Now that we’re well into year 2, the Airbnb Experiment continues to generate solid returns. With summer just about fully booked, I figured by now I have enough experience to share some of my top Airbnb hosting tips.
Before diving in, let me be clear: You need to be willing to put in the work. And when I say “work” I mean educating yourself, and being willing and ready to put in some sweat equity! (Or simply find a perfect gem of a space that doesn’t need an overhaul – but what fun is THAT??)
Our inaugural year was incredible. There were hardly any vacancies in the high season (June through September). But the highlight was hosting two-month-long stays during the low season, which boosted revenues. We missed out on hosting our long-term guest from Brazil this past spring, but we’re hopeful he’ll return in the late fall.
That said, this year’s revenues are quite good as well. After the mortgage, utilities, association dues, and maintenance costs are factored in, we’re pulling in an average of $400 net-net income each month.
This is with most of October, November, and December still wide-open on the booking slate. If we get the same amount of bookings in Q4 as last year, our average monthly cash flow will approach $800 per month. Not too shabby.
Compare those figures with year 1, and we’re actually on the upswing. Last year’s revenue may wind up being more than this year’s, BUT, last year we incurred major expenses to prepare the space. Those costs brought down our monthly cash flow to about $450 net-net income. If we hit the $800 / month mark by year-end, that’s an 88% increase from year 1 to year 2!
We’ll see how it goes in Q4. Rest assured, I’ll report it here. A lot will hinge on whether my long-term guest worker comes back for a month in November.
I’m already reaching out to see if I should block those weeks. (Another good tip for aspiring hosts: If you have a return/repeat long-term guests, proactively reach out before their usual booking dates get taken by random short term guests.)
Choosing the Right Location for Your Vacation Rental
We chose to purchase a condo that needed a cosmetic facelift. I’m glad we went this route. With a condo, we only have to worry about the interior space of the unit. This makes maintenance a heckuva lot easier.
Think about it. If we purchased a single-family home for a vacation rental, we’d have to hire a lawn care and snow removal company. Working full time with a home of our own, there’s no way we’d be able to keep up.
Many hosts opt to rent out space within their own four walls, more typically designating a single bedroom and bathroom to guests. I think this is a fine idea, but it probably works best for couples or singles without kids. That is unless your kids are very well behaved!
As a general very first tip, your first venture into vacation rentals should be finding a unit that allows you to truly focus on the living space. A condo/apartment configuration is easier, as is a room in your own home.
Granted, if you’ve got a sweet little tiny house in your backyard, you could make a killing renting that thing out. Tiny houses, especially those with modern/artistic appeal, are the epitome of glam Airbnb rentals.
THIS! Four kids plus mom and dad? No problem. “Caravan Tiny House Hotel” by H. Grimes is licensed under CC BY-NC-SA 2.0
Top 10 Tips for Airbnb Hosting
- Find a great cleaner. And when you do, take good care of him or her. Give the occasional bonus for continued 5-star marks for Cleanliness (and accompanying review comments noting how clean the unit is). Pay a decent wage, but expect excellent reviews. I currently pay our cleaning crew $87 for each turnover for a 1,000 square foot living space. That’s almost $30 / hour for a three-hour job and over $40 / hour for a quick 2-hour turnover. The good news? It’s the guests who effectively pay the cleaning costs since we bake in that amount with each booking.
- Understand and wield the power of dynamic pricing. Staying on top of your market’s supply and demand is crucial to maximizing your profits. I use Beyond Pricing to manage both our AirBNB and VRBO listings. The “BP” algorithms factor in seasonality, weekends, local events, and more for every day. All you have to do is set your base price and minimum price. BP also allows you to increase or decrease pricing depending on how far out or how close guests to book. I charge slightly more for guests booking 6 to 9 months into the future, and offer deep discounts for guests booking within a two-week window. This way, I optimize earnings while also minimizing vacancies.
- Stay at other AirBNBs or hotels and bring back good ideas. Whenever you travel, take note of the features you like and dislike. I’ve brought back a few ideas to enhance our pad including adding an Amazon Echo (great for juke-box music and weather updates), two different coffee makers* (traditional drip and an Aeropress), cozy blankets for the sofa, a brochure basket, etc. With a keen sense of what works and what doesn’t, you can borrow and steal the best ideas from other Airbnbs. Make your space a cozy and relaxing retreat that welcomes your guests home after a day on the beach, exploring, and having fun. They WILL appreciate it!
- Stick by your minimalist tendencies. I.e, Don’t over-furnish or overfill the space. The more open and airy your living space is, the cleaner and inviting it will feel, and guests will have less stuff to break (or complain about). When you overstuff a living area, guests feel that they’re imposing on someone else’s home. Maybe we can call this the Goldilocks Effect? Time and time again, guest comments have praised us for a clean and attractive space. Some basic tips for the newbie decorator: Stick to light / neutral wall colors. One big mirror per room to make it feel bigger and bring in more light. One big showcase / bold work of art on a wall opposing the mirror. Avoid extra furniture, like a desk or bookcase. Stick to a sofa, maybe two chairs, end tables, coffee table, and a small TV stand. In the bedrooms, all you need is the bed, two nightstands, and a single dresser.
- Be quick, like, rapid quick, to respond to all inquiries. Thank goodness for smartphones, right? This tip is essential. I’ve gained a handful of additional bookings by being quick on the draw. Often folks will shotgun search for a place on short notice. And the first host to respond gets the booking. Also, if you want excellent reviews (and you should if you want to avoid vacancies!) it’s always smart to answer guest questions as soon as possible. I sometimes struggle with this since I hit the sack earlier than most. A few times, guests have tried calling or texting trying to find our unit, and I’m sound asleep! Thankfully the reviews came back strong in those cases, but only after I apologized profusely the next morning. Oh, and the guests did ultimately find the unit, typically within a few minutes of attempting to reach me.
- Stay a few nights or a week at your Airbnb to get a sense of what works and what doesn’t. Our family spends a full week at our condo in the summer, visiting family and doing our best to RELAX. While there, it’s an opportune time to make note of possible improvements, perform a little light maintenance, and take inventory of supplies. It’s the little things that count. Are the pillows still comfy? Is there a pile of dust on top of the fridge? Is the dryer’s lint filter clogged? These visits are important. I’d prefer twice a minimum per year to stay in our pad if we could.
- Little touches go a long way. We leave a bottle of decent $10 white wine in the fridge for all our guests. There’s a guest book as well, and I underestimated this touch. Whenever we’ve stayed at beds and breakfast or boutique hotels, it’s fun to thumb through the guest book and see how others enjoyed their stay. It does influence your perception of the experience. We put flowers in a planter at the front stoop and put out a welcome card. Many hosts go much further, leaving treats, stocking the fridge, or having music playing when guests arrive.
- Automate! One of the best features of Airbnb (and VRBO) is the ability to save message templates. I have about a half dozen different situations where all I have to do is insert the guest’s name. This saves a tremendous amount of time with pre-arrival and pre-check-out instructions. I also recommend enabling auto-booking. This prevents you from losing prospective guests to other hosts and also saves you TIME. There are many tools to help hosts automate. I use BeyondPricing to set and forget pricing, and TurnoverBnB to coordinate cleanings with my cleaning crew. There are other tools available to help hosts automate and manage multiple properties, like Guesty and Hosty. I find with being listed on only two platforms and one property that things are manageable for now. If we were to add another unit or two, then it’s time to upgrade.
- Great photos make all the difference with your listing. I’ve mentioned this a few times before but it bears repeating: You need high-quality, well-staged photos of your Airbnb to attract guests! Use natural lighting, take photos from hip-level, and post-process to enhance colors. If you need help, hire a professional photographer. A couple of hundred bucks invested in this area is well worth the return!
- Set Up an LLC. Protect your assets by isolating your Airbnb into its entity. The limited liability corporation is ideal for vacation rentals (and long-term rentals as well). If something goes amiss and you get sued, the LLC will allow the plaintiff to pursue damages only from the LLC itself, not from your estate. Most states have a website for setting up LLCs and it takes maybe 10 minutes to half an hour. Just be sure to use LLC specific bank and credit accounts for transactions, and work with a good accountant to keep your taxes in order.
What Airbnb Hosting Tips Do You Have?
How risky is this business, anyhow? The statistics paint an optimistic picture. According to Priceonomics, Airbnb hosts are taking in over $900 each month on average. If you take the median, hosts are pulling in over $400 month over month.
The average is quite a bit higher based on “SuperBNBs” that charge substantially more than your typical Motel 6. Think Beverly Hills 8-bedroom BNBs with a heated pool…
There are challenges to be sure. Several municipalities are clamping down on the explosion of sharing-economy landlords. It’s super important for prospective hosts to learn about the climate for Airbnb businesses in their target market.
Become an Airbnb host today and make serious money towards YOUR early retirement.