Is Running An Airbnb Profitable? Here’s What You Need To Know

If you’re going to host your home on Airbnb, HomeAway, VRBO or any of the other rental sites, it’s worth understanding what it takes to be successful before you welcome your first guest. Here are some key details experts say to keep in mind.

Sally Miller left corporate America when her first child was born to spend time with her growing family. But this also meant the family income took a hit, so she started exploring ways to make money from home.

Hosting her four-bedroom home in San Jose, California on Airbnb turned out to be a great side-gig.

“I wrote our Airbnb listing to appeal to families — emphasizing the backyard, safe neighborhood, kids’ toys and equipment,” she tells CNBC Make It. She listed the entire house for $500 a night and frequently rented out the entire home for a week in the summer while her family was on vacation for over $3,000, she says.

“We rented out our family home on an occasional basis,” she says. “This extra bit of income was a great help as I worked to establish my home business.”

H/O: Airbnb listing for Sally Miller
Sally Miller wrote her Airbnb listing to appeal to families – emphasizing the backyard, safe neighborhood and kids toys.
Source: Sally Miller

This common side hustle attracts many who are looking to make money off an existing asset: their home. About half, 54%, of those who own their own home say they’d consider renting it out through a service like Airbnb, according to a recent survey of 1,000 people by real estate data company Clever. And 82% believe this is a good money-making strategy.

Airbnb hosts make, on average, about $924 a month, according to research from low-interest lender Earnest. Of course, that income can vary dramatically depending on where you’re based, how frequently you rent out your place, the quality of your home and the services you provide.

“You can set-up an Airbnb with your existing space and you can make a decent side income,” says Danny Rusteen, founder of and a former Airbnb employee. That said, Rusteen tells CNBC Make It that with that mindset, you’re probably not going to get rich either.

Wired For Wine

And for every story like Miller’s, there are also horror stories about terrible guests, broken furniture and run-ins with local law enforcement. One host recently complained about spring breakers who destroyed a Destin, Florida condo after “partying like rockstars for a week.”

“All of these platforms, especially Airbnb, are really good at pitching hosts that you can make so much money, it’s so easy,” Dan Webster, founder Airbnb Hell, tells CNBC Make It. But it does take effort and the return depends on many factors, so it’s like the old adage: Hope for the best, plan for the worst.

If you are going to be a host on Airbnb, HomeAway, VRBO or any of the other rental sites, it’s worth understanding the reality before you welcome your first guest. Here are some key details experts say to keep in mind.

Understand your upfront costs

Even if your home is perfect for you, it may not be for guests. So some redecorating is usually in order to eliminate the clutter and furnish the space. Even if you’re just renting out a spare room, you may need to invest in a new bed frame and mattress.

“You have to realize everything should be furnished and it should be fairly new because you are competing with other Airbnb hosts,” Webster says. He pegs the cost at roughly $1,500 per bedroom, plus another $2,000 to $3,000 for the rest of the house and common areas. Which is on par with other experts’ estimates.

20/20: staycation in Philadelphia
Laura Schuppert | Twenty20

Even if you’re not looking to become a superhost, there are some basic equipment that Rusteen recommends investing in:

  • a digital keyless entry system to make it easy for guests to access your place remotely (without losing the keys)
  • WiFi and, depending on the size of your apartment, a WiFi network extender
  • a SmartTV
  • extra towels (the more you start with, the less frequently you’ll need to do laundry)
  • toiletries such as shampoo and soap
  • pantry staples such as salt, pepper and condiments.

Of course, you could provide many more amenities — from ironing boards to wine openers. Many times, you may need to feel it out and add items as needed by your guests.

“It’s all about acclimating your guests to their new environment, aka your Airbnb listing, as quickly as possible,” says Rusteen, who now manages several properties in the U.S.

Photos can be another way “to set yourself up for success,” Rusteen says. “One of the first things you should do as a host is get professional photographs.” You can expect to spend $100 to $200, on average, for a session. You can actually find photographers for this through the Google Street View professional program.

You can get by without spending a lot to redo your space. Miller, who wrote a book on her experiences, says she spent very little, but she did put in quite a bit of time and work.

“We fixed things that needed fixing, put locks on some cupboards and on the office (so we could lock away valuables), and created a household information folder,” she says.

So it’s important to keep in mind that you will likely put in money or your time, or both, to prepare to rent out your space.

GDF Studio

Covering your bases

You never really know what’s going to happen once your guests show up, so make sure you’re protecting your investment ahead of time. And that means checking that you will operate on the right side of the law and making sure you’ve got a game plan in case something goes wrong.

The first step is to put in some time researching whether it’s legal to hostand what requirements you need to meet. For example, some hosts will find they need to take a trip down to city hall to fill out some paperwork.

“Many times, the city needs to be informed that you’re renting out your space,” Webster says.

And while you could perhaps welcome guests without doing this step, it may save you headaches later. Also be sure to check not only local laws, but also rules and bylaws enforced by homeowners’ associations, condo boards and landlords.

20/20: Renovating and painting a small house
Experts say about 10% to 15% of every vacation rental booking is going to go toward some type of repair or ongoing maintenance.
Annelie | Twenty20

Additionally, make sure your insurance covers your new venture. Mistakes happen, so it’s important to think ahead. The big companies such as AirbnbHomeaway and VRBO provide liability insurance that covers up to $1 million, but there are restrictions and it can be a challenge submitting claims.

“Anything below $50, just pay it out of pocket,” Rusteen recommends.

If you are worried about being left with a bill for some expensive accidental damage, Rusteen and Webster recommend purchasing short-term rental insurance. And before you start accepting guests, it’s a good idea to read through the fine print of your existing homeowners’ or renters’ insurance policy. Some policies have stipulations that extra renters can negate your entire policy.

Overall, whether you choose to get extra insurance depends on the level of risk you’re comfortable with. Miller discovered that, for her situation, getting home insurance for Airbnb rentals was extremely difficult and costly. Instead, she took the approach of minimizing risk by thoroughly screening her guests and asking for a security deposit.

Managing expectations

One of the biggest surprises for hosts is the variability in income, Rusteen says. Most hosts will find that bookings come in waves, and that they may end up charging different prices for high- and low-season. “You have to be able to stomach” the fluctuations in month-to-month income, he says.

“You can’t just say, ’I made $300 this week, I’m going to go out for a nice dinner.″ Webster says. Instead, you need to understand that you’re going to need $100 of that booking next week when you have to replace something that broke.

And for many hosts, if their home is not located in a Airbnb hotspot, they may be handicapped from the get-go. “Many aspiring hosts do not understand that the earning potential for their property is largely determined by their location and the existing demand for Airbnb travel,” Symon He, co-owner of LearnAirbnb, tells CNBC Make It. While the demand for Airbnbs has grown significantly in recent years, much of that growth is still concentrated in areas that already have strong travel demand, he says.

You also have to keep in mind that there’s an ongoing time commitment. For every guest that you book, you have conversations with five others, Webster says. In his experience, the way to make the most money is to offer short-term rentals and rent your space room-by-room, instead of the entire apartment or house. But that’s a lot more work.

“If you’re a working professional, it’s very inconvenient to do that,” he adds.

H/O: Airbnb listing photo of Sally Miller's backyard
Sally Miller’ rented out her entire home, which included a backyard pool.
Source: Sally Miller

For Miller, the Airbnb rental was a part-time gig, so she focused on getting a smaller number of multi-day bookings. But even once she was more experienced, she was spending two to three hours per booking — communicating with guests and preparing her home by tidying up.

She also opted to pay for professional cleaners to clean the house and make up beds. “For people renting out just one room or doing full-time rentals, then the turnaround time between guests may be even faster,” she says. So a cleaning service may be the best option.

You will also have upkeep costs. About 10% to 15% of every booking is going to go toward some type of repair or ongoing maintenance, such as carpet cleanings, and replacing lost or broken items. “People don’t factor in the damage that happens over time — some of it is just purely wear and tear, some of it is more intentional and more dramatic,” Webster says.

Hosts should budget for their overall operating expenses to range from as little as 25% to as much as 75% of their earnings, He says. That, of course, depends on the volume of bookings and how much of the operations are outsourced, such as managing the listing and cleaning services.

The hosts that typically earn the most are the one with an entrepreneurial mindset, who think of their rental as a business, Rusteen says. “It’s some work, but there are a lot of pros [to becoming a host], for sure.”

The reality is, there are a lot of benefits to becoming a host, but it’s important to keep in mind that to do it right, you do need to invest some time and perhaps some money.

Source: CNBC