If you've been researching investing in Airbnb properties as a way to gain extra income and to start climbing up the ladder of the real estate world, you're certainly not alone.
As of 2021, there are as many as 2.9 million Airbnb hosts worldwide, with over 600k homes listed as Airbnb rentals in the United States alone. This means that the US holds the title for the country with the most Airbnb businesses currently active and listed on the platform. Honolulu, Los Angeles, New Orleans, Seattle, and Portland are the cities with the highest number of properties listed.
A brief look at this data might be enough to convince even the most skeptical investors to put their short-term rental properties on the popular hosting site — there's a lot of money to be made in the Airbnb business!
Still, the complexity of making an Airbnb business work might put many real estate investors off the journey altogether.
From local restrictions to intensive marketing requirements, managing an Airbnb property is definitely not a walk in the park, and without a blueprint to follow, knowing where to start might be the most challenging part of it all!
So, what should you know before diving straight into the world of Airbnb hosting, and what are the essential steps you need to take before listing your rental space?
If you're interested in how to start an Airbnb business in 2022, you've definitely come to the right place!
Why start an Airbnb business in the first place?
Before we start explaining how you can kickstart your new business, let's answer one of the most common questions new investors have: Why should you start an Airbnb business in the first place?
Unsurprisingly, the main reason is that running a short-term rental property business is incredibly profitable (yes, even in 2022). On average, hosts can make an additional $924 per month renting their property out to travelers, though figures can be a lot higher depending on where the property is located, how frequently you make it available for guests, and what in-demand amenities you have to offer.
Charging guests as much as $300 or even $500 per night is definitely not unheard of if your location ticks all the boxes, and if you're a homeowner who's already considering renting out your home for extra income, you'll definitely make more profit by running a short-term rental than becoming a full-time landlord.
Though starting a hospitality business like this can be complex, managing the daily requirements of a long-term rental can be a lot more taxing, all while not bringing in the income your time and hard work deserve.
Platforms like Airbnb have made home-sharing a lot more accessible and easy to get into, so as long as you understand the market and you're prepared for the costs and risks involved, you'll be reaping the benefits of short-term rental investing in no time!
How to start an Airbnb business in 2022
If you've been thinking of starting an Airbnb business as a way to supplement your income and kickstart your journey into the world of real estate investing, you probably already know the basics of Airbnb hosting.
You'll need to find a suitable property, set a price for short-term and long-term stays, list it on the Airbnb website, and wait for the guests and passive income to come flooding in.
But is this really all there is to starting a successful Airbnb business?
Well, yes and no.
Between getting all your taxes in order, identifying the right market to invest in, and dealing with the necessary permits and licenses, starting an Airbnb business might need a little more time and work than you might have anticipated.
Here are all the key steps you need to take for not only getting started, but thriving in the world of short-term rentals!
Crunch the numbers
The first thing you should do is take a closer look at all the costs associated with running an Airbnb rental, from the cost of purchasing a suitable property to the recurring expenses of permits, management fees, cleaning services, marketing, and remodeling.
If you already own a home that you want to convert into a short-term rental property, you'll definitely have to face fewer expenses, but keeping up with the daily maintenance of an Airbnb business still requires plenty of resources — especially if you want to stand out!
On average, Airbnb hosts spend as much as 15% of every booking on maintenance and repairs, and depending on what advertising avenues they choose to pursue, an even bigger cut on marketing alone.
Once you have a full picture of the costs and a projected monthly income to compare them to, you can start setting a budget to comfortably meet all your needs and avoid taking unnecessary risks.
If you are yet to find a suitable investment property to use as an Airbnb space, this budget will dictate what type of property you can go for, its location, and the extent of any repairs, furnishing, and remodeling decisions.
Research viable markets
Next, you'll want to start doing some essential market research on up-and-coming locations and rising trends in the tourism and hospitality sector.
The reason is quite simple: With so many great hosts and quality stays available in the States and abroad, you'll be in for some fierce competition from the get-go. Researching the most profitable markets to invest in is the best way to guarantee a fully booked rental property and a stable cash flow!
This means looking at locations that are not too popular, yet not so unpopular that they won't attract sizable tourist crowds.
Start by researching which tourist hotspots are projected to become bigger in the following years, and cross-reference them with important factors such as property prices and current Airbnb rentals restrictions. Not all cities support short-term rentals, so you'll want to make sure you won't be spending half your income on expensive permits and sky-high taxes!
Keep in mind that this step is not only for property seekers: Even if you already own a home you want to convert into an Airbnb property, you'll still have to make sure your location can make for a profitable business.
Your research might lead you to invest in other Airbnb properties altogether, or simply just change who you market your stay to.
Identify your dream guest
And on that note, who should you cater your rental property to?
Finding the perfect target audience for your goals requires just as much research as finding the perfect location, and if you want to maximize your chances of success, you'll want your chosen location to match just what your dream guest would want from an Airbnb listing.
For example, you might want to target your stay toward families, usually considered less risky guests than students or singles, at least when it comes to property wear and tear. In order to appeal to a family audience, your rental should be located in a family-friendly area, be close to family-friendly amenities, and be fitted with kid-friendly furniture like high chairs.
If targeting an audience of working professionals, on the other hand, you'll want to pay special attention to factors like WiFi speed, as well as choosing a more metropolitan location.
Find the perfect home to invest in
How much regular maintenance and cleaning will you need to stay on top of?
What are the most popular local attractions you can give easy access to?
How can you repurpose the property for long-term rentals or other investments?
After you have identified the perfect location, these are just some of the key questions you should be asking yourself when viewing a new property.
Not all homes have what it takes to become an Airbnb rental, as you'll usually want your property to be easy to reach and relatively close to major transportation hubs and highways. On top of that, vacation rentals should be versatile enough to be able to be converted into different types of rental properties if you decide to change up your strategy further down the line.
Once you have found the perfect home to fit your budget, you'll want to purchase it with either your own savings, a buy-to-let mortgage, or third-party financing such as real estate syndication and private lending.
Make your business a legal business entity
Next, you'll have to get ready for a fair bit of paperwork.
In order to register your business and sort out all tax requirements, you'll have to form a legal business entity first. The vast majority of Airbnb hosts choose to register their stay as a Limited Liability Company (LLC), as this legal entity is designed to protect your personal assets, whether it's real estate properties, savings, or cars.
This avenue is also best suited for a real estate investor who owns multiple properties alongside a personal residence, as you can put all the short-term rentals you own under one LLC and maximize your tax savings.
Forming an LLC is quite straightforward: You'll just have to pay a standard filing fee ranging between $40 and $500, depending on where the asset is located.
The biggest benefit of starting an LLC for your Airbnb rental is that you will be covered for whatever accidents might happen at the property, as hosts are found liable for any damages taking place on the premises.
On top of that, setting up an LLC will allow you to pass your business income through your individual tax return, so you'll only be subjected to income and self-employment taxes.
Research insurance options
When it comes to insurance, you'll have to apply different kinds of plans to make sure you're 100% covered on all fronts.
Airbnb already offers a good degree of cover when registering your property on the site, with the platform's host protection insurance protecting you against damages of up to $1m.
But for anything else, you'll have to start filing the paperwork yourself!
First, you’ll need to apply for homeowners insurance on the property so it can be covered on the days it's not being rented out. The best course of action will be to research insurance companies that offer home-sharing insurance options. Next, you’ll also need to apply for business insurance to cover general liability for when you are actively renting, as well as workers' compensation insurance if you hire staff to oversee and clean the property while you're away.
Make sure you have your permits in order
As we hinted at earlier, not all cities are welcoming of short-term rentals, and depending on your location, you might have to pass through multiple hoops and apply for different licenses to run an Airbnb rental.
Generally speaking, you’re always going to need a business license to operate any type of business rental, so you'll have to apply for either a TOT certificate, a Land Use Permit, or a Lodgers Tax License to run your business locally, depending on where you're based. On top of that, you’ll need to register your business with the local county agency responsible for collecting all hotel tax.
When it comes to paying taxes, you'll also need to make sure you are following local regulations.
In some tax jurisdictions, Airbnb is the party responsible for collecting the local occupancy tax on your behalf, but in different locations, it is the hosts that are considered responsible for making sure their Airbnb earnings are used for paying income tax.
Open a business bank account
The last piece of paperwork you'll have to deal with is opening a business bank account to make accounting tasks easier to keep track of.
Airbnb will provide you with a 1099-K for filing your taxes as long as you conduct 200 or more transactions on the website, so having a dedicated account (and credit card) will help you deduct expenses and file taxes more easily.
Get your property ready for hosting
With all taxes, insurance, and licenses taken care of, your next course of action will be to get your property ready for receiving guests.
This means that you will not only have to make sure the home is fully furnished and repaired but also organize your business plan for the year ahead.
If you're planning on managing the property remotely, you might want to hire a property management company to take care of the rental space for you, so they can help you sort out any maintenance issues, and manage your listings and guests. You will also have to find a local cleaning company to come in and make sure the house is ready to receive guests, as you will have to do pretty extensive cleaning in between guests checking out and checking in.
Set your rates
Setting your rates will require no small amount of research, as you'll have to compare what your local competitors are charging to what your property offers. Make sure to adjust listing prices according to changing demand and tourist seasons.
For example, you can charge premium prices for spacious rentals close to popular attractions and desirable amenities, and even more when there's a shortage of properties in your local area and you're listing during peak season.
During the low season, on the other hand, you will have to lower your prices to keep your stay competitive and continue attracting guests, as prolonged vacancy periods can quickly eat into your profits.
Write your first listing
Time to create your very first property listing!
After signing up on the Airbnb site and registering as a host, you'll want to take your time crafting a detailed description of your property, using SEO writing. To make your online listing as visible as possible make sure to take high-quality photos of the space.
Make sure to pay special attention to lighting and angles when taking pictures, as it can be really easy to misrepresent what your property looks like with a shoddy photo.
Hiring a professional photographer is usually worth the investment, and so is identifying the best and most competitive features of your property to showcase in your listing, especially when it comes to the very first opening lines and listing title.
Market your property right!
Once you have put your listing on the website, you'll want to continue marketing your property on different platforms to ensure you are reaching your target guests and preventing long vacancy periods.
In addition to listing on other home-sharing platforms like VRBO, you might want to start your very own business website and even social media account, so you can boost your property's visibility organically or invest in some paid advertising.
The best way to thrive in this business is to stay on top of trends and keep reimagining your rental to fit changing demands, so don't forget to go back to your listings to tweak the descriptions or update your pictures!
Find the perfect property for a successful Airbnb business
There are so many different ways to make money in real estate, and if you find that running an Airbnb business is not the right call for your goals or skills, you won't have to look far to find a better avenue to pursue.
And you don't need a lot of capital either to get started: There are a number of other investment options you can engage in with as little as $50k in the bank!
We want to make short-term rental investing accessible for all, whether you want to turn real estate investing into a full-time job or simply want to earn extra passive income by managing properties remotely.
Browse our latest listings or learn more about the benefits of short-term rental investing today.