extend way beyond the financial. You’ll meet travelers from around the world who are interested in unique travel experiences rather than cookie-cutter hotel experiences.
About the Author:
Cynthia Badiey
Cynthia Badiey is a writer and author who has written about everything from real estate to cloud computing, private aviation and educational technology. She has written blog posts for Ten-X, Auction.com, XOJET, NetSuite and Sun Microsystems. An experienced marketing professional, Badiey is the principal of Comma Writer, LLC, which specializes in content creation and strategy, marketing communications and writing. You can reach her on Twitter at @cynthiabadiey.
