Should You Become An Airbnb Host?

should you become an airbnb host

This is the first post of a six-part series.

This post is a long time coming. I’ve been getting an increasing number of website chats, social media messages, and emails from future potential hosts…FPH’s…?

 

Well, first things first, let’s define ‘host’. A host is how Airbnb describes someone who has available space (room, couch, house, mansion, boat, island, anything) to rent out on a short-term basis.

 

In this article, I will briefly touch on things that you may not have thought of if either you’re totally unfamiliar with renting property or you rent property on a long-term basis (typically this means yearly rental contracts).

 

Note to existing readers of my blog: You are likely an existing and intermediate or advanced host so you can skip this blog post.

 

Related blog: How Safe is Airbnb?

 

Do you have what it takes to be an Airbnb host? You do if you can get through this. Click To Tweet

 

What Is Airbnb?

 

First, you need to know what Airbnb is. It’s an online platform that connects buyers and sellers.

 

The buyers are people looking to rent space on a short-term basis. They do not have to be tourists. They can be your neighbor who has repairs on his house, going through a divorce, or for their parents coming to town (I have accepted reservations from all plus many more).

 

Sellers are owners of space interested in renting on a short term basis of typically 2-7 days.

 

I say “space” because you can rent out a floor mattress, a shared or private bedroom, an entire house, a treehouse, private island, boat, anything…

 

Sign up for Airbnb now and receive a $50 credit towards your first reservation. And, you should stay at least once as a guest if you decide to become a host.

 

Airbnb is a platform connecting renters of 'space' with owners of 'space', or houses, boats, islands, tree houses, rooms, etc. Click To Tweet

 

Summary Of This Article

 

I am assuming you are either unfamiliar with renting or you have only rented on a long-term (yearly) basis in the past. I am also assuming that IF you decide to be an Airbnb host, that you want to be one of the best in your market which means you want to make the most money.

 

What that means is while some of the below is optional, it all will be required if you want to be the best host and fully capitalize on the additional profit from renting on a short-term basis.

 

That point is very important so it gets another paragraph. The following article is exhaustive. You will not know everything I’m talking about. You may feel overwhelmed. This article is not to convince you to be an Airbnb host. It’s to weed out those who are unfit. There are plenty of crappy Airbnb hosts already. I would know, I’ve slept more than 700 nights in Airbnbs around the world in 30 countries (as of June 2019).

 

This article will help you decide if renting your space on a short-term basis makes sense for you and your situation.

 

I will explain what it means to be an Airbnb host and what you can expect, both the positive and the negatives.

 

There are issues you need to consider that are specific to short-term renting like the legalities, if it’s allowed in your building or city, tax issues, security deposit issues, cleanings, etc.

 

But in the end, it will all come down to these two questions:

 

  1. How risk averse are you? Income is not consistent on a monthly basis and many strangers will enter your home.
  2. How hands off do you want to be? Some people actually want to interact with the guests while others want to be totally hands off. In a later post, I will discuss whether or not you want a property management company and how to identify a good one.

 

 

If you're an Airbnb host, you are a small business owner. Click To Tweet

 

Differences Between Long- And Short-Term Renting

Monthly Income

The amount of income will be wildly different from month to month. You will be susceptible to slow and busy seasons.

 

In slow seasons you will charge 50% of the nightly rate you would in busy seasons and your occupancy will be somewhere between 50-70%. In slow seasons you may make less than you would on a traditional rental, but in busy months, you will make 200-300% more than you would on a long-term rental. I’ve even seen 500% variances from traditional rentals.

 

It's not uncommon to earn 500% more via renting your home on Airbnb than renting it the traditional way. Click To Tweet

 

Furnished Space And Amenities

Airbnbs are furnished. You can go budget or luxury, but you must furnish plus some. Iron, face towels, dish soap, slippers, black-out curtains, blender, etc. Some are optional, but this is a huge difference between long-term rentals. Many hosts even purchase a Netflix subscription for their guests.

 

I have created a full list of amenities you’ll want to supply based on your listing quality.

 

More Costs

You have to spend money to make money is no truer than here. Along with the 2-5x more income are more expenses. You will have linens expenses when the guest damages a towel, if you have a faulty water heater it must be repaired, consumables (paper towels, soaps, etc.) need to be replenished, a monthly Netflix subscription to increase guest satisfaction, amenities like bed lamps with USB plugs to charge your guests phone.

 

Occupancy

While occupancy is mostly a non-issue on traditional, 12-month rentals, it is a constant issue for short-term rentals. You need to monitor your occupancy. The 2-5x more you make doesn’t come for free. On average, reservations are 3.5 days.

 

Calendar and Nightly Rate Management

As reservations are on average 3.5 days, you need to manage your calendar and occupancy to ensure you are covered for future months.

 

The best practice is to connect to a third-party pricing partner who will automatically update your calendar prices. When events come to town, you’ll need to take that into account and adjust your nightly rate or minimum nightly stay.

 

More Like A Business

If you haven’t guessed by the last few points, you will need to be entrepreneurial.

 

If you are an Airbnb host, you are a small business owner. You need to manage your income (nightly rates and occupancy) and expenses (we will get to this later). You will need to develop processes and leverage tools.

 

The good news is that you already found my blog and next you should check out my YouTube channel. Ultimately, you will have to make business decisions. “Should I invest in X?”

 

Advertising

Related to the above, you are now a marketer. You need to create a listing on Airbnb (this is what we call an online advertisement, here is a prior Airbnb listing of mine), get familiar with the system, and keep it optimized to properly sell your space.

 

Customer Service

Your FPG (future potential guest) needs someone to get a hold of at all time. This includes at 2am on Saturday.

 

If you are doing things right, this should very rarely if ever happen. If the electricity goes out, you need to get that fixed asap. Same with the internet, hot water, heat, anything. When the guest leaves and forgets their favorite t-shirt, you’ll have to ship it to them.

 

Being an Airbnb host means being a customer service wizard. You have to deal with the guests, maintenance staff, cleaners, etc. Click To Tweet

 

Exploding Heads

When a guest calls you to tell you the internet doesn’t work and you get the internet company over there asap only for them to tell you that it just needed to be plugged in..

When the guest tells you the electronic door pad doesn’t work so you rush over only to find out the guest typed the code incorrectly..

When the guest says the shower drain is totally clogged and the plumber tells you that the drain was simply covered in hair, probably from one of the guests shaving in the shower..

These situations occur on a regular basis. You will have to know how to troubleshoot (Is the power on for the router? Tell me what code you typed in? Can you check the drain for anything visible sticking up?).

 

You can hire a property management company to field all the customer service, or you can figure things out for yourself. These issues will decrease as you learn how, what, and when to communicate information to your guest.

 

Cleaning

You will be responsible to clean your Airbnb after each reservation and before the next.

 

The normal check-out time is 10-11am and the normal check-in time is 3-4pm. This gives you or your cleaners about 5 hours to clean your Airbnb. The guest pays the cleaning fee.

 

This is going to be one of the hardest things to figure out and is the most common complaint of Airbnb guests. Your cleanliness standard will rise significantly after being an Airbnb host.

 

Online Reputation

You now have reviews to maintain. Each guest gets to review your space and their experience. There are no slum lords on Airbnb. Each guest will rate you from 1-5 stars and even one, four-star review is a killer and to be avoided at all costs.

 

There are no slum lords on Airbnb. Click To Tweet

 

Security Deposit

While you can charge a security deposit, it really matters little as you have to go through the same process with Airbnb to make a claim.

 

If the guest agrees with you, it’s rather simple to charge them extra. But, if the guest disagrees, you have to provide support and get Airbnb involved who will make the final decision which does not always go the way of the host even with solid evidence.

 

I had a guest smash the side of my garage and I took pictures noting the scratches in the same area of the car, but ultimately got denied by Airbnb…

 

Insurance

…for these situations you will want additional short-term rental insurance.

 

Hosting

You are now responsible for each guest stay in your city. Do you take control of this important aspect by provided solid recommendations? Or not? This is one of the many things that separate the excellent hosts from the mediocre ones who complain about low occupancy.

 

Increased Involvement

Unless you either have a troublesome long-term tenant or hire a good vacation rental property management company, you can expect to more actively manage your Airbnb including sending messages to FPGs.

 

With my Elevate Host system which leverages tools to automate everything, you will work about one hour per listing per week.

 

Refunds

Issues happen. When they do, you will offer a refund. You can easily do this through the application.

 

 

Positives of Short-Term Renting

Less Wear And Tear

That’s right. While long-term tenants probably use the kitchen and spend more time inside, a short-term renter is only in your city for a few days and is likely to eat out and spend a lot of time outside, thus only using your bathroom and bedrooms.

 

Yes, some guests cook, but overall, there will be fewer footsteps in your house and fewer amenities used. Additionally, you will be cleaning 3-4x per month. Your home will permanently be in sellable condition.

 

Contrary to popular belief, renting on Airbnb results in LESS wear and tear. Click To Tweet

 

Higher Market Value

Absolutely. If you rent your home out on a short-term basis, you can sell for a higher price when that time comes as long as you kept good records of your income and expenses.

 

Flexible Use Of Property

Unlike long-term rentals, you can now block off your calendar when you want to use your space. And, it will likely be a beautiful space, one you can subtly brag to your friends and family about.

 

No More Renter Rights

Many cities create unreasonable tenant rights (looking at you San Francisco, though they’re hardly alone) which makes it near impossible and expensive to remove your existing tenant.

 

I know one person in San Francisco who was living in a 5-bedroom home in a desirable area for $800 per month because her grandparents lived there and the law says the landlord can only increase rent 1-2% per year. Market value on this home assuming it was in good condition would be $6,500+ per month.

 

What’s worse is the house was a piece of sh*t. The tenants didn’t want to invest much in improving the space as they did not own and neither did the landlord for obvious reasons.

 

With short-term rentals, something to be aware of is squatter rights. Sometimes if a guest stays in the home for 30 days, they get tenant rights, can stop paying rent, and have you spend time (usually 3-6 months) and money to evict them. This is a rare case and only in cities which seem to not yet have it figured out (…San Francisco…).

 

Income

As mentioned above, you will make a lot more money, if you are a good host (we will get into this below).

 

The best hosts make 500% more than they would with a traditional rental. In numbers that means if you rented your space for $1,000 per month, or $12,000 per year with a 12-month contract, you could earn $5,000 per month, or $60,000 per year with an Airbnb rental.

 

Meet People Across the Globe

This is more applicable to hosts who will rent out a room in their home, but you can also opt to meet your guests upon check-in.

 

As an Airbnb guest, I have met many of the hosts even though I am renting entire homes. When I was the host of my couch in San Francisco, I met hundreds of people from numerous countries. You feel like you’re traveling in your own city!

 

The couch I rented out in my living room for almost three years while living in San Francisco

 

 

Becoming An Entrepreneur

As touched on above, if you’re an Airbnb host, you can be as entrepreneurial as you want. You know inside you were always an entrepreneur, so give it a try! Many people even quit their day jobs after a year of successful renting.

 

Be Part Of A New Community

Search ‘Airbnb [your city]’ and I bet a few facebook groups or meetups come up. If not, why not create one because I know there are other hosts already in your city. Airbnb is virtually in every city across the globe, more than 35,000 of them. Additionally, Airbnb throws events on an occasional basis.

 

 

Negatives Of Short-Term Renting

Guest Issues

You will have to deal with your guests. There will be issues. If done correctly, you can optimize your home and processes so this aspect is limited. But in the beginning, especially, you will have to work out all these issues that are bound to arise.

 

For example, to open your front door, is there a little wiggle you have to do to the knob? Or a specific area on the faucet you need to get to for hot water in the shower? All of these quarks turn into complaining guests and will need to be addressed and fixed.

 

Emergency Situations

Occasionally (like once or twice per year) you will have an emergency situation with your guest that needs to be addressed. One of the houses I managed years ago had a minor explosion in the firepit causing the tempered glass above it to shatter. This is an emergency situation that needed to be dealt with real time. You need a plan for this in advance.

 

More Time Committed

This is offset with the more money you will earn, but overall and unless you have a bothersome long-term tenant, short-term renting does require more of your time. After all, you’re now a small business owner.

 

Increased Stress

You have more things to manage, like your calendar, the guest expectations, etc. This can cause a lot of added stress if you don’t know how to manage it.

 

Laws

Your city may have laws that make it impossible or unprofitable to rent on a short-term basis.

 

Neighbor Relations

Unfortunately, we will in a world where you don’t know your neighbor even if they share a wall with you.

 

If you don’t know your neighbor, more than their name, go over right now with an offering (wine, baked good, anything), give it to them, and ask if you can meet them for a coffee this week. Do this regardless of whether or not you will be an Airbnb host.

 

If you decide to be an Airbnb host, you can and should tell your neighbors. If you’re on good relations with them, you can even ask them to keep an eye on your home.

 

But, there will be some disorderly guests who create excess noise. Better than a long-term tenant who throws parties every other weekend, right?

Again, there are tools to mitigate this risk.

 

Check out my review of Noise Aware and Party Squasher which are two companies who monitor the noise level in your Airbnb.

 

If you don't already know your neighbor, get on it! It's good for society, good for Airbnb hosting. Click To Tweet

 

Other Things To Consider When Short-Term Renting

Legalities

What if the guest breaks their arm on your property, does your current insurance over that? Should you create a separate company for your hosting activities to protect your assets?

 

Digital Locks

You will want to install a digital lock after the guest loses the keys on a Friday night at 11 pm and can’t get back in. Ultimately, this makes your life easier and improves the guest experience.

 

Taxes

Taxes are different based on different sources of income. Talk with your accountant about any potential effects and how to optimize them.

 

HOA

While your city may allow you to rent on a short-term basis, your building may prevent it. They may even fine you for this activity.

 

Security

Theft and robbery occur regardless of who you’re renting to. In fact, a thief may even target your home more than a longer-term tenant. Your guest could be a thief, but of course, there are ways to filter out bad Airbnb guests. What about your cleaners? Have you vetted them? After all, they have access to your home.

 

Ultimately, How Do You Decide To Be An Airbnb Host?

Did I scare you? If you happen to still be reading this mini-book, then I’m glad. Let me know what you thought in the comments.

 

Some people are just not good hosts just as some people are just not good at math. That’s just how it is. In fact, I routinely decline to help existing hosts because after a discussion I can tell that they do not have the proper mindset to be a good Airbnb host and my limited time is better spent on hosts who I can help.

 

It’s subjective, but answer these questions after you’ve read the above to find out:

 

  • Are you ok making $500 one month and $2000 the next?
  • Do you have the ability to think like a business person? Are you going to invest today (for example, in luxury towels) for a return tomorrow (in terms of positive reviews)?
  • Do you have the time, especially now when you just start, to more actively manage your Airbnb rental, the guest requests, messaging, dealing with issues, monitoring your calendar and pricing, repairs and maintenance, etc?

 

 

Not everyone has what it takes to be an Airbnb host, but I do. Do you? Click To Tweet

 

 

If you have the right mindset, are not risk-averse, are entrepreneurial, and have the time to actively manage your Airbnb, then I think you’d be a good Airbnb host and fully support your decision.

 

But, you have to think long and hard about your ability to be a host. If you make the wrong decision, you will end up spending more time to make less money.

 

Do you have what it takes?

 

If you think you do, my next article will be about how to get started on Airbnb from signing up, creating an optimized listing, leveraging tools, managing guest expectations, and how to prepare your space.

 

I found a comprehensive guide for interested homeowners who considering Airbnb. Click To Tweet

 

Next: How To Get Started On Airbnb, Part I of II

I'm Danny, the Airbnb expert

About Danny Rusteen:

Starting in 2012, Danny has been an Airbnb employee, Superhost, and Airbnb property manager. Danny lives in Airbnbs (600 nights). As a guest, Danny has traveled to 29 countries and sifted through thousands of Airbnb listings, so he knows what makes a listing stand out and how to offer a world-class experience to your guest. Follow his journey.