Starting an Airbnb can be lucrative for generating income from vacation rentals. However, it’s not as simple as just listing your home and waiting for the bookings to roll in. To succeed, you need a solid strategy, the right tools and expert insights to guide you.
In this article, you will learn:
- The complete process of how to get into an Airbnb business.
- Key financial considerations including Airbnb fees and short-term rental taxes.
- Expert tips on preparing your space, setting a pricing strategy and optimising your listing.
Let’s dive into the details of launching a successful Airbnb business.
How to start an Airbnb business
Airbnb fees
Here are all the Airbnb fees you must consider.
Airbnb service fees
Airbnb charges hosts a service fee ranging from 3% to 5% of the booking subtotal. This fee covers the platform’s cost, including payment processing and support services. If you’re part of Airbnb Plus or use other premium services, this fee might be higher.
Airbnb also charges guests a service fee, ranging from 14% to 20% of the booking subtotal. This fee is automatically added to the guest’s total price at checkout.
Cleaning fees
Many hosts charge a cleaning fee to cover the costs of preparing the property between guests. This fee is added to the guest’s booking total and it’s essential to set a reasonable amount that reflects the cleaning expenses.
Research what other hosts in your area charge for cleaning fees to ensure your rate is competitive.
Additional fees
If your property accommodates more guests than the base number included in your nightly rate, you can charge an additional fee per guest. This fee helps cover the increased utility and wear-and-tear costs.
If you allow pets, consider charging a pet fee to cover additional cleaning or potential damages caused by animals. Depending on your cancellation policy, Airbnb may charge guests a fee if they cancel close to check-in. Ensure your cancellation policy is clear to avoid misunderstandings.
Payment processing fees
If you accept payments in a different currency than your own, Airbnb will charge a conversion fee, typically 3% of the transaction amount.
Also, additional fees might be deducted from your earnings depending on your payout method (bank transfer, PayPal, etc.).
Taxes and Airbnb fees
In some jurisdictions, Airbnb automatically collects occupancy taxes from guests and remits them to local authorities. However, this isn’t the case everywhere, so it’s essential to check your area’s local laws and tax requirements for short-term rentals.
The fees you pay to Airbnb can be deducted as business expenses when filing your taxes. Keep detailed records of all costs and expenses to comply with tax laws and maximise deductions.
Short-term rental taxes
When starting an Airbnb business, it’s essential to understand the various taxes that may apply to short-term rentals. Taxes can vary depending on your location, and being informed will help you stay compliant and avoid surprises.
Occupancy taxes in the United States
Hosts in many U.S. cities and states must collect and pay occupancy taxes, similar to hotel taxes. These taxes are often a percentage of the vacation rental rate and guests cover them.
In some jurisdictions, Airbnb automatically collects and pays these taxes on your behalf, but this isn’t universal, so you’ll need to verify your local regulations.
Occupancy taxes in the United Kingdom
There is no specific occupancy tax for short-term rentals in the UK. However, hosts must be aware of other potential tax obligations, including income tax on rental earnings.
Occupancy taxes in Portugal
In Portugal, hosts must collect a municipal tourist tax from guests, which varies depending on the city. For example, Lisbon and Porto charge a fixed amount per guest per night, which must be reported and paid to the local authorities.
Occupancy taxes in Thailand
There is no national occupancy tax for short-term rentals in Thailand, but local regulations can vary, so it’s crucial to check with the relevant local authority.
Income taxes in the United States
In the U.S., if you rent out your property for more than 14 days a year, you must submit a report to the IRS. You can deduct expenses such as property management fees, utilities, and mortgage interest. Keeping detailed records of all income and expenses is crucial for accurate reporting and maximising your deductions.
Income taxes in the United Kingdom
In the UK, you must report your rental income to the HMRC. You may be liable for additional taxes, such as National Insurance contributions, if your Airbnb activity is classified as a business and you earn over a certain threshold.
VAT and Other Taxes
Value Added Tax (VAT) may apply to rental income in some countries, such as the European Union. The VAT rules can be complex, and whether or not you need to charge it depends on your total income and specific circumstances.
Depending on your location, using your home as a short-term rental might affect your property taxes. Some jurisdictions classify Airbnb properties differently, which could lead to higher property tax rates.
Prepare your space
Here’s how to get your property ready for guests.
Design for comfort and functionality
Start by furnishing your property with quality items that balance comfort and functionality. Choose durable furniture that can withstand frequent use but don’t skimp on comfort—guests will appreciate a cozy sofa or a supportive bed. Consider the layout carefully to ensure enough space for movement, and think about the needs of different types of guests, from solo travellers to families.
Your decor should reflect the location and vibe of your property. Whether it’s a beachside retreat or an urban loft, choose a style that improves the overall experience. Use local art or unique pieces to give your space character, but avoid clutter. Simplicity often resonates better with guests.
Ensure safety and accessibility
Equip your Airbnb property with essential safety features. Smoke detectors, carbon monoxide detectors and fire extinguishers are non-negotiable. Also, consider adding a first-aid kit and clearly marked emergency exits. Handrails and non-slip mats are essential for preventing accidents if your property has multiple floors.
Make your property as accessible as possible. This includes having at least:
- One step-free entrance
- Wide doorways
- Accessible bathroom features like grab bars if your target market includes elderly or disabled guests
Even minor adjustments can make a significant difference in attracting a wider range of guests.
Invest in quality amenities
Provide the essentials, such as:
- Fresh linens
- Towels
- Toiletries
Guests expect these basics, and having them ready upon arrival sets the tone for their stay.
Ensure the bed is made with clean sheets and enough towels for the number of guests you expect. Go beyond the basics by offering additional amenities that improve the guest experience.
Consider providing a welcome basket with the following:
- Snacks or local treats
- Selection of coffee and tea
- High-speed Wi-Fi
If your property is in a warm climate, air conditioning is a must, while in colder areas, heating should be efficient and easy to control.
Modern travellers often expect more than just a comfortable bed.
Consider equipping your space with:
- Smart TVs
- Streaming services
- Charging stations
If you want to stand out, offering a library of books, board games, or even a sound system can add to the appeal.
Professional cleaning and maintenance
Cleanliness is one of the top factors in guest satisfaction. Establish a rigorous cleaning routine between stays to ensure every part of the property is spotless.
Pay special attention to high-touch areas like:
- Door handles
- Light switches
- Remote controls
Hiring a professional cleaning service can be a worthwhile investment in maintaining high standards. Regular maintenance checks are also crucial to prevent minor issues from becoming bigger problems.
Ensure that:
- All appliances are in good working order
- Plumbing is leak-free
- Heating/cooling systems are functional
Keep a list of reliable local tradespeople for quick repairs when needed.
Create a welcoming atmosphere
A little effort in creating a welcoming atmosphere can go a long way. A personalised welcome note or a guidebook with local recommendations can make guests feel valued. Add fresh flowers or a small plant to bring life into the space.
Make the check-in process as smooth as possible. Keyless entry systems allow guests to check in at their convenience, and providing clear instructions beforehand can reduce confusion. A well-organized check-in reduces the chances of misunderstandings or delays.
Set a pricing strategy
Here’s how to approach the pricing aspect of running an Airbnb business.
Understand your market
Start by researching similar vacation rentals in your area. Look at the nightly rates of properties that offer comparable amenities and location advantages. This will give you a baseline to understand what guests are willing to pay in your market.
If you’re considering investing in a high-demand area, it’s vital to analyse both the current market and future prospects. Understanding how to maximise vacation rental potential in Austin, Texas, can help you make informed decisions that boost your revenue.
Pricing for short-term rentals can fluctuate wildly based on seasonality. During peak seasons, such as holidays or local events, you can charge a premium, while in off-peak times, you may need to lower prices to maintain occupancy.
Use dynamic pricing
Consider using dynamic pricing tools that adjust your rates automatically based on:
- Demand
- Local events
- Competition
These tools, such as Airbnb’s Smart Pricing, analyse various factors in real time to optimise your pricing, ensuring you’re neither undercharging nor overpricing.
If you’re managing a rental property in a competitive state like Texas, exploring a professional vacation rental management service can provide valuable insights and automated tools to stay ahead of the market.
While automated tools are helpful, monitoring and adjusting prices manually when necessary is also essential. For example, if you notice a particular weekend filling up quickly across your local market, you should increase your rates to capitalise on the demand.
Offer discounts strategically
Offering discounts for extended stays can help fill gaps in your calendar and attract guests looking for extended stays. A weekly or monthly discount can be an attractive incentive for these guests and reduce your turnover costs.
On the other hand, if your property isn’t booked close to a specific date, consider offering last-minute discounts. This can help avoid vacancies and keep your property occupied. Conversely, offering early-bird discounts can encourage guests to book far in advance, providing you with a steady stream of bookings.
Consider additional fees
If you charge a cleaning fee, ensure it’s competitive but reflects the costs involved. Guests appreciate transparency, so avoid unnecessarily inflating this fee.
On the other hand, managing additional fees and setting the correct prices could be challenging. Consult resources on real estate investment strategies to help you refine your approach and optimise all aspects of your rental property.
If your property can accommodate more guests than the standard rate, consider charging an additional fee for extra guests. This can help cover the increased utility and wear-and-tear costs.
If you allow pets, a pet fee can help manage the extra cleaning required and potential damages.
Leverage a short-term rental property management service
If managing pricing seems daunting, consider partnering with a property management company like One Fine BnB. We use proprietary software to dynamically adjust your pricing based on many factors, ensuring that your property is always competitively priced. Our service is perfect for optimising occupancy rates year-round.
With professional management, you benefit from a hands-off approach where experts handle pricing complexities, allowing you to focus on other aspects of your life or business while maximising your rental income.
Create an Airbnb listing
Here’s how to craft a compelling and optimised Airbnb listing.
Craft a captivating title
Your title should immediately grab attention and highlight the best aspects of your Airbnb listings. Focus on unique features—a stunning view, prime location, or unique amenities. For example, “Cozy Downtown Loft with Rooftop Garden” is more appealing and descriptive than “Downtown Loft.” Keep the title clear and concise to convey your property’s key benefits quickly.
Write a detailed and inviting description
The description should paint a picture of what guests can expect. Highlight experiences, like enjoying a morning coffee on the balcony or unwinding in a spacious living room.
Include essential details such as the following:
- Number of bedrooms
- Types of beds
- Available amenities like Wi-Fi or parking
Mention any special features that could appeal to your target audience, such as pet-friendly or nearby local attractions. Incorporate relevant keywords naturally to boost your listing’s visibility in searches.
Use high-quality photos
Consider hiring a professional photographer with good lighting and wide-angle shots to capture your space.
Before photographing, ensure your property is:
- Clean
- Well-organized
- Free of clutter
Add small touches, like fresh flowers, to enhance appeal.
Don’t forget to include exterior shots if your property has a:
- Garden
- Patio
- Attractive views
Set the right expectations
If your property has any limitations, such as a steep staircase or small bathroom, mention these in the description. Transparency builds trust with guests and reduces the likelihood of complaints. While being honest, emphasise what makes your property special and why guests should choose it.
Optimise for searchability
Use relevant keywords throughout your title, description and photo captions to increase the chances of appearing in search results on Airbnb and Google. Consider other listing platforms such as Vrbo, Booking.com, Expedia, and others to increase the visibility of potential guests. Regularly update your listing description and photos to improve performance in search algorithms. Adjust content based on guest feedback and any changes made to your property.
Utilise a professional Airbnb property management service
If managing a high-performing listing feels overwhelming, consider a property management service like One Fine BnB. We specialise in managing vacation rentals and optimising revenue for our homeowners. Our professional listing creations, including high-definition photography and 3D virtual tours, make your property stand out.
Track performance and optimise
Critical metrics for proper tracking and optimising performance include:
- Occupancy rates
- Average daily rates (ADR)
- Guest reviews
Regularly review these metrics to identify trends and areas for improvement.
Use tools like Airbnb’s dashboard or third-party software to track these metrics efficiently. Optimise your listing by:
- Adjusting pricing
- Updating photos
- Enhancing descriptions based on performance data
Consider partnering with a company like One Fine BnB for a hands-off approach. Our advanced software tracks all critical metrics and optimises your listing in real time, ensuring maximum occupancy and revenue.
FAQ
Are there any possibilities for tax deductions?
Yes, Airbnb hosts can deduct various expenses, including mortgage interest, property taxes, utilities, cleaning services and Airbnb service fees. It’s advisable to consult with a tax professional to ensure you’re maximising your deductions and staying compliant with tax laws
How much does it cost to start an Airbnb?
The cost to start an Airbnb varies widely depending on factors like property location, initial furnishing and any renovations needed. On average, you can expect to spend between $3,000 and $10,000 to get your property guest-ready, not including ongoing expenses like maintenance and utilities.
How to start an Airbnb business without owning a house?
You can start an Airbnb business through rental arbitrage, where you lease a property with the landlord’s permission to sublet it on Airbnb. Another option is co-hosting, where you manage someone else’s property for a share of the profits.
Who pays the fees for Airbnb?
Both hosts and guests pay fees on Airbnb. Hosts typically pay a service fee of 3% to 5% of the booking subtotal, while guests pay a fee of 14% to 20%. Guests pay additional expenses like cleaning and extra guest fees.
Ready to maximise your Airbnb potential?
