A Short Guide to Short-Term Rentals, via Airbnb
Are you looking to invest in a rental property? Or perhaps you already own a second home in a beautiful country but spend less time there than expected. Investing in real estate is the ideal solution for people who want their money to work for them. One popular way is through short-term rentals via Airbnb.
If you're wondering:
Is it profitable to run an Airbnb?
Is it difficult to start an Airbnb business?
How much do Airbnb hosts earn?
What kind of commission does Airbnb charge?
How to earn passive income with Airbnb?
…then I wrote this text with you in mind!
What Exactly Is Airbnb?
Airbnb - or rather "Air Bed and Breakfast" - is an online service that allows you to rent accommodation from private persons. It was launched by three friends who moved to San Francisco in 2008. When struggling to pay their rent, they came up with an idea. Attendees of a design conference who had nowhere to stay could pay to sleep on an inflatable mattress in an apartment two of them owned. The idea turned out to be a hit, and Airbnb was born.
Interestingly, one of the co-founders' fathers has Polish roots!
Since its establishment, Airbnb has grown into a multi-billion-dollar company with more than 4 million listings in over 100,000 cities worldwide.
What Makes Its Business Model Such a Huge Hit?
The Airbnb team are constantly working to maintain an edge in the market. Examples of their strategy are:
Diversification: Airbnb has expanded beyond short-term rentals and diversified its product selection to include travel experiences, such as tours and activities and boutique hotel-like packages.
Partnerships and Acquisitions: Airbnb has partnered with several companies and made acquisitions to expand its services and reach.
Investment in technology: innovative tools and features, such as Airbnb's Superhost programme, help improve the user experience and maintain the company's competitive edge.
Focus on Sustainability: initiatives such as the "Night At" campaign, which helps promote environmentally friendly and unique accommodations, set Airbnb apart from its competitors.
Expansion into New Markets: Airbnb continues to expand into new markets worldwide, which has helped the company reach new customers.
Airbnb's innovative business model helps them stay ahead of the competition while creating and promoting a new market for short-term rentals and unique travel experiences.
There are many factors to consider before listing your property on Airbnb.
Don't base your decision on hearsay success stories - there are methods to help you make an informed choice. Firstly, remember that (despite the undeniable popularity of short-term rentals) it may not be the best or most cost-effective option for you. It all depends on your conditions and needs.
Long-Term Rental or Short-Term Rental:
The advantages of long-term rentals are:
More Predictable Income - knowing how much cash is coming through each month makes it easier to schedule a maintenance and repairs budget and predict the potential investment return more accurately.
Lower Tenant Turnover - tenants usually take care of the basics, such as house cleaning, gardening, and utility payments. Additionally, they tend to look after the property better – as they consider it their home.
Easier Financing - investors are offered more attractive interest rates and financing terms, as the creditor perceives long-term rentals as having less potential risk.
The disadvantages of long-term renting are limitations on raising rent, difficulty performing routine maintenance, and the risk of renting to the wrong tenant. You also won't be able to use your property regularly.
The advantages of short-term rentals are:
Greater Income Potential - you can easily adjust the rental price to the current market rate, maximising your gross rental income.
Easier Maintenance - the property is thoroughly cleaned and checked for any maintenance issues before a new tenant arrives.
More Flexibility - you can use your property alone or with your family by blocking the dates you want on your calendar.
Disadvantages of short-term rentals include the lack of a steady rental income, higher operating costs, and local regulations restricting or prohibiting such rentals.
You also need to consider several issues:
Are you renting to make the property pay for itself when you're not using it, or do you want to make this your primary source of income? Your goal should determine the amount of capital needed and the level of risk. There are three main types of landlords:
1. Those wanting to earn a few extra Euros out of their space.
2. Those who want a stable additional source of income.
3. Those who want to build a serious business on Airbnb, which will eventually become their primary source of income.
The greater the income potential, the more planning, capital, work, and risk you must put into this investment. Your needs will dictate the location, size, and nature of your listings, as well as the tools and strategies used. To illustrate, use the profit calculator: https://www.airdna.co/airbnb-calculator
As an Airbnb host, you regularly invite strangers into your home (or one of your homes). If this aspect of the venture makes you anxious, then Airbnb is probably not for you.
Have realistic expectations about the time commitment of an Airbnb host. It takes more than just listing your property to earn money. First-time hosts are often shocked by the time and effort required to provide the right experience for their guests. Fortunately, you can outsource these responsibilities to rental property professionals or find a trusted co-host in your circle of friends.
Where to Start?
1. Find Out if You Need a Permit
Obtain the appropriate permit from your housing cooperative council or homeowners' community. Research if there are restrictions on short-term rentals.
2. Prepare Your Rental Space
Costs to incorporate into your budget include:
Installing a keyless lock to make giving and receiving keys easier (a mobile app will save you the stress of ensuring doors/windows are locked, letting late guests in, etc.).
Buying and installing appliances to make your guests more comfortable, such as a refrigerator, washer/dryer, microwave, coffee maker, dishwasher, and TV.
Equipping the kitchen (plates, bowls, cups, cutlery, a set of simple pots and pans, and basic groceries such as coffee, tea, sugar, spices, cereal, and distinctive local products).
Stocking the apartment with several aesthetically consistent (and easy to wash/iron) sets of linens, towels, washcloths, etc.
A supply of basic toiletries (liquid soap, shampoo, conditioner and shower gel, lotion, extra toothbrushes, or razors), household chemicals (dishwashing liquid, dishwasher/washing machine capsules, etc.), paper towels and toilet paper. (To get the highest possible rating, you must offer more than just the essentials).
Fire alarm and fire extinguisher.
Cable TV/Netflix/HBO, fast and efficient internet.
Cleaning services between bookings.
Agency fees (if you use one) or your trusted co-host's salary.
Taxes.
Promotional costs (professional photos).
Decor - making your apartment aesthetically pleasing and functional can be very affordable, and it will significantly affect the first impression of potential guests. Remember that people " shop with their eyes" on Airbnb.
Providing additional amenities where possible (e.g., for people with disabilities, young children, remote workers, and pets). There are fewer listings like this, giving you more visibility.
Insuring your apartment (Airbnb guarantees Host Liability Insurance and Host Property Damage Protection if a guest damages your place or property during their stay. Here are the details: www.airbnb.pl/help/article/279).
Read your agreement with Airbnb very carefully, knowing it will help you in many situations. For example, from a friend's experience: after an Airbnb renter flooded the wooden floor of their apartment, they had to provide a proof before getting reimbursed for repairs, including:
o That they reminded the renters to close the roof windows in case of rain.
o That it rained heavily in that location when they rented (the guests claimed it didn't, but three independent online weather tracking services proved otherwise).
o The cost of purchasing and installing the damaged floor (invoices), the percentage extent of the damage and the current cost of installing and purchasing a new one to the same standard.
Ultimately, after many emails and phone calls (plus convincing the Airbnb staff that they read the contract with understanding, and the effects of the summer storm were not "natural disaster damage" that would exclude financial liability, as it was suggested to them) they received the full amount. It's always good to know your rights!
3. Set a Price
Think about affordability, audience, and market.
The fee for most Airbnb hosts is 3% of the booking total (this is higher if you are an Airbnb Plus host or have a very strict cancellation policy). The listing price your guests see is higher than what you earn.
Airbnb's metrics show how your per-night rates compare to other Airbnbs in the area and when it's worth considering lowering (or raising) prices on certain weekdays/holidays or festive seasons or if there's a surge in demand. You can set a minimum number of nights for guests to compensate for the cost of maintaining the space (cleaning and upkeep). Consider charging for additional guests or services, such as deep cleaning, equipment rentals, or local tours.
Airbnb collects fees from guests prior to arrival and then sends you the money according to your chosen method (for example, PayPal or direct deposit) 24 hours after the guest checks in.
Other factors affecting your payout include weekly or monthly discounts, weekend or seasonal rates, or VAT.
4. List Your Space
Write an honest offer. Don't exaggerate the advantages or hide information about problematic details:
Highlight what's unique to make it stand out from other offers.
Point out the amenities and advantages of the location.
Include professional photos (of all the rooms and the area) to help visitors understand the size and layout of your property.
Use a template of the house manual (for easier communication with guests) https://hosttools.com/blog/short-term-rental-tips/airbnb-house-manual/.
Make a checklist for your chosen cleaning company.
5. Hire an Agency or Get the Help of a Co-Host.
Ask at least one trusted person who is authorised and knowledgeable to help with:
Emails and communication with guests.
Repairs and care of the apartment (including urgent issues).
Guidance for guests regarding location.
Check-in process.
Add a co-host to your listing (up to three people) and make sure they understand Airbnb's Co-hosting Terms and Conditions. If you can't find a trusted co-host, use a professional company that handles short-term bookings (I wrote about them in the article: To outsource rental property management or not to outsource - that is the question).
How Much Can You Earn as an Airbnb Host?
Your earning potential depends on:
How much you pay for your space.
How often you can/want to rent it out.
Expect moderate profits initially, especially if you can't devote much time and energy to Airbnb. The more effort you put into making your space beautiful and functional - and the more time you spend interacting with guests - the better your reviews and ratings will be. Responding quickly to inquiries is crucial.
You will be rated on the overall experience, accuracy, cleanliness, communication, check-in, location, value, and amenities. Good reviews will help you move up in Airbnb's search rankings, which means you'll appear more often in search results and therefore get more bookings.
How Much Are Airbnb Taxes?
By operating an Airbnb, you may be considered a small business owner by the property country's tax administration. You will have to report any income and expenses on your tax return. If you earned more than $600 during the calendar year, Airbnb will send you a form to help calculate and report your business income.
You may be able to deduct certain expenses related to your Airbnb business on your tax return:
Mortgage or rent for your property.
Utilities consumed during the stay.
Insurance for the property.
Repairs to the property.
Cleaning service.
Consult a qualified tax advisor to ensure you make the correct deductions and fully understand the tax regulation, especially if your property is in a country where you do not reside permanently.
Even when outsourcing your rental service to an agency/hiring a co-host, you should regularly review the process by:
Checking the cleanliness and maintenance of equipment.
Restocking the inventory.
Making improvements based on guest feedback.
Running an Airbnb is about meeting guests' expectations. Their reviews are often excellent business tips on optimising your rental profits.
If you have questions about short or long-term rentals in Spain, contact me:
Edyta
You can also find me:
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