Renting your house or room on Airbnb is a fantastic way to build wealth with the property you already own, and in some situations it can be worth purchasing property specifically for the purpose of starting a short-term rental business.
That’s exactly what I did. And so far, the results have been better than I expected.
In this beginner’s guide on how to start an Airbnb business, I’ll cover everything you need to know about becoming an Airbnb host, and share some insights based on my experience so far.
In this article I’ll go over…
- Why I decided to become an Airbnb host
- Questions to ask yourself before listing your space on Airbnb
- Keys steps for success as a new Airbnb host
- Pro tips for new Airbnb hosts
- The unexpected perks of running an Airbnb business
- My Airbnb hosting experience
My Story Of Getting Started As An Airbnb Host
The beginnings of my Airbnb business started when I worked the night shift at the local motel. The complaints about the place were many: the walls were paper thin, you couldn’t adjust the temperature of each room individually, they didn’t allow pets (even service animals), and so on.
Yet the place stayed consistently full, and even had a waiting list at peak times of the year. (In our tiny town, this meant around the rodeo and hunting season.) This clued me in to an unmet short-term housing need in my area.
Why I Decided to Become an Airbnb Host
My husband and I thought long and hard about whether to buy a property to rent out on Airbnb. His job comes with housing, so as renters, we couldn’t do anything with our primary residence.
We live in a tiny town in rural Texas. And by “tiny,” I mean one stoplight and more cows than people.
The fact that we’re so far away from a major city made us nervous about the prospect of investing in a rental property. Was there really enough demand to justify an Airbnb? I had an inkling based on my motel experience, but I wasn’t sure.
So we used an Airbnb profit potential spreadsheet and ran the numbers. We plotted out how much it would cost to buy the house and furnish it with everything a rental would need. Then we forecasted our monthly expenses to see how many bookings we would need to cover them.
We figured out that if we could keep our Airbnb occupied for an average of four nights each month (charging what the local motel charged), we would break even.
We were fairly confident we would be fully-booked during the fall for hunting season, so even if the place sat empty for much of the rest of the time, we would be safe.
With this knowledge, we took the leap and bought the house.
My Property
We bought our friend’s house when he moved. It’s not fancy, but the people in our market are mostly utility workers, hunters, cowboys and other working-class folks; they aren’t looking for the Ritz Carlton — just a clean place to crash.
Our house has two bedrooms and one bathroom, as well as a fenced backyard for visitors’ dogs. We decided to make our place pet-friendly, as we knew we could capitalize on the people with animals that the local motel turned away.
Even if you don’t have a whole house to rent, there’s still plenty of opportunity with short-term rentals on Airbnb. One local woman in my town rents out her camper. Glamping sites — camp tents with a luxury cot or mattress — are becoming more and more popular. A friend of mine remodeled a backyard shed into an efficiency apartment, which now makes enough to cover his mortgage.
Questions to Ask Yourself Before Listing Your Space
Before listing your space as a short-term rental, it’s a good idea to do some soul-searching. Airbnb is an ongoing commitment, and you’ll want to know what you’re getting into before you start this kind of business.
Here are a few helpful things to ask yourself:
- What are your goals in becoming an Airbnb host? Do you want to meet new people from other places? Make a little extra cash? Start a short-term rental empire? Your goals will determine everything from your pricing to the amenities you offer your guests, so get clear on what you want from the experience.
- How much time and money are you willing and able to invest? Like any business, an Airbnb rental requires upstart capital. Furnishing a place costs a surprising amount, and there will be ongoing costs your business will need to cover, such as property taxes and utilities. Moreover, you’ll have to clean the unit between each guest or hire someone else to do so. Make sure you have the time for this (or the time to manage it) before you commit.
- What are the local and state laws and regulations regarding short-term rentals? More and more cities are regulating or even prohibiting short-term rentals, so check your city ordinances and/or HOA to make sure your Airbnb won’t have to shut down before the first guest arrives.
- What type and amount of insurance do you need? Airbnb offers some coverage for damage done by guests, but the general consensus among experienced hosts is to get homeowner’s insurance that is specifically designed for an Airbnb. (We use Proper Insurance.) Normal homeowner’s insurance may not cover you if you rent out your place.
- Are you willing to share this space with strangers? Whether or not you live in the space you’re renting, some people are unsettled by the thought of having perfect strangers in their home — particularly if they have children. If the thought of someone else touching your stuff makes your skin crawl, you should probably look into a different type of business.
- Do you have enough financial cushion to weather a dry spell? Many Airbnb locations (beach houses, mountain cabins, glamp sites, etc.) are seasonal. Your financial position should allow you to stomach a couple of months with few or no bookings without going broke.
Seven Keys to Success as a New Airbnb Host
If you want to know how to be the perfect Airbnb host, the key is to do a lot of research and prep work beforehand. Here are six items to take care of before your listing goes live to ensure you hit the ground running.
1. Know Your Market
Whether you’re renting out a shed in your backyard or buying a home to rent in a distant city, it’s crucial to know a decent amount about the geographic location of your Airbnb, as well as the demographic that will be using it.
My humble two-bedroom home is just what hunters and cowboys in rural Texas expect. It’s comfy and clean, but it’s sparsely decorated and has just the basics. But I’d get raked over the coals if I tried to offer the same caliber of experience in a luxury resort town.
It’s also important to know about your market’s competition. How many other Airbnbs and hotels are in that region? Are they the same size and/or price point as the one you’re offering? If the market has a lot of competition, that isn’t necessarily a red flag as long as you can offer something the others don’t.
For instance, if every place in town is a $300-per-night bunkhouse that sleeps 12 people, you can fill a potential hole in the market by offering a simple one-bedroom efficiency for $70 per night.
It’s also important to know what’s drawing people to your area. Be aware of major attractions and events in the area, such as festivals, music competitions, state parks, car shows, theatrical performances, races, sporting events and so on. You can optimize your pricing and give your guests a more catered experience if you know why they’re coming to stay at your place.
This information is also crucial in predicting the peaks and troughs in your bookings.
2. Run the Numbers
You’ll need to forecast what you’ll spend to acquire your Airbnb space (unless you’re renting out a room you already have), as well as what you’ll spend fixing it up and decking it out.
Then, add up what ongoing costs your Airbnb business will incur. When you crunch the numbers, you’ll need to include the following expenses in your estimates:
- Property taxes.
- Occupancy or hotel taxes (Airbnb does this for you).
- Utilities, including internet and/or cable.
- Replacing furnishings that guests steal or break (stained towels, broken plates, etc.).
- Services like lawn care and pest control.
- Cleaning.
You’ll also have to predict how much income your property will generate in order to determine if renting your place on Airbnb is worthwhile.
When you estimate your income, do so assuming a lower occupancy rate than you think you’ll have.
Be prepared to give a few refunds, as not every stay will work out. Determine how many nights will cover your expenses, then check out the data on Airbnb occupancy rates in your area.
3. Recognize That You’re Entering a Hospitality Business, Not a Real Estate Investment
If you think that Airbnb will be a cinch because you’ve been a landlord of a long-term rental before, think again. I’ve done both, and Airbnb is a completely different animal.
I’d hesitate to even call Airbnb a real estate investment. It’s more like a hospitality business because there’s much more time, effort and attention involved.
With Airbnb, the details matter because you’re rated on every stay. And you have to compete with other listings for every guest; you don’t have the security of a 12-month lease.
So the quality of the furnishings matters. Cleanliness matters. Spare toothbrushes and K-cups matter. All these are more scrutinized than they would be if you were just renting out the place via a standard lease.
Of course, the profit margins have much more upside with Airbnb than with long-term rentals — but you’ll put in significantly more effort to get those margins.
4. Learn From the Pros, Then Do Your Own Thing
I’ve gotten some immensely valuable ideas and advice by connecting with other hosts on social media. Facebook Groups are especially useful to collaborate and get great tips, especially with how to handle problem guests.
However, know that every host will be scarred by their own horror stories, most of which will never happen to your place. So take the advice of the masses, but do so with a grain of salt.
5. Don’t Get Paralyzed by Perfectionism
You have to start before things are perfect. Our Airbnb still isn’t perfect, and we’ve been running the place for a few months now.
We still don’t have a towel rack in the bathroom, and we desperately need some more decor and silverware. But if we would have waited until everything was perfect, we’d be depriving ourselves and our guests of a great experience.
Eventually, you just have to start. Don’t be afraid to let your first few guests know that you’re new at this, but you want them to have the best stay possible.
Ask your guests for advice. What things is your place missing? Was there anything that bothered them?
If you’re upfront about being a newbie, people will usually cut you some slack and offer helpful suggestions.
6. Understand the Mindset of an Airbnb Guest
If you’ve never stayed in a short-term rental prior to starting an Airbnb business, I highly recommend it. This will help you experience firsthand what matters to a guest.
I stayed in one place that had abysmal mattresses; I stayed in another that had a fully equipped kitchen with plenty of cooking utensils and pots so we could make our own meals.
This information (as well as the frequent complaints at my hotel job) let me know what parts of my Airbnb rental would be important to my guests, and thus worth spending time and money on.
For example, I splurged on quality sheets and mattresses, put a full set of pots and pans in the kitchen, and skimped a little on the decor. I also knew that many of my guests would be bringing hunting dogs, so we fenced in the backyard.
Understanding and managing the expectations of your customers is key to creating a fabulous guest experience.
7. Learn How to Optimize Your Listing
Photos are extremely important for selling your place — especially if you’re competing in a saturated market. More pictures is nearly always better. Take them in plenty of natural light, and get the rooms from multiple angles.
Don’t forget to include any vistas you can see from the windows!
If you have a higher-end rental, consider hiring a real estate photographer to take pictures of your place.
Additionally, the Airbnb website has an onerous list of amenities that your place can offer — baby crib, board games, bicycles, hair dryer, hot tub and many, many more. It may be tempting to skip over filling out this section, but don’t. Add every single amenity your rental offers.
Remember, Airbnb is a mini search engine, and guests can filter the results they get by the features they want. Use keywords that your guests would use to find a place like yours in the title and description of your listing, such as “mountain cabin,” “beachfront,” “modern,” or “farmhouse.”
Pro Tips For New Airbnb Hosts
Based on my experience, being a good Airbnb host is really just following the Golden Rule: treat others the way you’d want to be treated.
Beyond that guiding star, here are a few tactical things you can do to optimize your Airbnb business.
- Furnish with used stuff. Your furniture, linens, pans and silverware are only new for the first guest. After that, everything is used anyway. So don’t shy away from great bargains on lightly used furnishings from Craigslist, Facebook Marketplace or your local thrift store.
- Spend money where it counts. People won’t complain much if your cups don’t match or your light fixture is a bit dated. They will complain if the mattress is lumpy or the front door won’t lock.
- Advertise outside Airbnb. Many of our listings now come from people around town who have family coming in, and local businesses that are bringing in clients to stay for short periods of time. Networking is key in an Airbnb business too!
- Use multiple platforms. Airbnb definitely has the biggest mindshare in short-term rentals, but they’re not the only player. Use all the platforms you can advertise on for maximum exposure, including VRBO, Vacasa, Furnished Finder and Flipkey. Be sure to sync your calendars so you don’t double-book across platforms.
- Consider multiple-night minimums for busy weekends. We learned this the hard way when someone snagged a single Saturday in the middle of rodeo weekend. We had to turn down multiple three-night stays because we forgot to set a minimum during that peak time.
- Don’t forget to track your expenses for tax optimization! The cell phone and internet usage to communicate with guests as well as the mileage you drive when you clean the unit are tax deductible, so don’t let those savings slip away. I use the Everlance app to track my mileage and business expenses, and it’s been fabulous.
Unexpected Perks of Operating an Airbnb
Perk #1: Tax Breaks
Every time I run to town to clean, furnish or just check on our Airbnb, the drive is tax deductible. I stack this with other errands, so a bunch of my fuel costs are now tax deductible!
Perk #2: The Ability to Help Those In Need
We get a lot of severe weather in Texas. In the short three months we’ve been renting the place, we’ve been able to offer help to two sets of fire victims, along with one family who was living in a camper during a winter storm. It’s been a blessing to be able to help people out with a place to stay.
Perk #3: Having a Place for Friends and Family to Crash
It gets a little cramped to host house guests for a few days, but you can extend the visit by offering your friends or family the privacy of their own place! Just be sure to block out the dates when you want personal use of your rental.
Perk #4: Access to a Source of Passive(ish) Income
Right now, I’m cleaning my own Airbnb property, but I’m hoping to outsource that very soon. Once I do, I’ll only spend a few hours a month communicating with guests and arranging bookings. The income isn’t completely passive, but it comes close once you have systems in place.
Related: Learn about other passive income business ideas.
My Airbnb Hosting Experience So Far
I’m happy to report that my Airbnb experience has exceeded my cautiously optimistic expectations. Even in our first month, we surpassed the four nights we needed to cover our costs. And we now have the place booked out for most of this summer!
And despite all the disasters I’ve read about online from other Airbnb hosts, my guests have been model citizens thus far (even the furry ones).
We have even gotten more requests than our one property can accommodate. So we’re hoping to create another very similar rental in a neighboring town: a two-bedroom place at a low price point to attract budget-conscious visitors.
Hosting Challenges I’ve Faced
The main challenge I’ve had has been making time for cleaning. Because our Airbnb is in such a small town, we don’t have a deep pool of reliable cleaners to choose from. So I’ve been taking this task on myself. That works for one Airbnb unit (though it gets old fast). But I know if I ever want more than one property, I’ll have to hire help.
We also ran into one guest that was turned off not by our property but by the property next door. Most houses in our tiny town are in need of a lot of TLC and are a bit run down, and the houses next to ours are no exception.
Local residents expect this, but people passing through can see it as unsafe or sketchy. In spite of the automatic deadbolt locks and the prison guard that lives two doors down, our guest viewed our place as unsafe and asked for a refund.
This has been my only dissatisfied customer to date, however — and my only regret is that we didn’t start this Airbnb business sooner.
