Blog | Entrepreneurship

How To Start An Airbnb Business

Find, list, and scale your Airbnb hosting business

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Rich dad said, “The key to wealth is knowledge.” He also said, “Growing your wealth requires growing your knowledge.”

One privilege I have is to travel the world speaking and meeting new people who are interested in things I don’t know much about. I’ve had more and more people ask me about investing in real estate and starting an Airbnb business. While I know a lot about real estate, I didn’t know as much about Airbnb as I wanted, so I learned.

Rich dad also said, “Business and life are team sports.” The best way to grow your wealth and your knowledge is to have a great team of experts. That’s why I teamed up with Symon He and James Svetec, the founders of LearnAirbnb and BNB Profit Academy, to build my knowledge of getting rich with Airbnb and to provide this guide to help you start your own Airbnb business. It’s packed with the knowledge they’ve gained to build an Airbnb empire. I’m thankful to them for sharing their knowledge with me and with you.

This guide is meant as beginner’s guide. If you’re looking for advanced knowledge from James and Symon, check out their free webinar “How to become a top performing Airbnb host & host with ease.”

First, what is Airbnb?

For those of you, like me, who might not be up to date on the latest trends in the gig economy, you might not know what Airbnb is.

In short, Airbnb has created a solution for travelers around the world to find comfortable accommodations that are local, authentic, diverse, inclusive and sustainable. Instead of simply providing a roof over traveler’s heads, Airbnb strives to provide a world where people can live in a place, as opposed to simply traveling to it.

How does Airbnb work?

Travelers are no longer content renting a room in a multi-unit hotel. They want a more authentic experience while on their journeys, both personal and professional. And while an immersive experience was previously only within reach of the wealthiest of us, Airbnb has opened the doors for inclusive and sustainable accommodations for anyone.

Founded in 2008, Airbnb has leveraged technology to allow over 6 million people around the world to enjoy intimate housing while on their travels.

Airbnb has connected the world so everyday people like you can monetize your space, passions and talents to become hospitality hosts.

What makes Airbnb different

Airbnb can be very lucrative… for the right person. In fact, you can make 3, 4, even 5 times more, but it requires different knowledge to be successful. Here are a few things to consider.

  1. You’re in the hospitality business

    Traditional real estate investors are called landlords. In Airbnb you are called a host. This means you are in the hospitality business. Your success is not just based on providing a nice place to stay. It is also based on your ability to provide a great experience.

  2. You’re in the pricing business

    As a real estate investor, you rent your properties over long periods of time. This means that you focus on a price in terms of months or years. With Airbnb, you must focus on price continually to optimize your profit because you are renting out in nights, not months and years.

  3. You’ve got higher liability

    As a real estate investor, your liability exists, but it’s focused around tenants and your physical property. With Airbnb, you have increased liability. People may take the things you’ve furnished your unit with. Your neighbors might complain. There are different laws and regulations to consider. You can be in danger of squatters. And so much more. There’s risk in everything, and the key to mitigating risk is…you got it, knowledge. You have to know your liability and take steps to minimize it.

  4. You’re a marketer

    As a real estate investor, you can find a good renter without having to be a great marketer. With Airbnb, if you don’t know how to position your property within the first few months to be as enticing as possible, you’ll have a very hard time being successful. The platform is very competitive, so you need to grow your skills as a marketer and salesperson.

If you love the sound of all these things, then it is for you. Read on.

Different types of Airbnb hosts

There are many different reasons why someone would want to become an Airbnb entrepreneur—or as James and Symon call it, a rentrepreneur.

  1. The opportunist

    These are usually people who have some extra space in their existing home or apartment, like a spare bedroom or a guest casita, and they want to make some extra money. They also have specific times where they want to rent and don’t want to rent. For instance, many big sporting events like the Super Bowl come to Phoenix, opportunists might open up some listings to capitalize on that.

  2. Side hustle seekers

    We’re living in a gig economy. People are driving for Uber and delivering take-out through Grubhub, all to earn some extra income. Side hustle seekers use Airbnb as a way to provide stable extra income, but it is not a full-time gig for them. There may be times where they don’t offer a listing, but they are pretty consistent in renting out. They also will take advantage of special occasions, just like the opportunist.

  3. The full-time rentrepreneur

    James and Symon define rentrepreneurs as people who have at least one, dedicated full-time short-term rental property on Airbnb. Their desire is to have their primary income be from short-term rentals, and they have ambitions to build an entire portfolio. Full-time rentrepreneurs understand that they need to focus on maximizing the potential profit from each hour they spend hosting their business, not just profit per unit.

It’s important to know your why before you begin your Airbnb business because it will inform your approach. All of them are solid reasons to get into Airbnb, but only one of them will make you rich: the full-time rentrepreneur.

The value of time

The reason full-time rentrepreneurs focus on the potential profit per hour they spend hosting their business is because, if you’re not careful, Airbnb can be extremely time consuming. If you don’t know how to maximize your time value, you’ll effectively make very little per hour. We’ll cover more on how to do this later in the guide, but for now, here are a few reasons why Airbnb is time consuming.

  1. Pricing

    I already mentioned this one, but it is worth repeating. You have to optimize your pricing on Airbnb daily. This requires research and adjusting your models constantly.

  2. Frequent turns and maintenance

    Because people stay in your unit for a matter of days, not months or years, the amount of time you spend cleaning and turning goes up a lot. And because you furnish the unit completely, there is more that breaks and needs replacing.

  3. Communication

    Between check-ins and check-outs, answering questions from guests, and writing and responding to reviews, there is a lot of communication that happens in Airbnb. And that takes a lot of time.

The most successful rentrepreneurs on Airbnb know how to maximize their time by minimizing the burden of these tasks.

How to start an Airbnb

Whether you have a property already, or you’re looking to purchase one specifically for Airbnb, the last thing you want to do is jump into it without the right preparation.

First things first, if you haven’t spent much time staying in Airbnb properties, you need to start now. Find properties similar to ones you own or are looking to buy, and take a massive amount of notes.

As James and Symon say, “The fastest way to learn what it takes to be a successful host on Airbnb is to get first-hand experience from the guest side…the person you are trying to please.”

Mark when you’re happy and unhappy. What did the host do right? Wrong? What added stress and what eased it? Understanding these will help you be a great host and increase your chances for success.

Location, location, location

In traditional real estate investing, location plays a big part in your success. For instance, if you have a nice house in a bad neighborhood, you’ll pay a lot and make little.

With Airbnb, location is also important. People are traveling and looking to be entertained…they are looking for an experience. So, you have to play up the strengths of your location to match the experiences potential guests are looking for.

People look for various kinds of experiences. Perhaps they want an urban experience with lots of nightlife and dining. Or maybe they want a quiet getaway in the mountains or countryside. Or maybe they’re looking for a clean affordable place to stay while on business.

Your location will have the qualities someone is looking for. Your job is to maximize the strengths of your location and highlight them for the right guest to find irresistible.

Airbnb rules for hosts

Because Airbnb is a disruptive technology and platform, in many cities the laws around short-term renting are not caught up with Airbnb. This means you can get into legal trouble if you’re not aware of the regulations in your area. And while Airbnb makes everything look easy and seamless on their platform, the reality is they put the burden of compliance on you.

Check your city’s zoning laws and make sure your property fits within the limits. Understand how many days per year you’re allowed to sublet. Get the right licenses and permits you need. Understand what taxes you need to pay and make sure they’re covered.

There’s a lot to learn and comply with, and in many cities the cost of non-compliance can be very high.

Again, business and life are team sports. A good attorney is with her or his weight in gold. My advice would be to find one who understands Airbnb.

How to make money with Airbnb

As with any investment, the goal is to figure out how to make money with Airbnb. This means you need to run a solid financial model that takes the following into account.

  1. Rents at nightly rates

    Again, pricing for Airbnb units is variable, so just picking one price and running it through your model could be deceiving. You could assume you’ll make more than you will…or you could be leaving a lot of money on the table.

    To understand your pricing, do a lot of research on Airbnb for properties like yours. How does their pricing change from night to night, special event to special event, holiday to holiday, season to season? Factor that into your model.

    You can also use a service like Airdna to do all this for you. It costs money, but the time savings could be well-worth it for you.

  2. Turn costs

    With Airbnb your turn costs will be higher. You have to do frequent cleanings and you need to restock your unit more. Additionally, because you furnish the unit, you’ll need to factor in replacement costs.

  3. Liability insurance

    While Airbnb does cover some liability for you, there may be cases where you want to have additional insurance—and your home owner’s policy won’t cut it. The world of insurance is complicated. Again, build your team, find a good broker that understands the industry, get a quote, and factor into your financial models.

  4. Vacancy per night

    Because Airbnb is highly seasonal and based on nights, vacancy can be higher. This is not a bad thing since income can also be higher, but you can’t use standard rental vacancy numbers. Take a variety of factors into account and come up with a conservative vacancy rate.

How to optimize your Airbnb listing

Once you have your financial model ready and your property on hand, it’s time to jump into the platform. There are other guides that can help you with the technical aspect of creating an Airbnb account and setting up your listing. It’s not hard. What is hard is nailing your listing for success.

  1. First three months are the most important

    James and Symon taught me that the first three months of your listing are the most important. Why? Because Airbnb’s algorithm favors new listings to keep their machine going. This means you get a brief window of time to see good traffic and great reviews on your listing. Get those and you’ll end up favored in the search results going forward. Don’t and you’ll find it a lot harder to get in front of potential guests. Here’s the things to focus on.

  2. Great photos

    If you’ve spent any time on Airbnb, you’ll immediately notice how visual it is. It’s a design-forward company and everything is clean and beautiful. Your photos for your listing should match. They need to evoke excitement and help people imagine themselves staying in your place. Remember, you’re selling experience, not just functionality. A professional photographer is a good investment here.

  3. Amazing description

    Your description is the place to match the strengths of your property with the type of guest you’re trying to attract. Don’t try to please everyone. Know who you’re targeting and write to them. Point out what’s close by, what makes your place unique, and make it clear why your unit is the best choice. A professional copywriter is a good investment here.

  4. Competitive pricing

    Do your homework on pricing and continually adjust your pricing to be competitive. If you have great photos and an amazing description, but you’re overpriced, you’ll still lose.

  5. Great reviews

    Reviews are extremely important on Airbnb. Again, you’re in the hospitality business. Make sure you give your guests an amazing experience, be responsive, and do whatever it takes to fix anything that goes wrong. Go above and beyond.

    Some things that help, include an easy to use lock box for check-in and out, contact info for you that is easily accessible, guides to the area, and an always clean and well-maintained unit.

Airbnb rules for guests

An important aspect of hosting an Airbnb is making sure house rules are clear, simple, and understood. This means not just having them in the app, but also having them in the unit. A binder in an obvious location that has contact info, area guides and suggestions on fun things to do, instructions on how to use electronics and utilities, and a list of house rules is a very smart thing to do.

James and Symon provide a good guide to house rules. Things to consider are, extra guests, smoking, off-limit areas, eating areas, cleaning procedures, laundry, gatherings or parties, quiet hours, and pets and animals. These all need policies detailed and clearly explained.

Scaling your Airbnb business

My rich dad would use the following diagram to explain the differences between how business owners and investors spend their time compared to employees and sole-proprietors or small business owners.

The differences between how business owners and investors spend their time compared to employees and sole-proprietors or small business owners.

People on the left side of the CASHFLOW® Quadrant make money by exchanging their time for money. Employees agree to do tasks for a certain amount of time (X) in exchange for an agreed upon amount of money (Y) resulting in their paycheck (Z).

Because you can make a lot of revenue through Airbnb, many people get fixated on their income while forgetting to consider the most important thing…the value of their time.

James and Symon shared with me a story about a rentrepreneur named Trisha. She had two units and made $4,165 a month in income after expenses. She did everything right as a host, except one thing. She didn’t scale.

After keeping track of her time spent on her Airbnb business, Trisha realized she was spending 147 hours per month. That meant she was making only $28.33 an hour. That’s not the recipe for getting rich.

James and Symon worked with Trisha to automate her processes more. This included hiring a cleaning service, installing digital locks, using a management service, and using a pricing service. The cost was an additional ~$1,500 to $2,000 a month, BUT she saved 125 hours month. Her effective hourly rate was now $107.31.

Why is this important? Because if you want to grow rich with Airbnb, you need to be able to scale. This means that you can’t get overloaded with working in your Airbnb business. You need to work on it.

Remember, to be a rentrepreneur, you need to have a multi-unit goal and intend to do this full-time…to replace your income with the income from your business. This means you need time to find the right properties to grow your business, not waste your time on managing your business’ every detail.

While Trisha was making less overall money, the time she had allowed her to expand her Airbnb portfolio, making her more and more money each month.

How to start your Airbnb business

If you want to start earning passive income by leveraging the assets you already own, look no further than this free training webinar with the Airbnb experts at BNB Profit Academy.

James and Symon will show you how you can leverage almost anything in your home to produce incredible returns using Airbnb.

This webinar is great for anyone who:

  • Lacks money but wants to begin investing in real estate
  • Already owns real estate but wants to maximize their ROI using Airbnb
  • Wants to become a top-performing host in any market
  • Desires to make cash flow with little “day-to-day” involvement

If you want to learn how to get started with Airbnb, reserve your seat at this free webinar.

Original publish date: June 18, 2019

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