Did you know Airbnb has a gross booking value of nearly $70 billion per year, and it’s growing at nearly 20% annually? If that doesn’t make you wonder how to start an Airbnb business, I’m not sure what will.
Sid and Eva started Nicasa in 2009, and today their 22 vacation rental properties make nearly $3 million annually. They shared their strategies for providing short-term rentals to business travelers and people on vacation. We’ll show you how these vacation rental owners make people feel like they have come to their second home.
(Wondering where we got the stats from the intro? Check out Airbnb Financials.)
What is Airbnb?
Airbnb is a short-term vacation rental platform that makes money by helping homeowners rent their properties. Airbnb takes a percentage for acting as the intermediary between the Airbnb host and the short-term renters.
What is an Airbnb Host?
An Airbnb host is someone who lists their home, rental property, or Airbnb experience on Airbnb. Airbnb hosting can be a great way to make extra income or start an Airbnb host business in your area.
We’ll answer some questions about successful Airbnb hosting next.
How Much Does An Airbnb Host Make?
Airbnb owners have an average Airbnb income of approximately $20,400. We calculated this number based on the Gross Booking Volume in Airbnb’s quarterly reports and the reported four million hosts. This number includes people who rent rooms and in other countries.
All of the Airbnb owners we have talked to at UpFlip report much higher revenue because they typically:
- Own more than one rental property.
- Aim for 70 to 85% occupancy.
- Optimize their rates based on demand.
Sid and Eva told us:
Find out more about how to start an Airbnb business from Sid and Eva.
How Much Does It Cost To Start An Airbnb Business?
The average price to start an Airbnb business is commonly $3,000 to $6,000 dollars to cover the cost of the following:
- A down payment
The costs can be higher or lower depending on the value of the house, the number of rooms, and your location.
How to Become an Airbnb Host
Airbnb recommends the following process for people wondering how to be an Airbnb host:
- Assess and prepare your property
- Create an Airbnb listing
- Adjust your Airbnb listing setting and rules
- Input your pricing and Airbnb payout method
Read more about how to become a host for Airbnb. We’ll provide a ton of Airbnb Host tips, but find out Airbnb hosting fees first.
How Much Does Airbnb Take?
Most Airbnb host fees are 3%. The Airbnb fees for host businesses are charged on:
∙ Cleaning Fees
∙ Additional Guest Fees
There are some exceptions, though.
How much does Airbnb charge hosts that are exceptions to the 3% fee?
Airbnb hosts may have scenarios where they are charged more than 3%. If Airbnb hosts operate in any of the following conditions, you will have additional fees:
- Airbnbs in Italy
- Apartments with service staff
- Hosts through external software providers
- Strict cancellation policies
In most scenarios, you’ll pay the guest fee of 14 to 16%.
Do You Have Any Airbnb Hosting Tips?
First, review the Airbnb Hosting Guide to get Airbnb tips for hosts.
Sid and Eva explained there are three main skills you need to develop to become a successful Airbnb business:
- Sales Skills: Learn to talk to high-value customers and investors. Giving How to Win Friends and Influence People a read is a good start.
- Business Skills: Learn how to measure and manage margins and customer acquisition costs. For tips, read Zero to One by Peter Thiel.
- Managing People: Sid told us this one is normally the hardest. It is constantly evolving.
Here are links to Sid and Eva’s book recommendations:
How to Start an Airbnb Business
There is plenty to do when you start an Airbnb business. Here’s an overview:
- Research Vacation Rental Laws
- Choose How To Make Money With Airbnb
- Find Airbnb Property
- Form An Airbnb Business Entity
- Register Your Airbnb Business
- Open a Business Bank Account
- Set up Airbnb Accounting Systems
- Get Airbnb Business Permits and Inspections
- Insure Your Airbnbs
- Learn How to List on Airbnb
- Set Airbnb Price for Vacation Rentals
- Market Your Airbnb Property Management Company
- Provide Stellar Customer Service
We’ll go through the list step by step. Get ready to learn how to start an Airbnb business.
Step 1. Research The Vacation Rental Market
Every location has different vacation rental laws, sales tax requirements, and business licensing requirements. You’ll want to understand the area’s Airbnb rental rules.
Airbnb businesses are often subject to zoning ordinances, homeowners association rules, and other laws. Some of the most common laws include:
- Airbnb properties must be inspected by the fire department.
- Small business owner must live in the residence.
- Airbnb businesses must carry business insurance and get a business license.
- No short term rentals in HOAs.
- Must have an in-town 24/7 support person.
It can be quite costly if you try to skirt these rules. Make sure you understand the local laws.
You’ll also want to do market research on the business opportunity.
Research the Airbnb Market in Your Area
A successful business needs Airbnb guests. You’ll want to know:
2. What local attractions draw visitors. Research local chambers of commerce and tourism boards.
3. Seasonal variations in visitors. Try the chamber of commerce for this as well.
Eva gave us an example of seasonality in Seattle:
Next, let’s discuss how to make money on Airbnb.
Step 2. Choose How To Make Money With Airbnb
There are a lot of ways to make money on Airbnb. You might consider:
- Owning an Airbnb
- Renting a room on Airbnb
- Becoming an Airbnb co-host
- Creating an Airbnb Host Experience
- Rental arbitrage
- Providing services to Airbnb owners
Curious to learn more about alternatives to owning a property for Airbnb? Check out our FAQs at the end of this article.
For now, we’ll stick to the first option in the list. Let’s keep looking at the process for owning an Airbnb.
Step 3. Find Airbnb Property
You’ll want to consider the following characteristics when you choose an Airbnb site.
- Location: You need an area with tourism, away from noisy areas like airports, and outside of HOAs. Keep your properties close together if you own multiple Airbnbs. Sid also warned that the risk is lower with Airbnb properties near you because you don’t need a property manager.
- Profitability: Airbnb rentals will have expenses. You’ll need to establish whether is Airbnb profitable at the property. If it’s not three times as much as the mortgage payment, it probably won’t be. Sid told us that you should furnish all your houses with the same products so they are all interchangeable.
- Desirable Qualities: Your Airbnb venture will be more successful if it has good qualities for your demographic. This may be a pool, a movie theater, lots of restaurants nearby, daily cleaning services, or other benefits.
Sid and Eva showed us a movie theater in one of their short-term rental properties. They told us:
Step 4. Form An Airbnb Business Entity
You’ll want to create a separate legal business entity to protect your personal assets from potential lawsuits. A legal entity is a business structure like an LLC or Corporation that will provide financial protection.
Unless you hire a lawyer to assist you, this step should be less than $1,000. Learn more about creating an LLC through the Secretary of State.
Step 5. Register Your Airbnb Business
You’ll need to collect sales tax and comply with local laws like business licensing. Airbnb will collect sales tax in most locations, but there are some places that doesn’t work. You can find more information here.
Each state is different, but you can find out the proper licensing and tax permits from the local SBA office.
Step 6. Open a Business Bank Account
You’ll need a business bank account when you have a small business registered as an LLC or a corporation. This will help you save money and manage your recurring costs better. You’ll also want to have all your Airbnb earnings go into this account and then pay yourself a salary.
You can consider any startup costs that come out of personal funds as business loans so that you can have them returned tax-free, unless you charge the business interest. Just make sure you consult a tax attorney to structure these correctly.
It’s normally best to get a bank account with a local bank or credit union because they typically have higher approvals on business loans. That will come in handy when you’re ready to start managing multiple Airbnb properties. Check out our blog about business bank accounts.
Keep reading for information on accounting for your own Airbnb business.
Step 7. Set up Airbnb Accounting Systems
You’ll want to have an accounting system that you use to track all your income and expenses, including:
- Airbnb revenue
- Property repairs
- Cleaning costs
- Mortgage interest and payments
- Other ongoing expenses
You’ll need to deduct expenses from your short-term rental income to calculate your profit and cash flow to pay your federal income tax.
Sid told us that a property owner renting their primary residence will normally cover the costs of the home and might have additional positive cash flow. Meanwhile, here’s what he had to say about managing multiple properties:
These programs will help you keep up with your cash flow, listing price, occupancy, check-in process, and customer satisfaction as well.
At the end of the year, you’ll need to file your federal tax return, so it’s better to estimate these figures before you take a down payment or security deposit for your rental space.
Step 8. Get Airbnb Business Permits and Inspections
You should have already done the research on how to start an Airbnb in your location. Now you’ll need to comply with all the Airbnb rules for hosting.
Many cities have special business permits that an Airbnb owner is required to have.
Some of them may be fairly complex. For instance, If you were wondering how to start an Airbnb in Las Vegas, you would need to:
∙ List your space for no less than two consecutive nights.
∙ Maintain a 2 person per bedroom, 10 people per house maximum capacity.
∙ Avoid locations within 1,000 feet of another short-term rental, nor be within 2,500 feet of any resort casino. In condos, less than 10% can be Airbnbs or VRBOs.
∙ Maintain a 24/7 local call service to assist customers.
∙ Conduct a $150 fire inspection and correct any issues.
In addition, you’ll need to pay the following for each property:
∙ $1,500 for more than three bedrooms.
Next we’ll provide the information on starting an Airbnb in specific states.
How To Start An Airbnb In Texas
Starting an Airbnb in Texas is pretty easy. Texas has no restrictions on Airbnb and prohibits cities from making laws preventing short-term rental properties. Despite that, you need to:
- Register with the Texas Comptroller.
- Pay local lodging tax and hotel occupancy tax.
- Comply with local requirements, especially if you live in Austin, Fort Worth, Galveston, Houston, and San Antonio.
Read more about Texas Airbnb requirements.
How To Start An Airbnb In Florida
Starting an Airbnb in Florida requires:
- Registering with Florida DBPR.
- Paying state taxes. Learn more from Airbnb’s site.
- Complying with local regulations.
Now you know how to start an Airbnb business in Florida.
Next, let’s look at Georgia laws about Airbnb.
How To Start An Airbnb In Georgia
Georgia does not have Airbnb rental laws in place at the state level, but some cities including Atlanta do.
How To Start An Airbnb In California
The State of California expects you to register and pay for the Transient Occupancy Tax (TOT) and comply with normal business laws, but each city has its own requirements.
You can apply for your LLC and the TOT on Bizfile. It will also direct you to the other appropriate websites to complete your registration process.
Step 9. Insure Your Airbnbs
When considering how to start a Airbnb business, you might not think about insurance requirements.
Fortunately, AirCare for Hosts provides insurance, but if you have Airbnb sales, you may want your own insurance as well.
Simply Business offers insurance for property management companies which you might want to consider if you manage the properties or co-host Airbnb units.
Step 10. Set Up Property for Vacation Rentals
This is probably the most crucial part of how to start Airbnb business operations. Sid told us you’ll want to:
- Purchase nice but cost-effective decor.
- Get blackout blinds.
- Buy intuitive bathroom fixtures.
- Install a security system.
- Take high-quality photos.
Check out our interview with Chris below to learn how to start an Airbnb cleaning business.
Step 11. How to List on Airbnb
You’ll need to go to the Airbnb sign-in page to list a property on Airbnb. Once you sign in, you’ll go to a page that looks like the one below if you’re a first-time Airbnb host.
Then, you’ll answer their questions about the location, amenities, and add some pictures. The more pictures the better.
The sign-up is pretty simple to follow, so I’m not going to go into detail on each step.
Step 12. Market Your Airbnb Property Management Company
Marketing is another critical piece of how to start an Airbnb LLC. Sid told us you’ll want to:
- Create a business website.
- Create custom Google Maps and embed the locations on your website.
- Create Yelp business pages.
- Focus on Search Engine Optimization.
- Share on social media platforms.
Sid also explained:
(Make sure to replace Seattle with your location.)
Step 13. Provide Stellar Customer Service
A successful Airbnb business host should always remember they are in hospitality. Sid told us:
Great customer service covers numerous aspects. From the first time they contact you to when the customer leaves, every experience will impact their view of your Airbnb listing.
Sid provided the following advice for those who want to start an Airbnb business.
The Booking Process
Sid told us during booking you need to make it attractive for customers. That means:
2. Require bookings of a minimum of 2 nights to avoid parties.
3. Automate email reminders.
Manage Property or Airbnb Co-Hosting?
The ongoing maintenance of Airbnbs is a part of the business many hosts don’t think about until it’s too late.
Managing an Airbnb can be a full-time job, especially if you run more than one Airbnb. The alternative is to work with a co-host or an Airbnb management company.
Here are some of the tips Sid shared from his experience:
- Provide every cleaner with a cleaning checklist that lists commonly missed tasks.
- Perform monthly, quarterly, and annual maintenance.
Managing the Team
You’ll need employees and subcontractors if you want to know how to start an Airbnb management company.
Sid has 25-30 employees and subcontractors working in cleaning and property management. He had some suggestions about managing the business structure. He told us:
He offered the following pointers:
- Host a Friday lunch and coaching meetings for all staff and subcontractors. Include investors if they desire.
- Pay above-market rates.
- Provide bonuses for 5-star reviews.
- Most Importantly: Help employees grow in their careers or personally. Loyalty makes better employees. He’s even helped with the down payment on a house to help an employee have a more stable cost of living.
Sid also told us he finds reliable cleaners on Turno (formerly Turnover BNB), Craigslist, and Indeed.
Airbnb How to Host FAQ
Now we’ll answer some of the most frequently asked questions about Airbnb hosting.
How To Start An Airbnb Without Owning Property
There are multiple ways to start an Airbnb business with no property. Some of the best ways are:
- Start an Airbnb cleaning business.
- Perform rental arbitrage, which is renting a space and then renting it as an Airbnb and making a profit on the difference.
- Become an Airbnb Experiences host and take people sightseeing or teach them new skills.
- Start an Airbnb property management company and co-host for other Airbnb owners.
Now that you know how to start an Airbnb business without owning a house, let’s look at how to start an Airbnb with no money.
How To Start An Airbnb Business With No Money
There are a few ways that you can start an Airbnb without money. You can:
- Rent rooms in your home.
- Become an Experience host.
- Save some money first.
- Attempt to get hard money loans.
- Look for houses where you can claim squatter’s rights.
How Does Airbnb Make Money?
How Airbnbs make money is by charging between 14% to 16% on top of the Airbnb host pricing. The guests pay most of this, but the Airbnb hosts pay 3% normally.
How Old Do You Have To Be To Get An Airbnb?
Airbnb requires both hosts and guests that create a member account to be over the age of 18.
Make sure to follow all housing laws and be disclosive when you create your listing. If there are things in your home that could hurt an infant, warn people. If the neighborhood is really quiet, let people know. You can use warnings like this to discourage tenants who wouldn’t be a good fit.
Make sure to read the Airbnb “Become a Host” guide here. We’ve tried to include as much of the information as possible, but there’s a whole lot more to learn.
Can I Airbnb My Apartment?
Some locations don’t allow people to use apartments as short-term rentals, plus apartments are notorious for having policies that could earn bad ratings for your Airbnb.
If you really want to try this, research the laws and the consequences for violations, then do so at your own risk.
Which Approach Will You Take to Airbnb For Business?
Now you’ve got a better understanding of how to get started with an Airbnb business.
There are a ton of options to make a living from Airbnb. It’s up to you to choose which Airbnb business strategy is best for you.
Which Airbnb business will you pursue?