Airbnb is a hugely successful online platform that enables someone to rent out their property – whether it’s a house, an apartment, an empty room, or even something else, anywhere in the world – to others, who become paying guests of the property’s owner.
Because of its undoubted success, Airbnb has become a viable option for those looking for an alternative real estate investment strategy.
Airbnb: The Traveler’s Go-To Digital Marketplace for Accommodation Anywhere
Airbnb has become the go-to digital marketplace for all types of travelers looking for accommodation – anywhere in the world:
- From those going on vacation who are looking for a home-from-home and those who wish to travel longer term, and experience life in another country
- To the traveling businessman who will be temporarily working in another location, or one of the growing number of “digital nomads” looking for the perfect work-life balance
Airbnb provides full, detailed listings of all these properties for their various property owners worldwide, and they provide a simple, secure booking system for any traveler looking to find and book their accommodation.
|Airbnb: Rising Controversy & Rising Profits
|Founded in November 2008 in San Francisco, California by apartment-sharing friends Brian Chesky, Joe Gebbia, and Nathan Blecharczyk, Airbnb has enjoyed unparalleled industry success since its launch – with around 5.6 million listings in 220 countries and regions (as of September 2020). The company name is derived from an abbreviated version of “air bed” and “bed and breakfast.”However, Airbnb, even with its success, has had its critics and more than its fair share of controversy. As complaints have risen, profits have, too. The company recently reported it’s making more money than ever; in the third quarter of 2022, revenue swelled to $2.9 billion, and net profits soared by 46% to $1.2 billion.“Q3 was our biggest and most profitable quarter ever despite geopolitical and macroeconomic headwinds,” stated Airbnb co-founder and CEO Brian Chesky.
Airbnb: The Alternative Real Estate Investment Strategy
Whether you’ve stayed in an Airbnb rental for vacation or have just heard about the lucrative possibilities of using Airbnb as an investment strategy, it can seem a great way to boost your passive income.
Here’s what you need to know:
– Airbnb lets you generate passive income from your home or spare room.
– Renting through Airbnb can be more lucrative than renting to a long-term tenant, depending on your location.
– Your costs may be higher if you rent through Airbnb since you’ll be expected to provide furnishings, keep the place clean, and pay the utilities.
– It may take a while to start earning money from Airbnb since bookings come largely from your reputation as an owner.
– Your monthly income will likely vary more if you rent through Airbnb.
– Risks of hosting include renting your place to rude guests, theft or damaged property, complaints from neighbors, and potential regulatory violations depending on your location.
Airbnb lists an amazingly diversified number of properties – from castles and stately homes right through to treehouses and “yurts” (Mongolian tents)
The Most Frequently Asked Questions (FAQs) about Airbnb
1. Can I Make Good Money Hosting an Airbnb?
Hosting on Airbnb can be a source of good income. However, the amount of profit you can generate by hosting on Airbnb can vary greatly and normally depends on location, property type, and seasonality.
Hosts with desirable properties located in prime areas can make several thousand dollars a month, while others often make much less.
It is important to consider the hosting costs, too, such as cleaning and maintenance expenses, to accurately gauge profitability. Additionally, local regulations and taxes also need to be taken into consideration.
In 2021, the typical U.S. Airbnb Host’s income averaged just over $13,800 (an increase of 85% from 2019).
Airbnb in the U.S.: The Alternative Investment Strategy
|The Most Profitable U.S. States
|The Most Profitable U.S. Annual Dates
4. New York
6. North Carolina
|1. Labor Day Weekend
2. Memorial Day Weekend
3. July 4th
5. October 2nd (Fall Travel)
6. August 2nd (Summer Travel)
|Note: The list of the most profitable states is taken from Airbnb’s data for 2021 and is based on aggregate income. However, Airbnb incomes can vary drastically within each state. The most profitable annual dates again come from Airbnb’s data for 2021 and are based on the highest income-generating dates for that year.
2. Is Airbnb Considered by Industry Experts to be a Sound & Profitable Real Estate Investment Strategy?
Industry experts have differing opinions on the profitability and soundness of investing in Airbnb rental properties. Some experts see it as a lucrative opportunity, especially in high-demand tourist and metropolitan areas where rental income can be substantial.
Others, however, are more cautious, citing the lack of long-term rental security, and the need to continually attract guests as potential risks.
Ultimately, the profitability of an Airbnb investment will depend on several factors, such as the location of the property, the demand for short-term rentals in that area, and the property owner’s ability to manage and market the rental effectively.
In summary, while Airbnb can be a profitable investment strategy for some, it’s not a one-size-fits-all solution, and other real estate investment strategies could fit some client properties better.
3. How Do I Become an Airbnb Host?
Becoming an Airbnb host is a straightforward process involving the following steps:
- Create an Airbnb account: Sign up on Airbnb.com to create a host profile
- List your space: Provide information about the property you want to list, including photos, description, and pricing.
- Set up house rules: Establish rules for your guests, such as check-in/check-out times, smoking policy, etc.
- Get approved: Airbnb will review your listing and approve it once it meets their standards.
- Accept reservations: Start accepting reservations and hosting guests.
- Provide a great experience: Interact with guests, provide a clean and comfortable space, and respond promptly to any questions or concerns.
- Get paid: Airbnb will automatically transfer the payment for each booking to your account.
Bear in mind that there might be local regulations and laws regarding short-term rentals, and it’s essential to check and comply with them before becoming an Airbnb host.
4. How Do I Set the Right Price / Rate for an Airbnb Rental?
Setting the right price for an Airbnb rental can be crucial to the success of your listing. Here are a few steps to help you determine the right price for your property:
- Research the market: Look at similar listings in your area to get an idea of what other hosts are charging.
- Consider the season: Prices tend to fluctuate based on the time of year, so be sure to adjust your rates accordingly.
- Factor in expenses: Take into account the costs of cleaning, utilities, and other expenses when setting your price.
- Use Airbnb’s pricing tools: Airbnb offers pricing tools, such as dynamic pricing, that can automatically adjust your rates based on demand and other factors.
- Test and adjust: Keep an eye on your booking rate and adjust your prices if necessary. It may take some trial and error to find the right price.
Ultimately, the right price will depend on various factors such as the location, size, and amenities of your property, as well as the demand for rentals in your area. It’s important to strike a balance between attracting bookings and earning a profit.
5. How Much Does Airbnb Deduct from My Earnings?
Airbnb will deduct a service fee from your earnings as a host. Under their split-fee structure, Airbnb takes 3% of your earnings, and then charges an additional service fee to your customers.
Alternatively, you can choose to pay between 14% and 16% of your earnings to allow your customers to rent without paying service fees. These fees will vary by location or rental type.
6. What is the Best Way to Counter Potential Risks from Renting to Strangers?
To ensure you are fully covered financially and legally from potential risks as an Airbnb host, you need to speak with your homeowner’s or renter’s insurance company to make sure your policy covers your property, your possessions, and your liability while renting out your place.
As an Airbnb host, you are given Airbnb’s host “guarantee,” which provides up to $1 million in insurance coverage for property damage in the U.S. However, this does not protect against theft or personal liability.
Therefore, it’s best to see if you do need extra coverage, and an umbrella policy might be your best solution.
7. Is it possible for a guest to “crash and dash” – to stay overnight without paying you?
Guests pay you through Airbnb, and as long as there are no problems, they will release your payment within 24 hours of your guest’s arrival. You should then receive it within one business day if you choose to get paid via PayPal or Payoneer prepaid debit card or within a few days for a bank transfer.
Better Off Home Buyers: Real Estate Solutions
Airbnb and other short-term rental platforms can be very lucrative, especially if you are patient and willing to do the necessary work to attract a continuous stream of paying guests to rent your property.
However, your operating costs may well prove to be higher than for a traditional rental property, and regulations have made investing in Airbnb problematic or even illegal in many places. It is advisable then to do your homework before taking the plunge into Airbnb investing.