How to Start an AirBnB Business - Should You Become a Host?

You have almost certainly heard of AirBNB, possibly stayed in an AirBNB, and may have read articles about the fights that AirBNB and similar services are having with local governments in many parts of the world.

You may see value in being involved in a growing business but you aren’t sure if it would make sense for you. Many AirBNB hosts and support businesses start out feeling the same way and kind of grow from there. I hope this blog helps give you a leg up as you explore business opportunities.

First off, you know the term AirBNB what is this really though? It is a platform that connects those with space to make available and guests that need a place to stay.

The term AirBNB has become synonymous with short term rentals in many tourist destinations all over the world. It has become so ubiquitous that like “Uber” it is simply a default term, in this case for non hotel accommodations.

There are many services similar to AirBNB offering a wide variety of accommodations. VRBO is the largest single competitor while most smaller companies focus on some sort of niche or location specific listings.

For the purposes of this post the answer to what is an AirBNB, is that it is both the platform and the term for accommodations offered by a non hotel.

What type of AirBNB business can I do?

You’re probably asking, wait how many types of AirBNB businesses are there? Well what I am referring to is whether or not you want to be involved in the AirBNB hosting and actually making your place available to others or whether you want to provide an ancillary service.

Consider a hotel, and how many different responsibilities and duties that are performed to make the stay of you as the guest as enjoyable as possible. Many of those same things need to be done in order to ensure that an AirBNB guest enjoys their stay and gives their host 5 STARS.

Just like any new business, one blog post or video is not going to provide you all of the insights and knowledge needed to start this business.

This is simply a jumping off point written from my own experience. I am also happy to answer any questions you might have that I can help with beyond the blog. Below you will see the 4 major areas of involvement that need to be covered to make for a successful AirBNB.

Some individuals handle all phases of the business but many others will farm out areas they aren’t comfortable with or stick to strictly the support roles of existing hosts.

AirBNB Host

The AirBNB host is typically the owner of the property, although some rental leases allow for subletting for short term rentals. If you don’t own your place you should be very careful about violating any terms of a property you lease.

In fact, even if you are a host you should be aware of any rules or regulations in your city, state as well as HOA. Once you know where you stand you need to understand what is entailed in being a Host.

AirBNB like many other platforms uses a community based rating system where each end of the transaction is held accountable. You are responsible for ensuring that your guests enjoy their stay and want to give you high star ratings and positive reviews and they are rated as a guest as well.

It is important to make sure that before starting an AirBNB business you are comfortable with that dynamic. AirBNB hosts are in fact business owners, and as such you have to to treat your guests the way you would want to be treated.

As business owners sometimes do, you have the ability to hire out parts of your business, but in the end you are responsible for the result. If you don’t want to clean, you can hire a cleaning company or person (FYI: AirBNB wants to know they make a living wage).

You can have maintenance staff available or via contract to make repairs as needed if you aren’t handy or aren’t nearby. You can even hire a company or individual to handle nearly everything for a management fee (usually a percent of revenue).

Before you get started keep in mind that you should at the very least know what success should look like so things don’t go off the rails. If your goal is to make money (which it should be at least one of them) you CANNOT just turn your business and property over without oversight.

AirBNB Property Management

There are many companies, and individuals that are willing to either fully manage or help manage your business for a fee. Of course you have to vet these services before you entrust your guests to them, as not all managers are created equal. For us, the idea of turning over the success or failure of our business to others did not make sense so we have continued to manage our properties even remotely.

A manager will offer some or all of the following services and of course price or percent of revenue will vary.

Communication with Guests: The importance of this cannot be understated.
Cleaning & Turning over Unit: They may have a third party that they work with or have staff in house.
Managing Calendar & Rates: As experts in the area they may be able to help maximize revenue. (However, because they maximize revenue they may drop prices when you wouldn’t in order to get the unit filled)
Repairs & Upgrades: As needed they may be able to handle this and bill you as needed

Cleaning an AirBNB

Cleanliness is obviously very important. You want your guests to feel comfortable and cared for especially in today’s world. If you do not have a clean place you will hear about it in reviews and ratings.

Whether you are going to clean yourself or you have a property manager or cleaning company I highly recommend a checklist. This allows you to be on the same page with all other parties as to what is expected.

Cleaning is also a great way for a non host to make money either on the side or full time. Speaking as a host, good cleaning crews are not easy to find. For many hosts paying someone to handle this aspect allows them to focus on the core business.

If you are new to this and want to earn extra income you can always start with cleaning one or two units, really figure out your plan, costs, etc and go from there. Planning and consistency is key whether you are a host or third party cleaning crew.

Maintenance

If you don’t know how to start an AirBNB business but you are handy, being involved in the maintenance side may be a good option for you. The thing about a short term rental is that you have a limited time to make a positive impression.

If your guest is having a problem with the hot water for a day and they are only there 3 days that really sticks in their mind. As a host you have to get this addressed quickly and you need a reliable maintenance person available.

As someone getting started on their own business these types of opportunities are great. If you are qualified to make sure problems are fixed quickly, you can charge a premium because time is of the essence.

These same skills and experiences will apply to other non AirBNB real estate investors and you can grow your business from there. I have found that a great way to find help in your area is through Thumbtack, which also makes a good place to advertise a maintenance business.

Renting your Real Estate

I only have AirBNB host experience as a person renting out real estate that I own, so that is what I can speak to. As I mentioned earlier there are individuals that will sign a lease then sublease the property on AirBNB but that is something I have very limited knowledge of. Therefore I will address the rest of the blog to those with their own property that want to become hosts.

First off, an AirBNB needs to be FULLY furnished. because guest needs to be able to walk in the door and start lunch or dinner once they have dropped their bags. The things that you need to live a normal day in your home they will need as well.

This can be a larger than expected investment if you are not ready for it. Please, before you start ordering furniture to start your AirBNB business read the rest of this.

You are going to be letting strangers use your things. If you are renting your own home you want your personal or valuable items locked away or out of the property. If this isn’t a place you live you will need to make your decisions with others in mind.

Don’t choose things that are difficult to use or extremely expensive to replace (unless super high end is your niche) because things will break and have wear and tear. Most of your guest will care for your property, but not all will and things happen accidentally even for those that are careful

Keep things relatively simple. I once rented a very cute old AirBNB house in a small town that had lots of cool things in it. One of those things was a juke box that was not working.

The friends we were with contacted the host who then had to send someone over to look at it. He did not get it working but it took up the hosts time, our time as the guests and their maintenance person’s time.

It is great to offer extras and exciting things, but they need to be in working order or they will just become a headache. So, if you aren’t scared away yet and are more prepared to start an AirBNB business now then keep reading, this might just be the thing for you.

Local Real Estate Market

Some markets support the idea of an AirBNB better than others. If prices are high but nightly rates are low then it may not be a good place for an AirBNB. You also want to be aware of the climate in your area, because more cities are putting restrictions on short term stays.

If your market is solid and you can get a good return you also need to compare it to traditional rentals. Again, your area might be one that actually draws higher rents and profits from traditional rentals without all the hassles. I don’t want you to be leaving money on the table so here are some tips for evaluation the strength of your market.

Look for clear guidance from local government about how to operate an AirBNB
Research current AirBNB listings for their amount of availability, quality and price
Compare with traditional rental rates and profit (profit after expenses is the most important factor)
If profit is limited look for appreciating prices (Real estate can make you ongoing profit and profit if and when you sell.)
For individual properties consider the need for the following (upgrades, updates, repairs) to get the property up to standards
In real estate investing the term CAP rate is used, which is essentially how much are you making versus how much is your asset worth. For a smaller investor consider it more like, how much money do I need to make in order to make this investment worthwhile. Then do the math backwards to find out if this is a good investment for you. (Compare it to other easy investments such as index funds that you could otherwise put your resources. As a personal choice I diversify so I am invested in the stock market, real estate and different types of business ventures.)
Look for a location that would allow for longer term renters in a furnished place (In the event Airb n b does not bring what you hope for this is a nice alternative)
Be aware of your neighbors. If you are in a residential area where most homes are owner occupied full time people will often be less tolerant and complain (whether warranted or not).
A location close to you is initially important so that you can address any issues that arise.
Don’t buy in a location you wouldn’t want to stay, and don’t furnish a place in a way that you wouldn’t want to spend a weekend in.

If you have run your numbers and considered different scenarios and this still make sense then you are ready for the next phase, which is actually setting up the business.

Setting up your AirBNB business

If you have never set up a business before, there can be much more to it than you realize. If you plan to do this part-time to drive some extra revenue from the property you already own you can keep it simple. However, if you hope to grow it and will be hiring out extra help you will want to do it right.

That might mean setting up an LLC, with it’s own tax ID, and bank account. I would recommend that you speak with a business attorney and or accountant about specifics. The minimum I would recommend is that you have a separate account for your AirBNB expenses and revenue, because it will make things easier when it comes to tax time.

Working with AirBNB and VRBO

What is AirBNB versus what is VRBO? The simplest is that they are the same concept but they get the job done in different ways. Below is a quick breakdown of the differences based on my experiences.

VRBO:

Prior to the pandemic I used to get more 2 week plus bookings from here
The platform provides no identity verification option to support the hosts
The platform is less intuitive than AirBNB
Less changes to the platform which means you know where things are
The percentage fees are higher
Wide range of marketing including travel booking sites
Platform will show you other properties that won a booking over yours so you can improve
Reviews are not as important (less guests have reviews or complete a review)
Average review is a little lower (This is from my experience)
App is less mobile friendly
Less restrictions regarding accepting or declining guests or cancellations

AirBNB:

Prior to the pandemic I didn’t get a lot of longer stays but that has changed
A lot of restrictions on accepting guests or not
Allows the host to require identity verification or a positive review
Intuitive platform
AirBNB is always changing things which can be frustrating
Low fees for the host, higher fees for the guest
Built in marketing with AirBNB brand awareness
Distinction for Super Hosts
Reviews very important but can be frustrating for hosts
Mobile friendly app (because of a glitch you will have old read messages that show unread)

To simplify things it is my recommendation that you start with AirBNB and get your listing and calendar fine tuned then add VRBO. it doesn’t hurt to add extra revenue opportunities

Things to Consider

When you set up your property for an AirBNB guest, whether it be your home or another piece of real estate there are some things you may want to take into account. Below is a list of general recommendations I would make to new hosts.

Use a smart lock, but have a lock box on property for emergencies
Ask an honest friend to stay the night to see what you’re missing
Personal items need to be put away and or locked away
A locked closet is a good place to put personal items
Think about what you would need at a hotel and provide that
Put together detailed check in and check out instructions
Have extra batteries available
Be clear on your pet policy one way or another
Don’t be afraid to get no guest if your price and requirements aren’t met

Working with AirBNB Guests

This could be its very own blog post, and might be some day so I will just offer some highlights. Remember guests are your biggest asset and biggest headache when hosting.

Provide clear instructions & ensure that your listing includes your house rules
Communicate shortly after they book about what is next
Make sure they know to contact you if they need anything
Check on your guest the day after they arrive
Fix issues as they arise, and apologize (you don’t necessarily need to offer a rebate)
Learn from mistakes and take action to correct
Be considerate and treat them the way you would want a host to treat you
Look for damage or issues after they check out before anyone else checks in

Consistency

The same way you show up to a hotel whether it be in a different city, state or country and expect consistency so do your guests. They expect consistency with the reviews for your place and when you don’t meet it they will dock you.

Only offer things that you can keep up with. Some hosts love to put out snacks or leave breakfast foods in the fridge, but if you are going to do those things you need to keep it up. It is better to be simple and be great at it than be extravagant but be mediocre at it. You don’t have to be the Waldorf, but you do have to be extremely consistent.

Growth

Don’t be afraid to let your business grow organically. That might be done by adding a property to your portfolio, listing a second bedroom in your house, or helping others manage their properties.

Just don’t grow too fast this business can become quickly overwhelming. A successful AirBNB requires significant time and sometimes financial investment, so before you throw a bunch of money at it make sure you know what you’re doing.

If this post makes you more likely to host, then I am excited for you. If it clarified that this isn’t for you, then I’m glad! Either way, I hope that you found this valuable.

If you do decide to host it is a good idea for you to experience other AirBNB’s as a guest to learn what to do and not do. Make the most of this journey and I hope you get to bring some extra enjoyment to your area of the world.