Rental properties are nice. Once you get them up and running, you can make them a nice source of passive income. Many rental property owners manage their rentals remotely and hardly ever have to visit them.
Sounds great, doesn’t it? Sure. Until that little voice in the back of your head starts asking:
“Can we do better?”
Many people have done better. And they’ve done it with AirBnB. People will pay more for a couple of nights than they will for a month, or a year.
AirBnB is a website service people use to rent out anything from extra space in their own home, to rental properties, vacation homes, cabins or any other unused real estate. Renters can rent the spaces anywhere from a night to a month or more.
Ever have someone wiling to sign a 2-3 year lease in exchange for a reduction in rent? Or a free month? The same works in reverse. And that’s why AirBnB can be so attractive.
The trouble is the turnaround. When you have someone renting for a year or more, you don’t have to clean, repaint or fix up the place for a long time. You also don’t have to pay for all that maintenance.
When people are moving in and out every couple of days, you will have some turnover fees much more often. Obviously, you won’t have to paint the place with every new tenant, but you will still have to clean it. Or pay for maintenance.
Another difference between renting your place the traditional way and renting it on AirBnB is that you will have to furnish the place. People who rent for a night or two won’t be bringing their own couch.
Willing to Work a Little More? Willing to Make a Lot More?
If you have to clean your rental a lot more and furnish it, maybe it’s worth sticking to the traditional rental model. But hold on. Take a look at the difference in potential income for you.
Here is an example we just pulled from Craigslist, close to the Las Vegas strip for a rental apartment the traditional way:
Now look at a typical 1BR apartment close to the strip on AirBnB:
When we looked at booking this one-bedroom apartment on AirBnB in March 2016 for an April stay, we saw that 16 days had been booked at $168/night. Do the math. The AirBnB apartment is returning $2,688 for April – nearly 5 times the traditional apartment rental!
This is also a great way to determine what your potential revenue will be if you turn your place over to AirBnB. Just click on the other listings like yours and see how many days they typically rent out each month.
Now the downside – the work.
In order to run the rental, you will need a cleaner and property manager. Both of those people can be you, but what’s the fun in that? Maybe you can combine them into one person and save some money as well. By hiring these functions out, it means you can manage your AirBnB place remotely.
Consider negotiating with a cleaner to be the property manager. You can offer to pay them a flat monthly rate, and they can do an unlimited amount of cleanings and changeovers. You just handle the marketing and advertising.
When you furnish the home, it makes sense to buy a couple of sets of linens and towels. Many times you might have people move out at noon and new guys move in at 3pm. Instead of your cleaner scrambling to wash everything, they can just swap them out and wash at their leisure.
It would probably be good to have contractors (plumbers, electricians, etc.) on your speed dial just in case.
As you set up the advertising for your place on AirBnB, you should seriously consider having AirBnB send over one of their professional photographers to get some great pictures. The better the pictures, the more calls you receive.
Many people worry about strangers coming in their house – or guests worry about renting from a stranger. That’s why AirBnB has an identification verification service. You will probably want to have them verify you to make your renters feel more comfortable.
AirBnB ‘hosts’ also greatly rely on reviews to help rent their place out. When you are just starting out, you won’t have much in the way of reviews. Just like renting out a place traditionally, if you don’t get many calls to rent, lower the price. Lowering the price will bring more people and more reviews will follow.
You also have a chance to review your tenants as well. But be careful of giving a tenant a bad review. They may retaliate and give you a bad review as well.
Make Sure You Use ‘Protection’
Renting to strangers involves risk, no matter how you do it. It’s a good idea to mitigate those risks as much as possible. Many of the actions are very similar to what you would do with more traditional rentals.
Start with insurance. AirBnB offers $1 million in coverage for property owners to cover losses caused by theft or vandalism. That doesn’t cover other problems with the house or injuries to guests. Make sure you check with your insurance agent to put all the other necessary coverages in place.
The last thing you want to have happen is for someone to shut you down. Or pay fines. Before you jump in on AirBnB, do some research. Are there laws for your state/city/town/county that prohibit short-term rentals? New York City has been imposing fines for certain AirBnB hosts.
What about homeowner’s associations? Make sure they are okay with short-term rentals.
Leaving instructions for your tenants might also be an easy way to have them behave the way you want. Plus, if they do something bad, you can show the court or insurance company the written rules they did not follow.
AirBnB is not for everyone. But it sure can be profitable. As you grow your real estate empire, it pays to look into upselling and growing the income on the properties you have.
Whatcha Got to Say?
We’d love to hear from anyone who’s had rental experience with AirBnB. Share below.
Upsell – What can you do to ring out more revenue from each of your rentals? AirBnB? Pay laundry? Commissions for recommending local businesses to your renters? Keep thinking about it.
Outsource – Even if you don’t run your properties virtually, act like you do. Wouldn’t it be better to spend your time finding new deals than fixing toilets?
Protect Yourself – The best investors protect their downside. Do your due diligence on properties. Purchase insurance. Use contracts and outside services to make sure you don’t get in trouble.