If you have the room - either extra space in your home or a separate property to rent out - running an Airbnb is a great way to make some extra income. After all, on average, Airbnb hosts make $924 a month. If you have several properties available or plan to focus on short-term rentals full-time, you could make even more than that.
For some people, it might seem overwhelming getting started as a new host, though. If you've never done anything like this before, you're probably wondering how to start an Airbnb.
There's a lot of planning, paperwork, and research involved in operating your own Airbnb business, and you'll need to stay organized to successfully rent your property. This article will walk you through all the steps you need to take to prepare your Airbnb property and launch your rental business.
What You Need to Know Before Starting an Airbnb Business
There is no formal education or training for operating an Airbnb business. However, the company has some basic host requirements. To provide a comfortable guest experience, Airbnb suggests you respond quickly to guests, accept reservation requests whenever you're available, avoid unnecessary cancellations, and maintain a high overall rating. The company also suggests that you offer your guests basic amenities, such as toilet paper, soap, towels, linens, and pillows.
Licensing and permitting requirements for running your property as an Airbnb rental depend on zoning and administrative codes in your city, county, or state. Before you launch your business, read up on your local laws.
Decisions to Make for Your Airbnb Business
Before launching your Airbnb business, you'll need to make numerous important decisions about how it will operate. Here are just a few matters you need to consider as a small business owner:
- Determine the Airbnb space you'll be renting. Will you be renting an extra room or a guest cottage at your home or do you plan to purchase additional properties to turn into a rental?
- Determine your target market. Define your target market so you understand who to promote your rental to. Does your city tend to draw vacationing families, professionals in town for business, or young couples looking for hip things to do? Once you do your market research and learn about who is visiting your city - and looking for a rental - you'll want to stage your rental to attract these types of guests.
- Determine your average range of prices. Your Airbnb rental pricing will be dictated by several factors, including rental fees for other properties in your region, your property type, number of beds, number of guests you can accommodate, and amenities offered. Consider launching a new listing with a lower price to draw bookings and adjust your rental price seasonally and on weekends to be more competitive. Also, will you tack on additional fees, such as a security deposit or cleaning fee, to your rental? This is something you'll want to decide at this stage, as well.
- Decide the number of bookings you can take on. Before you launch your Airbnb business, determine how much work you're able to take on each week. Remember that your vacation rental needs to be thoroughly cleaned between bookings, whether you're doing it yourself or hiring a cleaning service. Limit the number of bookings you accept to what your schedule can accommodate.
- Determine your business costs. Determine the costs involved with running an Airbnb rental. Will you purchase a property to use solely as a rental (and, therefore, have a mortgage to pay off)? Will you hire a cleaning company or property manager? You'll also need furniture, appliances, and decor that's attractive to your renters, as well as various amenities like soap, towels, linens, and pillows. Track all of your business costs.
- Determine the licenses and permits needed. Check your local zoning codes to ensure short-term rental properties are permitted in your community and to determine if any special licenses or permits are required to launch your Airbnb business. Also, be mindful of insurance requirements and local codes.
- Make a business plan. This important document will serve as the blueprint for your new business. Many of the items discussed above are included in your business plan, which also generally includes an executive summary about your rental business, any employees or services you contract for, what rental services you offer, and where you're located. You'll also include a more in-depth company description, market analysis, business structure outlining how it's organized and managed, complete list of services and product lines, marketing and sales information, and financial projections.
Taking Your First Steps as an Airbnb Business
Once your business plan is written and you've established the basics of how you'll operate your Airbnb rental property, here are the steps you should take to form your business.
Determine the Business Structure of Your Airbnb Rental Business
As you launch your Airbnb property, you'll need to determine the best legal business structure to adopt. Generally, the four most common business entity types are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.
Each type comes with a list of pros and cons to consider next to your particular needs and circumstances. Each entity will affect how your business is taxed, your personal liability in the event of a lawsuit, how you're allowed to raise funds for your rental business, and how you register your business with your local government.
For an Airbnb business, an LLC is likely your best option. It's fairly simple to launch an LLC, it allows you to be a single business owner, and it also provides tax flexibility and personal liability protection.
After selecting a business entity, you need to decide on a unique name for your rental business. There are two important factors to keep in mind when choosing a name.
First, you need to consider your state's legal requirements for naming a business. Most states require that you select an entirely unique name unlike any other business already registered. Some states prohibit the use of certain words in business names. Check your state laws as you're naming your business. Many states also offer a database of existing businesses for you to compare your possible business names against.
We've talked several times about your local zoning codes and licensing regulations, but it can't be stressed enough how important it is to follow your local laws. These will vary based on where you live. As you launch your rental business, review your city, county, and state laws for short-term rentals.
Tax laws also vary by jurisdiction; as a small business owner, it's important to understand federal, state, and local tax requirements. Your business structure will determine how you file your taxes. Most business owners will use their employee identification number (EIN) as a tax ID. You'll apply for an EIN after registering your business.
If you have employees, you'll also need to pay various taxes for wages, Social Security, and Medicare. Even if you're running your Airbnb as a solo operation, you'll still need to pay Social Security and Medicare taxes.
Each state (and sometimes counties and cities) have different sales and use tax requirements. Many municipalities also collect an occupancy tax on rentals. If you have any questions about taxes, it's best to consult a local tax expert in your area or reach out to Airbnb for more information.
After registering your business and having the necessary documents in hand, you should create a separate bank account for your Airbnb business. Most banks require you to have an EIN or a Social Security number to open a business bank account, as well as personal identification (like a driver's license), your business formation documents, any ownership agreements (depending on your business structure), your business license, a certificate of your assumed name, and monthly credit card revenue or an estimation of anticipated revenue.
Marketing and Promoting Your Airbnb Rental Business
Once you've registered your business, you need to establish a marketing plan for your property. Here are some easy ways to promote your rental:
- Create an outstanding Airbnb listing . When you list your property on Airbnb, put a lot of thought into creating your account. Your listing should be easy to read and understand and also sell potential guests on everything your property has to offer and any house rules in place. Tell a story and sell them on the experience. The photos you select for your listing will also go a long way in engaging vacationers. You might even want to consider hiring a professional photographer to capture the perfect images of your home.
- Build a website. You don't need to confine your property to the Airbnb platform. Successful short-term rental companies also have a separate website for direct bookings. You can create your own website using easy-to-use, point-and-click website builder sites like Squarespace and WordPress, or you can hire a professional to design one for you through sites like Upwork.
- Try other rental platforms. Branching out from Airbnb by listing your property on several rental websites means more vacationers will see it, increasing its chances of being booked. Sites similar to Airbnb include Vrbo, Booking.com, and FlipKey.
- Create social media profiles. Establish a social media presence for your listing to get more bookings. Whether you're on Facebook, Instagram, Twitter, or other social media sites, create engaging content about your property and fun things to do in the area to attract renters.
- Ask for reviews and referrals. Nothing carries more weight than a positive review or glowing referral from a previous Airbnb guest.
Taking Care of Airbnb Rental Business Tasks
While the Airbnb platform tracks your bookings and payments, Skynova offers a full range of accounting and invoicing software to help you run your short-term rental business. Our basic software gives you more control over your business, especially if you have your property listed on several sites.
Skynova can help your business in the following areas:
- Billing: Use our invoice template to submit rental invoices to vacationers.
- Estimates: Learn how and why you might want to create an estimate for any rental and use our free template to build in any appropriate taxes and fees and create an official estimate for renters.
- Track payments and costs: Use our accounting software module to track and review all of your income and expenses, keeping accurate and detailed records along the way.
- Receipts: Once a booking has been completed, generate receipts for renters with our receipt template.
- Deposits: Collect a deposit for your short-term rental using our deposit request template.
Transform Your Airbnb Rental Business Using Skynova's Software
If you have a property or room in your home, operating an Airbnb business could generate some extra money or even full-time income for you and your family. There's a lot of planning, organization, and research that goes into running a short-term rental operation. It's a specialized business area, too, so you need to understand everything from local zoning and licensing legal requirements where you live to how to market and promote a short-term property listing.
As you build your business, Skynova's software products and business templates make it easy for you to handle your day-to-day operations. Use our invoicing and accounting platforms to track payments and fees and handle all of your financial paperwork.