Airbnb has become increasingly popular in recent years, with people around the world renting out their homes or rooms for short-term stays. This trend has allowed people to generate additional income, but the question remains: is Airbnb renting actually profitable?
To answer this question, it’s important to understand how Airbnb works. Airbnb is an online marketplace that connects people who need a place to stay with hosts who have extra space. Hosts can list their space on Airbnb and set their own prices. Guests can browse listings and book a stay.
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Hosts can earn from $5,000 anywhere to $500,000 per year by renting out their space. This number can vary greatly depending on several factors, such as location, size of the space, and time of year.
- Location: This is one of the most important factors when it comes to Airbnb’s profitability. Hosts in popular tourist destinations, such as New York City, Paris, or Tokyo, can charge higher prices and may have more demand for their space than hosts in less popular areas. Additionally, hosts in cities with high hotel prices may be able to charge a premium for their space.
- Size of property: The size of the space is another important factor to consider. Hosts with larger spaces, such as entire homes or apartments, can typically charge more than hosts with smaller spaces, such as spare rooms or shared spaces. However, larger spaces may also come with higher maintenance costs, such as cleaning fees and utility bills. Renting a room may bring $50 per day in revenue, but renting out a big apartment or a house may bring even $500 a day.
- Season: The time of year is also a crucial factor in Airbnb’s profitability. Hosts in areas with seasonal tourism may see a significant increase in demand along with prices during peak travel times, such as summer or holidays. On the other hand, hosts in areas with low demand during certain times of the year may struggle to fill their space and may have to lower their prices to attract guests.
Costs of Airbnb renting
Despite the potential for high earnings, Airbnb renting also comes with some expenses. Hosts are responsible for maintaining as well as cleaning their space, which can be time-consuming and costly.
Additionally, Airbnb charges hosts a service fee of 3% for each booking, and guests are charged a cleaning fee as well as a service fee in addition to the nightly rate (booking rate + fees up to 14.2%). Don’t forget taxes too.
Main costs to consider:
- Maintaining costs: Anywhere from tens to thousands of dollars.
- Cleaning costs: Depends on whether a host employs a cleaner or does it himself/herself.
- Airbnb fees: 3% flat service fee.
- Taxes: These vary from country to country (consult with a lawyer).
- Loan or mortgage payments (not applicable to everyone).
Is Airbnb renting actually profitable?
The answer is: it depends. Airbnb can be a lucrative source of income for hosts who have a desirable location, spacious flat along with well-maintained space, and are able to attract guests during peak travel times.
However, it can also be a risky venture for hosts who struggle to attract guests or have high maintenance costs. Hosts who were relying on Airbnb income through covid outbreak had to struggle hard as people were forced to stay home.
Business listed on Airbnb is very dependent on travellers as it is mostly used by foreign people, not local citizens. Hosts who took on mortgages to get in the business may get in big trouble in case of covid-like situations or decreased traveling due to a recession. Now let’s have a look at some crucial figures.
How much Airbnb makes?
According to CNBC, 82% of people think Airbnb-ing is a way to go to make money and 54% of homeowners claim they would consider using Airbnb. On average, Airbnb hosts make a little over $900 monthly worldwide through property renting. According to Mashvisor, the average annual income for Airbnb hosts in the US is $44,000.
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That’s a little less than $4,000 a month. Not bad! Of course, these numbers are just averages and can vary widely depending on the factors mentioned earlier. Some hosts may earn much more than these figures, while others may struggle to earn enough to cover their expenses.
Hosts with a certain edge have the highest potential to make it (e.g. inherited place with low expenses, great location, low taxes). For instance, Shelby Church, a tech and lifestyle YouTuber from LA, made a video about her experience in Airbnb renting, which made around $81,000 in revenue in one year.
“How Much My Airbnb Made In Its First Year,” Youtube video by Shelby Church
She broke down how income from Airbnb varies from month to month, reaching almost $19,000 in revenue just in April, and dropping drastically to $1,500 during the summer months. While some people may say, “wow, $80k a year is great,” the reality may be the inverse.
Shelby Church concluded that monthly costs for electricity, water, gas, security system, mortgage, along with other stuff were around $5,500 a month! Paying a property manager and fixing other stuff in the house ended up being higher than the total revenue, bringing a loss in cash flow.
However, she said the value of the house appreciated by six figures since the purchase. All in all, there are many things to consider before diving into the Airbnb business and realizing this is mostly a long-term investment, so hosts need to view it as stocks (although it is less volatile), which fluctuates over time. If you do decide to start an Airbnb business, here are some tips.
Tips on how to stand out from the crowd:
- Offer unique amenities: To stand out from other Airbnb listings, consider offering unique amenities that guests will appreciate. This could include things like a hot tub, outdoor fireplace, or a complimentary bottle of wine upon arrival. Think about what would make your space more appealing and invest in those areas.
- Respond quickly to guest inquiries: One way to boost your Airbnb ranking while attracting more guests is by responding quickly to guest inquiries. The Airbnb algorithm may favor hosts who are responsive and engage with their guests more. Make sure to check your messages frequently. Responding promptly to any questions or concerns is crucial.
- Make use of professional photography: High-quality photos can make a big difference in how your space is perceived by potential guests! Consider hiring a professional photographer to take photos of your space, or invest in a good camera to take the photos yourself. Make sure the photos are well-lit and show off the best features of your space.
- Price competitively: Pricing is a key factor in attracting guests to your Airbnb listing. To maximize your earnings, you’ll want to price your space competitively. Research other Airbnb listings in your area and adjust your pricing accordingly. Keep in mind that guests are often looking for the best value for their money, so don’t overprice your space.
- Provide exceptional hospitality: Providing exceptional hospitality is one of the best ways to stand out from other Airbnb hosts and earn positive reviews. Consider leaving a welcome note or gift for guests, offering recommendations for local restaurants or attractions, or responding promptly to any concerns or issues. The more you go above and beyond for your guests, the more likely they are to leave a positive review as well as recommend your space to others.
- Build relationships with guests: Building relationships with your guests can help your business earn positive reviews. Consider sending a follow-up message after their stay to thank them for choosing your space, and ask for feedback on their experience. You could also offer a discount on their next stay to encourage them to book with you again.
By following these tips, you can stand out from the crowd when renting out your property through Airbnb, potentially beating your competitors. But remember it’s not all rainbows and sunshine. This is a business like any other, so hosts need to treat it that way. Nothing is as simple as it seems from the start.