How To Start an Airbnb Business

Planning for Airbnb Hosting

Woman with suitcase sits on bed and looks out window
•••

Georgie Wileman / Getty Images

Starting an Airbnb business can be an excellent way to earn income. Four million people host Airbnbs around the world, and the average host earns $9,600 per year.

However, making an Airbnb successful can be a challenge. While it may be a boon to some hosts, it can be a very risky investment for others. Read below to understand the basics of Airbnb hosting, how to get started, and whether it’s right for you.

Key Takeaways

  • Airbnb hosting is a very popular way to earn income, with the average host earning $9,600 per year.
  • Airbnb hosting comes with risk, including property damage and liability.
  • Hosts have to be strategic about choosing their availability, rates, and approach toward guests in order to garner good reviews.

What Is Airbnb Hosting?

Airbnb is a very popular short-term rental app. It lists photos and details of short-term rental properties, and guests can browse through the options and book a stay for their next vacation. Rental properties can be anything from entire townhouses to treetop tents. 

The app is open for anyone to create a property listing and become a host. Airbnb hosts can choose when their properties are available for short-term rental or even “snooze” their listings so that they’re not publicly viewable for a set period of time. No minimum time for property availability is required.

Hosts can set their daily, weekly, or monthly rates, often with discount incentives for guests to stay longer. Rates vary widely, but the average nightly rate in North America in 2020 was $161.

Airbnb guests can select their preferred property and length of stay, then book their reservation. The host doesn’t receive payment until 24 hours after the guest’s scheduled check-in.

Signing up to be an Airbnb host is free. However, Airbnb receives a percentage of all guest stays. Most hosts pay 3% of these earnings to Airbnb; the guests pay for a service fee of under 14.2% of the booking subtotal for cleaning and other costs.

Guests often leave reviews of their stay. They may include details about the space, location, and interactions with the host. Reviews are seen as critically important for the Airbnb host’s future business.

How To Start an Airbnb

Here are the first steps to starting an Airbnb business.

Have a Property

Most Airbnb hosts must own a property. Some may be able to sublease their rented property or sell an experience rather than a stay (see FAQ below for “Can I Start an Airbnb Without a Property?”). If listed as a place to stay, the property must be intended exclusively for lodging. A houseboat, for example, is acceptable as long as it remains stationary during the stay. Other Airbnb properties are marketed as event spaces, which can be rented for parties, photo shoots, meetings, or gatherings. 

Research Liability and Insurance Options

An Airbnb host is not required to consider their liability to qualify for hosting. However, hosts take on a lot of risk, including property damage and injured guests. 

A host may consider forming a new business structure so the liability doesn’t fall exclusively on their personal assets. Forming a limited liability company (LLC) for an Airbnb business is a common way to do this.

In addition to standard home insurance, hosts can buy Airbnb protection insurance for up to $1 million to protect their homes.

Review Local Laws

Laws regarding short-term rentals vary on state and city levels. Even a property itself, such as a co-op apartment building, may have rules regarding Airbnb rentals. To ensure that an Airbnb rental is legal, it’s critical to become familiar with local laws, such as business and housing standards, city zoning rules, landlord-tenant laws, and government tax collection policies on Airbnb stays.

Post a Listing

Hosts should log in to Airbnb and follow the app prompt to start a listing. They are required to upload at least one photo of the property and to set up a personal profile. On their listing, hosts can set their own rates. Listings should also include:

  • A description of the property
  • Date availability
  • Location
  • Accessibility information
  • Any amenities, such as air conditioning

Should I Start Airbnb Hosting?

Many people can start an Airbnb business—but not all Airbnb businesses are successful. Below are some issues to consider when deciding whether or not an Airbnb business is right for you.

Consider Property Size and Location

While it is free to list a property on Airbnb, profitability depends on many factors, including size, guests, and location. For example, one small private room with one guest in New York City is estimated to earn a host $1,393 per month, while an entire house with four guests in Tallulah, Louisiana, could earn $1,680, according to an Airbnb estimating calculator.

Generally, metropolitan areas like San Francisco and New York City have the highest occupancy rates, while popular areas for seasonal vacation rentals such as Park City, Utah, can rake in the highest rate average nationally per night, according to AirDNA. Competition is fiercer in popular areas, however, so hosts should consider how much time and money they are willing to invest to take on the challenge.

Calculate Upkeep Costs 

Airbnb strongly recommends that hosts provide basic amenities such as toilet paper and soap. At a minimum, the company says, guests in a lodging rental expect a clean and comfortable sleeping space with access to a bathroom. Some properties have private pools or access to a lakefront. A host should be prepared to maintain the amenities they offer.

Be Communicative

Airbnb hosts need to be reliable, honest, and communicative. For example, Airbnb requires that hosts maintain a high response rate by replying to reservation requests within 24 hours and that they avoid cancellations as much as possible. Hosts should answer guests’ questions and try to resolve problems. 

Guests can rate a host’s reliability, and a low rating can result in penalties in addition to poor reviews. A person who is not prepared to be very communicative and connected should reconsider being an Airbnb host.

Consider Risk

Starting an Airbnb business comes with a variety of risks. Hosts have to be constantly mindful of local laws to avoid penalties. Guests are entitled to request refunds. In extreme cases, some of them refuse to leave. Uncontrollable issues can disrupt the travel industry; the pandemic, in fact, slashed Airbnb’s overall revenue by 30% from 2019 to 2020.

A host must decide whether they are willing and able to take on these types of risks. Before starting an Airbnb business, hosts should carefully review Airbnb’s terms and policies, research possible challenges, and speak to experts such as financial consultants and attorneys.

Tips for Successful Airbnb Hosting

Hosts have to be crafty and adaptable to make their business successful. Here are some pro tips.

Study the Market

Hosts should study other listings in their area to make sure that their prices and offerings are competitive. They can also meet up with other hosts in their area to compare notes.

Post an Excellent Listing

Airbnb recommends that hosts take special care to make their listings stand out, meaning they should always: 

  • Use high-quality photos
  • Fill out their entire profile and update it regularly
  • Describe the space clearly using an attractive description and title
  • Be honest and upfront about the property and any house rules

Set Smart Rates

Price is one of the biggest factors that guests consider when choosing an Airbnb space. 

In addition to setting a competitive price for their area, hosts should fluctuate their pricing based on seasons, events, and weekly trends.

Accumulate Positive Reviews

Hosts should do everything they can to acquire positive reviews from guests. Airbnb data suggests that positive reviews on a listing are correlated to higher earnings. Guests can rate their overall experience from one to five stars and leave a written review, which will both live on the listing. Separately, guests can also rate specific elements of their stay including cleanliness, value, accuracy of the listing, communication, arrival experience, and more.

Very highly rated, active hosts may qualify for “Superhost” status on Airbnb, which gives them exclusive rewards and more visibility on the app.

Frequently Asked Questions (FAQs)

Can I start an Airbnb without a property?

If a host is renting their property and does not own it, they still might be able to list it on Airbnb. Through a process called rental arbitrage, a host can sublease the property for short-term rental. These hosts need permission from their landlord and they would have to consult local laws, which vary on the subject. 

Hosts can also sell experiences on Airbnb such as local tours, workshops, and virtual performances. However, Airbnb charges a 20% service fee to list an experience.

How do I finance an Airbnb business?

An Airbnb host may be able to finance their business by applying for loans, including traditional, asset-based, or hard money loans. Some banks, such as Fannie Mae and Quicken Loans, allow hosts to list their Airbnb income when applying for mortgages. 

How easy is it to start an Airbnb business? 

It’s very easy, and free, to post an Airbnb listing. However, it takes time, investment, and research to make an Airbnb listing successful, lawful, and protected from risk.