What is Airbnb Rentals?
Have you ever wanted to get into real estate but didn't know where to start? Many think you need to own or sell real estate to be in the real estate game. However, there are other options to take advantage of the real estate market. One relatively new real estate category is something called short term or vacation rentals.
If you've ever been on a business trip before or you've gone on a holiday trip, most likely you've needed to stay somewhere for several days. Since the inlaws or a friend's couch is probably not the ideal solution, hotels, motels, and resorts are the most likely option.
However, with the advent of the sharing economy, normally reserved for hotels and motels, the short term or vacation rental market has opened up to anyone that owns real estate property. Even if you don't own real estate, you can still take part in his emerging economy.
If you aren't familiar with Airbnb, they are a global online marketplace for short term housing rental and tourism experiences. Their bread and butter, however, is their housing marketplace. It's an alternative solution to hotels for short term stay. They operate through websites and mobile sites that allow renters to find short terms rentals from homeowners willing to open up their homes or their investment properties.
Airbnb has opened up an opportunity for homeowners and investors to rent out their properties on short term rental terms. It's an alternative solution to month-to-month and yearly rental contracts for homeowners and investors. This works best for those that use their properties as vacation homes or investment properties.
There are other short-term/vacation rental sites like HomeAway, Tripping, and VRBO, but the most prominent is still Airbnb.
How Does it Work?
How Do You Make Money?
arbitragersThere are generally three ways of making money with Airbnb Rentals:
- (1) Owner Host - You own the property and you rent it out through Airbnb.
- (2) Rental Arbitrage - You lease property from property owners and you rent out the property on Airbnb looking to make a profit after paying for the monthly lease expense.
- (3) Co-hosting - You partner with property owners and manage their properties through Airbnb listings without paying for any leases or owning any property. You make a percentage of the rental amount.
As an owner host, you own the property and you also manage your Airbnb rentals. This is a great way to pay down your mortgage while even generating cashflow.
The limitation with owner hosting is the capital required to purchase more properties. This limits the amount of cash flow that you can generate if you're only renting out properties that you own.
Rental arbitrage is beneficial if you're able to effectively rent your leased property above your lease rate. The downside is that you take on the risk of not being able to cover your rental cost. The upside is that you can keep everything after all your expenses are paid and you're able to scale up on the number of properties you rent. However, not all homeowners are willing to rent out their property to renters that are sub renting their property.
With co-hosting, you become a property manager for property owners that want to utilize the Airbnb rental model but don't know how or don't have the time for it. Many property owners are willing to cohost because they can get higher rental amounts than long term lease rentals. Also, it allows them the flexibility to use their properties when they want.
You make money by taking a management fee, usually a percentage of revenue, fixed amount, or a percentage of profit. That's up to the property owner and yourself. For example, if your management fee is 20% of revenue, you rent out a property for $200 a night, your portion is $40 that night. If you have 10 properties under management, each renting at $200 a night, your portion would be $400 if all 10 properties were rented out that day.
What Are The Pros & Cons?
- Ability to generate significant cash flow.
- Little risk if you don't own the property or have a lease contract in place.
- Ability to scale income.
- Able to automate most parts of the business.
- Not stuck to a certain location. Work remotely after initial property staging.
- You have to deal with property owners if you don't own the real estate.
- Since you don't own the property, you aren't building a long term asset in the property.
- You have to find properties in good locations and then convince the property owner to partner with you.
- Deal with occasional bad renters.
Estimated Startup Cost
Technically, you don't need funds to start Airbnb rentals. The more affordable route is cohosting, where the property owner fronts all the expenses to stage a home, making it attractive to Airbnb guests. However, it could help by having an attractive website and business cards that show your level of expertise and professionalism when attracting cohosting partners.
Key Activities as an Airbnb Co-host
As an Airbnb co-host, you'll initially spend a fair amount of time finding properties to manage and getting them rental ready by staging them. As you start building up your properties under management, your time will shift to daily activities like managing listings, dealing with tenants, and cleaning/preparing rental units. Many of these things can be automated by implementing a system in place.
Start Airbnb Rentals
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By Brian Page
Hi, my name is Brian Page and I'm the creator of the BNB Formula.
I’ve cracked the code on how to become financially independent by renting properties I don’t own and listing them on Airbnb.
This opportunity has nothing to do with starting a complicated online business. In fact, if you’ve ever rented an apartment or a house before – you already know how half of this works!
I should know, I did it myself.
A few years ago, my roommate unexpectedly moved out and left me responsible to pay the rent. So I listed his room on Airbnb.
Within a couple of months, the earnings from that room covered all my living expenses, including my utilities. So I began renting (not buying) other properties near me and listing them on Airbnb.
And in less than six months I earned over six figures.
I was able to quit my job and have now taught nearly 7,000 people in 38 countries how to do what I did.
Listing rented properties on Airbnb is extremely lucrative
….it’s a game changer.