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How To Make Money With Airbnb – The Complete Guide

If you’ve made travel plans in the last few years and were looking into places to say besides hotels, then chances are you’ve come across Airbnb. Ever since it launched, Airbnb has exploded in popularity. It’s been reported that they have approximately 150 million users covering more than 81,000 cities, with over five million Airbnb listings available at any given time.

But here’s the thing – they don’t own any properties! So to generate revenue, the Airbnb business relies on people just like you, who are willing to put up their place for rent as Airbnb hosts. When done correctly, that could mean a great opportunity for passive income!

In this post, we’ll explore exactly how to make money with Airbnb as a host, what expenses you should expect to pay, and how you can maximize your returns.

1br airbnb property

What Is Airbnb?

Airbnb is an online peer-to-peer, short-term rental service that connects travelers and hosts. Originally called “Airbed & Breakfast”, the company is now worth more than Hyatt Hotels with a valuation of about $18 billion.

Most travelers who use Airbnb are looking for less expensive and sometimes more personable touches than the scripted, standard offerings you’ll find from a traditional hotel chain. That means if you don’t use your residence all of the time, own additional properties, or just simply have a spare bedroom that no one ever uses, then you’ve got the potential to earn some extra money with Airbnb rental!

sofa set in an airbnb place

How Do You Make Money With Airbnb? 

Whether you’re thinking of hosting guests on the same property where you live or on a rental property, below are ways to make money with Airbnb rentals.

Host Service Fees

To make money through Airbnb, you have to become what’s called a “host.” This simply means that you have a room or property that you would like to offer people to rent.

It’s up to you what you want to charge. However, unless you’re savvy to the latest travel deals and comps in your area, you can rely on Airbnb’s Smart Pricing tool, which automatically adjusts your price based on local demand.

However, before you join the world of Airbnb hosts, you should check your local laws, especially local taxes. In the United States, money made from real estate like Airbnb listings is subject to taxation. So even when the Airbnb rental belongs to a non-US tax resident, the law is the same.

Furthermore, find out if you need a business license before starting your Airbnb business. Do this even if you’re only renting out a spare room.

Extras

Just like hotels and vacation rentals, as an Airbnb host, you can set additional fees upfront for things like:

  • Late check-in
  • Pets
  • House cleaning
  • Parking
  • Extra guests
  • Etc.  

If you have other unique amenities or want to provide other services, you can do that too. For example, if you live near a lake and have a paddleboat, you could list this as an extra charge for guests to use.

Since this is your personal property, it’s also a good idea to require an up-front security deposit. As long as it is refundable, most people will have no problem paying it.

Payments

One of the nice things about the Airbnb business is that you never handle any money directly with the travelers. Instead, all transactions occur through their platform, so you never have to get your hands dirty.

According to Airbnb’s site, payment is released about 24 hours after the guest’s scheduled check-in. If you’re a new Airbnb host, they may also have a few additional holding periods so that they can ensure that everything goes smoothly.

earning money on airbnb

What Are Your Airbnb Expenses? 

Airbnb vacation rental is not only about making money; there are some expenses to consider. Below we discuss different costs.

Airbnb Fees

To make the most of the Airbnb platform, you need to understand Airbnb payment guarantees.

Like most other peer-to-peer platforms, there’s nothing up-front to pay until a deal is made. Airbnb doesn’t charge any fees to list your property or force you into some kind of hidden paid membership arrangement. Once someone books your rental property, Airbnb will charge you a modest 3-5 percent hosting fee.

That’s pretty competitive when you compare it to Homeaway who charges 5 percent, and Booking.com who charges 15-20 percent. It’s also well worth the money considering they handle all of the advertising and facilitate all financial transactions.

expenses in airbnb

Insurance

As part of their service, Airbnb covers every booking with $1 million in property damage protection and another $1 million for liability insurance against accidents.

While that’s a nice benefit, it should not be taken as a substitute for your own homeowner’s or renter’s insurance or protection against theft or personal liability. Check with your insurance provider to see what they can offer to ensure you’ve got 100 percent coverage. They may just recommend that you get an umbrella policy.

Income Taxes

Airbnb rentals may not be a full-time job, but anytime you earn any income, the IRS will want to know about it. Therefore, be sure to keep detailed, written records of your Airbnb income. 

Generally, extra income is reported to the IRS using form 1099. You might also be able to deduct your cleaning fees and insurance as business expenses, reducing your taxable income. Talk with a tax professional to make sure you’ve got all of your bases covered.

How Do You Increase Airbnb Revenue?

In case you’ve been wondering how other hosts on the Airbnb platform have increased their income, wonder no more. Below, we share ways you can increase your revenue.

Create An Irresistible Listing 

Airbnb advertises to millions of travelers every single day. If you want your listing to stand out among the rest, then you’re going to need to put some effort into it.

Start by writing an enticing headline. This is the first thing potential guests will see when browsing other listings in your area. In addition, write an alluring but honest description of the property and include what your Airbnb offers. 

Follow this up with lots of great, bright photos showing a clean and inviting space.

Set the Right Price

While you can rely on Airbnb to help you determine what price you should set, it wouldn’t be a bad idea for you to do a little market research yourself. Try looking through other sites similar to Airbnb and see the prices other hosts are offering for similar spaces. You can get a real estate agent to help you with this.

You might decide that you’d like to take a more competitive approach than Airbnb suggests and offer a slightly lower price. Though you might not make as much money per night, this strategy could help to increase your occupancy rate.

Additionally, if you know of special events coming to your area (like a sporting event, concert, or popular convention) and you believe you could set the bar higher, then don’t be afraid to set custom prices for these premium times.

Set Expectations

The last thing you want is to pay for something your guests either damaged or weren’t aware they shouldn’t do (like throwing a huge party). Be transparent about your expectations and set clear written house rules.

Go the Extra Mile for Positive Ratings

Nothing helps boost your listing and drive more sales your way, like the credibility of 5-star reviews.  

To get those, you’re going to need to earn them. Start by being friendly and responsive to each of your guests. Always make sure the space is spotless and go one step above by leaving personal touches for your guests. 

This could be something as simple as local restaurant recommendations or a list of events going on that week. A positive review can make you an Airbnb superhost. In addition, for every year you retain your superhost status, Airbnb gives you a $100 coupon.

Other Important Considerations

Below are other things to consider for an Airbnb rental business.

Permissions

As a property owner, before listing your place on Airbnb, you’ll first want to make sure that it’s okay for you to do so. For example, if you live in a neighborhood with a homeowners’ association, then you might be required by their bylaws to get their written authorization.  

If you rent your space, you’ll want to get your landlord’s blessing first since, legally, they are responsible for everything that happens on the property.

Taxes

If your local area generally charges taxes for short-term rentals (such as a transient occupancy tax), then this is something you’ll want to be aware of up-front. Otherwise, it can eat into your profits. But, again, you should check with your local government to be sure.

Just like a hotel, you can usually pass this expense on to your guests. This can be done on Airbnb as an additional item under Special Offers.

Conclusion

In the end, making money as an Airbnb host or increasing your income boils down to ensuring your guests have the best experience on your property. Also, familiarize yourself with Airbnb policies and local tax laws. This way, when you make money on Airbnb, it stays in your pocket.

DJ Whiteside

DJ Whiteside is a financial enthusiast who believes in helping other people to achieve financial independence. He’s constantly looking for practical ways to optimize savings, reduce spending, and create a lifetime of passive income. DJ holds an MBA from the University of Michigan, which allows him to take an analytical approach to financial topics. He has been a financial writer since 2011 and has self-published 5 personal finance eBooks relating to saving, retirement, and financial independence.

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