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.
6. Get verified
Airbnb uses a verification process that requires users to prove who they are through various methods. Airbnb explains verification here. Users can authenticate themselves by, for example, providing ID, or posting a photo of themselves or linking their Airbnb profile with one on Facebook, LinkedIn or Google.
Your Airbnb profile displays how many verification badges you’ve earned. Earning badges gives potential guests more comfort in renting from you. Earn a badge by opening “Trust and Verification” on your profile. Click the “Verify Me” button.
7. Screen out the loonies
Another reason to engage potential guests in a bit of email conversation is to assure yourself that you are not dealing with a loony tune.
Forbes columnist Alexandria Talty interviewed one host who told her:
“It is really hard to know if people aren’t crazy. Usually I can tell by the way that they write messages. Sometimes I will ask what is the purpose of your trip and who are you traveling with, and then see from there,” explains Rachel, a New York City native who started renting her Lower East Side apartment to help make ends meet in 2012.
Tips for vetting guests:
- Look for reviews of a guest written by hosts. Some hosts won’t rent to a guest who has not received at least two reviews from hosts.
- View guests’ Airbnb profiles and look for their verification badges.
- Pay and communicate with your guests only through Airbnb.
8. Reach for the stars
Guests rate hosts by giving (or withholding) star ratings in several categories. Stars at the top of your home’s listing show how guests have rated you. (You’ll need reviews from three guests for this to appear.) As you’d expect, Airbnb has plenty of rules to prevent use of reviews for misuse or extortion.
Strive for really stellar reviews. Potential guests will use them as a guide in deciding whether to stay with you and whether your home is worth the price.
Keep a careful eye on your ratings and your guests’ experience. Winning starred reviews is the name of the game for a host who wants to profit.
9. Buff up your profile
Write a great profile for yourself, one that inspires trust in potential guests. Read profiles of other hosts for inspiration. Be real. Authenticity inspires trust and helps guests feel they know you. Describe yourself, your interests and background, why you host and maybe something about your hosting philosophy.
10. Review your guests
Leave reviews of your guests once they have left. This makes it more likely they’ll leave a review of you and your home.
11. Select a communication method
Decide if you prefer email, phone or text. Use your preferred system in communicating with guests to introduce consistency and prevent confusion and lost communications.
12. Provide well-organized guest information
Write a succinct, informative list or note with guidelines for guests. Include everything a guest needs to know in one place. (Leaving additional notes in various parts of your house or texting or phoning last-minute instructions will drive guests nuts and earn you bad reviews.) Your instructions should briefly explain the ins, outs, rules, how-tos and quirks of your home.
For extra points (on a separate page) point guests to great restaurants, shops and amenities in your neighborhood or town.
13. Provide free Wi-Fi
Your guests will be disappointed — practically guaranteed — if you do not offer free, reliable Wi-Fi at your home. It’s a modern necessity.
14. Above all, make it seriously clean
Extras are great. Extra fresh towels and linens, free parking and other goodies. But the quickest way to a guest’s heart is leave your home spotlessly clean. After cleaning thoroughly, take even a second pass at your bathrooms and kitchen. Airbnb’s cleaning guidelines are here.
A few years ago a friend and I stayed at a vacation rental that might have had a lot going for it. But the unkempt condition marred our experience. The linens smelled sour, dust lay thick on every surface, and the kitchen and bathroom were at best marginally clean. Our review gave the place major points off because of this.
15. Manage your calendar like a pro
Your Airbnb calendar is the heart of your rental operation. Become a pro at using it. (Airbnb’s guidance is here.) Avoid at all costs making guests guess when and whether your home is free. “The less you decline a guest, the higher up in the Airbnb search you will appear,” says Talty of Forbes.
Are you tempted to rent out your home to visitors? Have experiences with daily rentals? Share your thoughts in comments below or on our Facebook page.