The Investors Blog/Tips/How To Make Money With AirBnB

How To Make Money With AirBnB

Wednesday, February 22, 2023

One of the best ways to quickly generate cashflow in real estate without all the headaches and hassles is to be a short term landlord.  Meaning, you rent out your home or condo by the night.  One big issues with that is most people don't want people in the same house as them when renting, makes sense, it would be awkward if I rented a hotel room, and a stranger was sharing the room with me. The other big issue is that most newbie real estate investors don't have the capital required to buy the property, arrange a mortgage, furnish the property and ultimately rent it out.  It's costly and if you are going to do that, you should just stick with traditional buy and hold tried and true method of real estate investing.

Here is a great Airbnb hack, you don't  need to be a homeowner or have a lot of capital to make money on Airbnb without owning property using rental arbitrage. In fact, the costs associated with listing your first property are pretty low—even more so because we’re using other people’s properties.

Estimating start up costs

Before jumping in with two feet, you need to estimate some or all of your start up costs to this method of investing. The potential profitability of your listing and testing for demand will determine your make or break. Ideally, you want to be profitable at 50 percent monthly occupancy—that’s a good barometer of success.

For example, let’s say the going nightly rate in your target location is $200. Fifteen days booked—or approximately 50 percent occupancy—will make you $3,000 for the month. If your rent and expenses are $2,000, then you’ll net $1,000. That’s pretty good for 50 percent occupancy and doesn’t even account for additional costs that you will charge the guest, like a cleaning fee.

7 steps to airbnb success

1. Set Up Your Business: 

If you plan on scaling your portfolio beyond three properties, begin by starting your business properly. Set up a solid foundation and infrastructure to conduct business in good standing and grow effectively.

Start with a legal entity. For most people, an LLC. or INC. works best. It’s easy to set up and manage, offering favourable tax options.  Doing this now will help you find more deals later on when you start searching for properties. Plus, some property management companies won’t allow you to perform rental arbitrage without a corporate lease.

Take inventory of your assets, resources, and network. What can you leverage for immediate success? No, you don’t need tens of thousands of dollars. But if you do have investment capital, I’d still encourage you to start small. It’s tempting to jump into the business head-first, but you must learn the systems first before you scale. Capital-wise, you only need between $1,000 to $2,000.

2. Build Your Success Team: 

You need a good team, like any business owner or real estate investor. It’s easy to handle everything yourself at first—but you’ll want additional support once you start to scale.

Your core Airbnb business team should consist of your accountant and your attorney. These three team members will guide you around common newbie pitfalls. Here’s what to look for:

  • Lawyer: You want someone who specializes in corporate law and/or real estate. Even better if they have personal experience with real estate investors and other rental property owners.
  • Accountant: They should understand tax strategy and have experience with real estate investors.
  • Realtor: And finally, Realtors can be a terrific asset in finding, negotiating and completing the paperwork necessary for success, but again, you must find someone who has experience with real estate investors.

Once you scale out to three or more properties, it’s time to start expanding your team, too. Here are some of the key members that you’re going to need:

  • Co-host: This person is a member of the Airbnb community who doesn’t control any property themselves but helps full-time hosts manage existing properties. Think of them like your personal property manager who oversees day-to-day operations. Airbnb allows you to give the co-host a percentage of the profit of each deal that they help you with.
  • Cleaning crew: In the beginning, you can clean your own properties. However, this is very time-consuming. Your options are a professional company, an individual, or a small business. Generally, mom-and-pop cleaning crews are more adaptable and cheaper, while professional companies cost more but are more effective and have more accountability.

In addition to these key members, you’ll eventually need a bookkeeper, interior designer, photographer, and general contractor.

3. Do Market Research:

Most people who get into Airbnb arbitrage don’t conduct any market research beyond a Google search—if that. Just because you have a nice property and think it’s in a popular part of town doesn’t mean it will be successful.

You want to use hard facts to find properties in the most profitable parts of town. Which submarkets, zip codes, and streets will give you the biggest bang for your buck? The Airbnb website can tell you much about your market—if you know what to look for.

HELPFUL HINT:  Whole-home properties make you more money.  And the minimum nightly rate of at least $100. This rate tells you where the most in-demand properties are located.

Next, examine the map for clusters of listings. Go through them one by one to identify patterns. What is in demand in this unique market? Look for:

  • ​Number of Bedrooms
  • ​Amenities, like washer/dryer or air conditioning
  • ​Proximity to downtown or other touristy spots
  • ​Decorating style

Your job is to discover these market-specific details and repeat them in your business strategy.

What attractions are visitors talking about in your city? It could be beaches, parks, shopping, or bars. Look for this information in the descriptions of the top Airbnb listings, the reviews, and with Google searches on various travel sites. This will give you a better idea of where to look for properties.

As you expand your Airbnb offerings, you might be interested in paid tools to test for occupancy and demand. Now, though, you can run these analyses for free on the Airbnb website. Look at several listings in your market and then look at their bookings one to two months into the future. This gives you a decent idea of how they are actually doing.

To do this, just click the “Check-in” button on the right side near the calendar. Then cycle through the months with the navigation arrow. The days that are booked will be filled in, and the open days will be in bold text.

Obviously, much more goes into market research, but this is enough to get started.

4. Find Properties:

Now that your real market data shows you exactly what areas are most profitable, what home types people like, and what attractions guests want to visit, it’s time to find your first property.

There are many rental property search tools online, and you can use whichever one you feel comfortable with. I recommend Zillow. Search for your market, selecting the filters that apply to your metrics.

Once you narrow your search down to the exact submarket or zip code you are considering, it’s just a matter of analysis. You may have to sort through 50 to 100 rental properties before you find your needle in the haystack—but this effort will be rewarded in the end.

If you want to narrow the process even further and cut down on your upfront costs, you can search specifically for furnished properties.

Of course, you have to be upfront with the landlord. If they’re not on board with you listing their property on Airbnb, look for another option.

5. List Your Property:

Listing your property is straightforward. Follow the Airbnb page instructions by selecting “Become a Host.” You can create a dummy profile to get started and then create your real listing later on.

After you are set up, you can create your schedule, set requirements for guests, and establish your daily rates. From there, everything is taken care of on the Airbnb website and app, making this model so easy to get into.

6. Optimize Your Listing:

It's competitive in the short term rental space, so just like most successful businesses you will need to find a way to stand out from the crowd.  Now that you have your property set up on the Airbnb platform, you can begin optimizing your profile to attract more guests. Every profile has a rank, which is determined by an internal algorithm only known to Airbnb—just like Google search results. Many known white-hat methods increase your rank and attract more guests.

Great pictures are essential. We recommend hiring a professional photographer—it will cost a couple of hundred bucks. If not, then at least learn a little about lighting and photo editing. Your pictures are one of the first things people notice. Often, tourists make immediate yes-no decisions based on the quality and appeal of the photos. If you want good examples of great photos and top-of-the-line listings, then click the “Airbnb Plus” homes to view your market’s top-rated properties.

You can glean more tips from those Airbnb Plus listings, too. Do they use certain keywords in their titles? What rooms do they showcase? Is there an interior design pattern that stands out?

Do your best to model your profile after the top performers. Many people who get into Airbnb arbitrage just wing it and try to come up with everything by themselves. This is why most people get mediocre results.

7. Automate Your Business:

If you are not taking advantage of technology, there is no point in starting an AirBnb business.  We don't want you creating more work, or worse a second job.  So make sure to automate as soon as you can.  Successfully building an Airbnb rental arbitrage portfolio that generates thousands of dollars per month is pretty awesome, but being stuck working 100 hours per week to maintain it certainly isn’t. We didn’t get into business and investing, so we could work two or three times as much as everyone else. We invest because we want freedom, control, and options.

Establishing appropriate systems to run your Airbnb arbitrage business with minimal effort and maximum income.

Once you have your property set up, you’re responsible for basic property management tasks and cleaning. If your landlord has a property manager or you are using a condo in a complex, then your basic property management needs are taken care of. If not, you must find a good property manager who can handle these things.

Your cleaning crew needs to understand exactly what to do each time they clean. They also need to know when to come. The best way to do this is to sync your Google calendar with your Airbnb schedule and then share a “read-only” version with your cleaning crew so they can access the calendar, but they can’t change it.

A co-host is your next most powerful automation technique. Find someone you can trust with experience in the hospitality and real estate industries. This person will be your business’s face on the properties they represent and manage. They will be responsible for handling guest questions and providing additional services. Think of a co-host as an internal Airbnb property manager for you and your listings.

If you have numerous listings in multiple markets, then you will have more than one co-host who manages their own section of your portfolio. After a certain point, you can hire a CEO or asset manager who will take on your job of overseeing and growing the company.

Next, automate the check-in process. Do you want to personally drive to each listing and greet every guest? No. Get around this burden by developing a self-check-in process for your guests.

You can put keys inside an old-school lockbox, like the kind that real estate agents use, or you can use smart locks. The downside of the lockbox is that people can lose the key or come back months later and rob you, assuming you don’t change the code. The upside: they’re cheaper.

Smart locks offer many options and more security features, like the ability to remotely access the property from your phone. A popular model is the August Smart Lock, which will run you a couple hundred dollars.

You can also give temporary codes that expire after your guest leaves, allowing you to see who is accessing the property and when. This gives you a lot more control and accountability.

You’ll also want to develop a comprehensive house manual and give guests access immediately upon booking. It should cover every possible question a guest could ask—everything from WiFi passwords, gate codes, and available amenities to local attractions, transportation options, emergency contacts, and co-host contact information.

This manual gives guests everything they need to be self-sufficient. Most people don’t want to be bothered when they are staying at your property, just as they wouldn’t in a hotel. Make it easy for them to get what they need without too much effort.

Conclusion

Starting an Airbnb arbitrage business is one of the best models for people without much real estate experience or startup capital because many of the mechanics are handled for you. However, it’s even better if you have these things because you can launch and scale your business much faster.

If you put your head down and diligently work on this, you will be making a six-figure income in 12-18 months—a level of success almost unheard of in most industries.

Stephen Headshot

Hi, I Am Stephen Young

CEO Of The Best Blog Ever

I have always loved real estate, and our blog gives you more information about real estate if you are looking for a deep dive. Here we interview other real estate investors, and we show you their journey from start to finish. Be sure to sign up for our weekly newsletter to keep up to date with all of the new blogs, interviews, and investment opportunities.

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