Photo (cc) by Manoir de la Boirie
Airbnb, the monster vacation rental company, has nearly 1.4 million listings of homes and rooms around the world available for rent by the night. (To picture the scale of this, see a map of New York City Airbnb offerings.)
Asking investors for a $1 billion cash infusion recently, Airbnb valued its business at $24 billion, says The Wall Street Journal. Who can blame you for wanting a tiny chunk of that treasure for yourself?
The economics of hosting
How much money are people making hosting their homes? Yahoo Finance ran the numbers, saying, “It’s still all about location, location, location.” In hot locations, earnings are high:
- In Miami, San Diego, Chicago and Philadelphia, for example, renting one room in a two-bedroom home earns enough to cover about 90 percent of the monthly rent or house payment, SmartAsset, a financial technology company, tells Yahoo.
- In Houston, earnings cover around 100 percent of a host’s rent.
You’ll make more, of course, by renting out your entire home.
- Top earning cities include San Diego (average profit: more than $31,000 a year), Miami (nearly $28,000), Chicago, Boston and San Jose.
- Yahoo didn’t publish the entire list of cities and profits to be made there, but anticipated profits ranged from $15,000 to $31,000 a year with an average of $20,619.
Other cities have higher rents, but they also have higher expenses, cutting into profits.
To be sure, many other vacation rental companies provide a similar service. Well-known ones include VRBO, FlipKey and HomeAway. Whichever you choose, if your aim is to profit from nightly rentals, pay attention to these 15 tips:
1. Check local rules
Your first step is to learn whether it’s legal in your town to offer your home as a nightly rental. Many vacation rental hosts live in cities or states where nightly rentals are prohibited, yet they do it anyway. If you flaunt the law, you risk expensive penalties that could undermine your profits.
In New York City, for example, hosting your home is illegal if it is for less than 30 days and the host isn’t present, according to The New York Times. The city fined one host $2,400, although a regulatory board ruled in favor of the host because his roommate was present when the host’s bedroom was rented to a tourist. Other hosts have lost money to fines, however, and have been forced to cease nightly rentals.
- Read the terms and conditions for the rental site you are using. For instance, Airbnb’s are here.
- If you are a renter, your lease may have restrictions on subletting; by breaking them you could risk losing your home. (One renter whose landlord gave him the boot writes about it at Fast Company.)
- Legal information site Nolo.com tells how to find the regulations in your city but acknowledges that this sometimes is difficult.
2. Follow the company’s instructions
You can profit from the experience of the vacation rental company you are using. Its site should have instructions to hosts (if not, use another company). For example, Airbnb tells how to host, including how to:
- Price your home.
- Set up a calendar.
- Choose payment methods.
- Set security deposit requirements.
3. Learn from other hosts
For a glimpse into the world of hosting, check some of the online communities for hosts that have sprung up. (From AirHostsForum, for example: “Diary of a Burned Out Airbnb Host,” “Guest wants to host 30 people wedding brunch” and ““Home Alone” children left in my house!“) A few communities:
4. Research the competition
One company, AirDNA, takes host support a step further — for a fee. It tracks “the daily performance of over 400,000 listings across 5,000 cities worldwide” and offers “intelligence reports that feature occupancy rates, seasonal demand, and revenue generated by short-term rentals.” A one-time report for my area cost $49.95. Charges for consulting (on rates, website copy, property management and the like) is listed at $199 to $399.
Or, do your own research: Pretend you are a vacationer in your town and check into each and every rental that could be your competition — same area, similar amenities and size — to learn from what others are up to.
5. Manage expectations
Head off misunderstandings and negative reviews by being frank about pluses and minuses of your home and any of its oddities in your rental’s online description. Avoid upsell and hyperbole. These set guests up for disappointment.
Try to chat a bit with people who reach out to you or inquire about your home. Ask in a friendly way about their plans so you can help ensure that your home fits their needs and expectations. Their happiness is the key to your Airbnb ratings, which are the lynchpin of your profits.