If you’ve been wondering how to start an airbnb business, you’re in the right place. Airbnb is a service that lets homeowners rent out space to visitors. It’s like a private hotel network. Unlike a hotel or motel, Airbnb accommodations give travelers the feeling of being at home.
Guests can stay for as little as a day and as long as several months. If you’re a homeowner looking to diversify your income, this could be the perfect business opportunity for you.
To help you get started with your Airbnb business, we’ve put together this easy-to-follow guide. Follow these steps to make sure your business is well-planned, law – abiding, and properly incorporated.
Why You Should Consider Starting an Airbnb Business
There are lots of reasons why you might want to start an AirBnB business. For starters, if you travel a lot, you could be making passive income from other travelers staying in your home.
Some Airbnb owners also use the property as a rental and don’t live in it at all. If you’re interested in investing and don’t like the idea of someone staying in your personal space, Airbnb is a great business venture to consider. It’s important to check with your city and any homeowner’s associations to make sure short term rentals are allowed.
How Airbnb Hosting Works
Homeowners with everything from a single room to a whole house may use the site to post their property for rent. People seeking for a room to rent in a specific location may then use Airbnb’s website and app to filter through the offerings and discover something that suits their criteria. In several circumstances, you may stay at an Airbnb for less money and have more space and amenities than a hotel room.
For travellers, booking an Airbnb is basically the same as booking a hotel online. They go to the app, search for rentals in the area they’re visiting, and enter the dates of their trip. The site will then find a property that suits their needs.
Airbnb estimates that there are over two million guests staying in an Airbnb on any given night, with over seven million listings in over 100,000 cities globally. As a host, your job involves laying establishing fees, and making sure that your guests have a great experience. This includes things like creating smooth transitions, laying down reasonable ground rules, and adding special touches (offering city guides, games, or a coffee/tea bar).
Questions to Ask Before Starting an Airbnb Business
Can you commit your time to hosting?
Listing and keeping a good Airbnb listing takes more time and work than you might think. You’ll need to take into account that your visitors could contact you at any time and you’ll need to be available to respond to any questions or concerns they might have. When you’ve gotten your processes down you’ll be able to spend less time managing reservations. But you’ll still need to be there for your guests when they need you. Do you have the time and flexibility to put in the effort required to be successful?
Can you commit financially? Do you have all costs covered?
It’s not enough to establish your daily and weekend pricing and then leave it at that. Unless you’re willing to lose money, getting optimum pricing right the first time and keeping it right as you continue to host on Airbnb takes patience. Are you up for the challenge of monitoring competing rates to maintain your price profitable? Are you ready to pour in money for snacks, maintenance, cleaning, and other fees and costs to keep your business up and running?
Is your space legally rentable?
Most folks who have a single-family house and are paying a mortgage on it or own it outright should be legally allowed to rent it out on Airbnb. Some occupancy laws may ban you from renting out through Airbnb if you live in a condo, apartment, or townhouse.
Some cities and municipalities have regulations that prohibit paid visitors from staying in private dwellings for short periods of time. You confirm that you will respect your local norms and regulations when you agree to Airbnb’s terms of service. Finally, it’s your responsibility to do your homework so that you don’t break the law.
Costs Involved in Starting an Airbnb Business
When you get started, make sure you have a business mindset. It takes money to make money! In general, a 1-bedroom home will cost between 6,000 and 7,000 dollars to furnish and make it suitable for renting. A 2-bedroom condo will cost between $8,900 and $9,900 if you’re starting from scratch. This number dwindles incredibly if you already own your own furnished home.
Cost involved in starting an airbnb business includes:
- Security Deposit
- Subscriptions for guests (such as Netflix)
- Soft goods (pots, pans, toiletries, etc)
- Services (a professional photographer, a bookkeeper)
As you gain expertise, you’ll get better at pinpointing exactly where you can cut costs and save money.
How Does Airbnb Approve Listings?
As of 2020, Airbnb has verified every single listing. As part of the process, all hosts and postings will be checked to ensure that they are who they say they are, that images and content are correct, and that the locations fulfill safety requirements. Verification doesn’t mean that Airbnb is going to send inspectors to each and every house and apartment listed on the service. Instead, a combination of corporate and community monitoring will be used to verify the information.
8 Steps to Start an Airbnb Business
1. Make an AirBnB Business Plan
As an entrepreneur, you need to have a well-thought-out strategy. It will help you map out the specifics of your company and uncover certain unknowns. For example, the costs of insurance, entertainment subscriptions, and any amenities you want to offer your guests.
2. Form a Legal Entity
The sole proprietorship, partnership, limited liability company (LLC), and corporation are the most popular business structures.
If your airbnb business is sued, forming a formal business organization like as an LLC or corporation safeguards you from being held personally accountable.
3. Register for Taxes
Before you can start doing business, you’ll need to register for a number of state and federal taxes.
You will need to apply for an EIN in order to register for taxes. It’s very simple and completely free!
4. Open a Business Bank Account
To protect your personal assets, it’s important to set up distinct business banking and credit accounts. Separate your personal finances from your business finances with NorthOne.
5. Obtain Necessary Permits
If you fail to get licenses and permission from the appropriate authorities, you can be hit with significant penalties…including losing your business.
6. Get Business Insurance
You’ll need to invest in insurance to make sure that your business is operating safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
7. Know Your Target Market
Guests who stay in Airbnb spaces expect a more personalized experience than they would in a hotel or motel. Think about what you can offer your guest that a hotel can’t. For example, homey touches like a stocked library, or popular local food items like honey or baked goods.
Consider nearby attractions such as colleges, stadiums, and event centers to establish your target market. For example, are you hosting more business travellers, or families on vacation? This can influence the kinds of amenities you offer.
8. Choose What to Charge
The cost of renting varies based on the size of the home and the location. The majority of the pricing is close to local hotel rates, but you’ll need to do some market research to figure out what the proper rates are in your location. Don’t forget to consider things such as a late checkout fee or a cleaning fee.
How much can you make by owning an Airbnb?
California was the state in the United States where Airbnb hosts made the highest money on average in 2020. In 2020, Airbnb hosts in California earned an average of $32,876 in host earnings, up from $32,142 in 2019.
In 2020, traditionally strong vacation rental markets topped the lists, with hosts in Colorado ($32,441), South Carolina ($27,615), and Florida ($27,362) making the most on average as Airbnb hosts.
Click here to see the specific information for your state.
Do I need a business license to run an Airbnb?
Since you’re asking how to open an Airbnb business, in many places across North America, you’ll need to get permissions and a business license. While the specific regulations may change, there is typically little difference between renting out a room of your house and listing numerous homes on Airbnb. Consult your city council to find out what is required in your region.
We hope this guide helps you decide if an Airbnb is right for you. If it is, now you know the steps needed to make it happen. Hosting an Airbnb can be a great form of passive income. Good luck on your business ventures and be sure to come back for more helpful tips for small business owners.