The concept of renting out your house, apartment or condo must have seemed ridiculous to a lot of people when Airbnb started in 2008. People had become accustomed to the idea of staying at a hotel or hostel when they travel. But now, the options for where you can stay are limitless. There are Airbnb properties all over the world, including castles, windmills and treehouses. But is there money to be made renting your property out to strangers?
The numbers don’t lie
Think Airbnb is a fad or that it’s only being used by certain groups of people? Think again! According to iPropertyManagement, Airbnb has over 150 million users around the globe. There are over six million Airbnb listings for customers to choose from, and the company is worth around 35 billion. Airbnb has become a way of life and a source of regular income for a lot of people.
What you need to know before becoming an Airbnb host
Before signing up as a host, there are a few things you need to consider. This process is a little more labour-intensive than just cleaning up and handing over the keys. To offer the best experience possible (and to maintain a positive rating), you need to ask yourself a few questions to be certain that you’re up for the trials and tribulations that can come with it.
- Are you looking to make a living as an Airbnb host or do you want a second income to help pay down your mortgage?
- If you’re only renting out part of your home, you will be staying with complete strangers. Are you comfortable with this?
- Do you have the time to put into being a host? Listing the property, dealing with bookings, handling customer complaints and finding time for your own life is demanding. Can you make it work?
- What makes your property stand out from others around you? If it doesn’t, you may need to make some changes. Are you capable or willing to do that?
- If you live in an apartment or condo, is being an Airbnb compatible with the regulations of your building? What would your landlord or neighbours think?
- You have to consider all risks and liability associated with this. Besides the strangers in your home, you’re risking potential theft, property damage or injury. Airbnb does offer liability insurance, but you need to be prepared for the worst.
How to succeed as an Airbnb entrepreneur
If done right, a person can make a pretty decent living dedicating their time to being a “professional” Airbnb host. It takes a lot of work, time and savviness, but it can be done. Here are a few steps to help you get the most financially out of your effort as a full-time Airbnb host.
1. Check if you qualify for a mortgage if required
Before you begin your great journey to become a successful Airbnb host, you need to make sure that you either have enough money to buy your first properties for cash, or that you are qualified to get the financing to secure your purchase. If financing is required, make sure that you have enough money for the down payment, your credit score is in good standing and you have money for the closing costs. You also need to take into account federal and provincial Land Transfer Tax, mortgage and title insurance and all other legal fees related to any real estate transaction. To help you calculate all these payments you can visit https://mortgagecalculator.ca/ where you will get the breakdown of all the costs.
2. Make sure you’re not breaking any laws
As stated earlier, Airbnb hosting can be a legal grey area in some buildings. Make sure you do your homework first before you quit your day job. Research what short-term rental legalities are in your area and read through any rules if your home is part of a housing association. Some city’s legislation requires that any law enforcement officer can enter the property to inspect it for compliance with the city regulations.
3. What is the Airbnb market like in your area?
After you have maneuvered your way through the legal elements of Airbnb, you need to do some serious research to see what the market is like in your area. Find out what the average cost and occupancy rate is for similar spaces to yours.
Airbnb does offer some tools to help you with this, but if you want to do this as your full-time job, you must put the work in. The biggest challenge that we hear about from Airbnb hosts is the lack of access to key Airbnb data and using it better their pricing models. We all know that better pricing leads to increased bookings and higher, more consistent occupancy rates. What more could an Airbnb host want?
A large percentage of hosts complained of the inability to properly critique Airbnb analytics due to a lack of insight and access to critical local market data. Without updated, reliable, in-depth market data, optimizing your pricing and the general profitability of your Airbnb listing is pretty close to impossible. There are simply too many question marks and too many variables to try to tackle the optimization process alone!
Instead, try Markets by DPGO and find out valuable market insights for your Airbnb listing. Discover your market’s average daily rate, occupancy rate, market supply, day of the week factor, minimum night stay requirements, day of the week occupancy rate, and a helpful map to help you identify exactly where the listings are located. These are the basic insights that you’ll need in order to take your pricing from updated to optimized. If you’re closer to a tourist area. If you’re closer to a tourist area or have special amenities you may be able to charge more. Don’t undersell the value of your space!
4. Who are your customers?
To better your chances of getting consistent rentals, as well as return visitors, you need to fully understand who your customers are. Consider the type of space you have and the area you’re in to find your target audience. Then market to the business travelers, families, couples, or singles that will want to rent your space. Once you know who your target audience is, you can start transforming your space to suit their preferences and requirements.
5. Are you able to host multiple spots?
If you own multiple homes or apartments, then this is a no-brainer. The more rented out properties you have, the more cash you have coming in. But this involves capital, and it should only be done once you’ve been in the Airbnb game for a while, and completely understand the process. You never want to risk your own comforts in life to try and make more money. Read more about how to make money with Airbnb at iGMS blog.
6.Create a legal entity
If you’re looking to go all-in, create a legal business entity, like an LLC, to run your properties. There are many amazing guides on differences between LLC and S-Corp, like this article from howtostartanLLC. This can help you learn all you need to know if you decide to go with this business structure. This helps prevent you from any personal liability issues. But you will also need to open a business bank account, obtain all proper permits and licenses and purchase business insurance. This can be a lot of work, but with big chances comes big rewards!