how does airbnb work

How Does Airbnb Work For Hosts? + 5 Tips to Maximize Profit

If you’re considering getting into short-term rentals, Airbnb is one of the best ways to market your property for rent. But, how does Airbnb work? This article answers that question and more, including identifying opportunities to maximize your profit!

Real estate investing is an excellent way to generate passive income, and vacation rentals are no exception. According to AirDNA, the annual revenue potential for vacation rentals ranges from $30,000 to over $100,000.

So, whether you’re looking to purchase your first vacation rental or considering renting out your second home, understanding how Airbnb works is a necessity!

What is Airbnb?

Airbnb a home-sharing service that connects property owners (“the host”) that are willing to rent out space or their entire property to guests. The founders, Joe Gebbia, Brian Chesky, and Nathan Blecharczyk, derived the name from “air mattress b&b,” which is sometimes called air bed and breakfast.

The service allows guests to make online reservations for properties worldwide, which are great for family vacations, special sports events, and business trips. Also, Airbnb provides help with rebooking assistance, refunds, reimbursements, and more.

Airbnb prices can be competitive to hotel rates. One of the main benefits of an Airbnb over a hotel room is guests’ ability to rent an entire home, which provides a more personal experience.

How Does Airbnb Work for Hosts? Listing Your Space

Step 1: Verify Area or HOA Permits Hosting on Airbnb

Before you list your space, make sure your city or HOA allows you to host your property as an Airbnb. For example, Barcelona is working on limiting Airbnb in their market.

Also, some Homeowner Associations may not allow you to turn your home into a short-term rental. Therefore, be sure to do your homework first before listing your property or purchasing a property you intend to turn into a rental.

Step 2: Create an Account to Become an Airbnb Host

Visit Airbnb.com to create a free Airbnb account to become a host. It requires a valid email address and birthday.

Step 3: Take Great Photos

There is a saying, “A picture is worth a thousand words.” Thus, take high-quality photos of your property. Consider hiring a professional, if necessary. Be sure to include as many pictures as possible of the different areas to make your Airbnb listing more attractive.

Step 4: Determine Your Guest Rules

It’s essential to set ground rules for your guests. Of course, you should not discriminate against potential guests on religion, race, or gender because this violates Airbnb’s Nondiscrimination-policy. Still, you should be clear about what you expect from guests.

Some ground rules you might consider are rules related to late-night parties, volume control, or other illegal activities. Not only will these activities potentially disturb and upset your neighbors, but you also don’t want to increase the likelihood of damage to your home or other issues.

Step 5: List Your Space

Return to the Airbnb website to list your property or space. Enter your property address and select your property types, such as apartments, houses, or second units. You’ll also have to specify additional information, such as how many guests you can accommodate and how many beds are available.

Step 6: Review and Approve Bookings

After you list your property, the next step is to approve potential bookings and review guests. Airbnb also has the feature “instant book listing,” allowing guests to make last-minute reservations and automatically get approved.

How Do Airbnb Payments Work?

Airbnb takes a 3% commission of bookings while guests pay a 6-12% service fee. Guests can pay with major credit cards or via Paypal. Hosts may also receive payment via direct deposit, Paypal, or a traditional check.

How to Maximize Your Profit

When it comes to vacation rentals, there can be an abundance in one city. So, to capture the business, you want to make sure you stand out and gain repeat business for the future. Here are some tips to help you maximize your profits:

1. Optimize Your Listing

When you list your property on Airbnb, make sure to complete all the fields, even if it’s optional. You want to provide as much information to your guests as possible to help them be confident about making a reservation.

Also, take high-quality photos of your listing. The more pictures you upload, the better. You want to motivate guests to book with you and not turn them off.

2. Location

Which sounds better to you: a vacation rental near the beach or a vacation rental within walking distance from the beach? Not every Airbnb needs to be on the beach, but having the “right” location can allow hosts to charge a higher premium.

Consider who your potential guests are in your area. Families are willing to pay top dollar to have a kid’s day out at the “perfect destination.” Some people prefer rural areas with a lakeside view, while others want to stay downtown with primary entertainment access.

3. Research Rates Throughout the Year

How much should hosts charge? The answer is, “It depends.” Rates can easily vary throughout the year. For example, think about how much a host can charge during the July 4th weekend in Florida compared to a reservation scheduled in February.

While some locations will have a peak season, others may be popular year-round. Perhaps your rental is located near a major theme park or a popular conference center. The more popular the area is throughout the year, the more you’ll be able to rent your place out, and the higher your profits will be.

Look at the other listings in the area to give you an idea of what the going rate is. AirDNA also has a rental property calculator for short-term rentals. For long-term rental properties, check out this rent affordability calculator.

User Experience

You’ll maximize your rental potential and earn stellar reviews if you provide an experience comparable to a hotel and its amenities. A few examples are an on-call service to support your guest’s needs or accessible family board games. Also, travelers looking to book unique accommodations are willing to pay top dollar. So, if you can do anything to stand out, you can give them a story to tell their friends when they return home.

The goal is to score high ratings from your guests. Airbnb will most likely promote your listing in the future when it sees guests love your property. When you make money, they make money!

Promote Your Website

Although this is an article about Airbnb for hosts, building your own website to promote your rental is a way to increase your margins.

Satisfied guests are more likely to rebook with you on their next trip. Plus, if they rebook through your website, guests can avoid the guest service fee. Usually, hosts also pay a service fee, which can be avoided if you have your own website. Everyone wins!

Tips to Protect You and Your Property

Real estate is a business that depends on people. There is no doubt property owners worry about a guest destroying a host’s home or squatters occupying the space while vacant. Here are few tips to help protect you and your property:

  • Guest Rating: Hosts can rate guests after their stay. This rating gives future hosts an idea of the quality of guests wanting to reserve a visit at their property and whether or not they should approve their request.
  • Host Guarantee: Airbnb protects against damage to a host’s property and their belongings caused by guests up to $1 million.
  • Host Protection Insurance: Airbnb also offers host protection insurance programs covering a host’s legal responsibility for bodily injury to guests or others up to $1 million.
  • Security Cameras: Security cameras, such as Nest or Ring, allow hosts to monitor their property online from anywhere in the world.

Airbnb Basic Requirement for Hosts

Although Airbnb does not own any of the properties, the company does have basic requirements for hosts to create a comfortable Airbnb experience for all guests:

  • Be Responsive: Hosts should respond to inquiries within 24 hours
  • Avoid Cancellations: Airbnb’s cancellation policy frowns on cancellations and discourages hosts from doing so.
  • Provide essentials: Hosts are required to provide basic necessities for their guests, such as toilet paper, towels, linens, pillows, and hand and body soap.
  • Maintain an Overal High Rating: Airbnb encourages hosts to provide a high level of quality to their guests, which increases the chances of receiving a high rating. You want those high ratings!

Conclusion

Airbnb is a great platform to help owners market their property to millions of people and house hack their way to a vacation or investment property. However, not every kind of investment is a good deal, especially in real estate. Therefore, investors and property owners must do proper market analysis.

Homeowners that are serious about generating rental income should treat their vacation rental like a business. Thus, it’s important for owners to also budget for repairs and vacancies, especially during low times in the year.

Are you ready to rent out space and make extra money? Or, are you still looking for your second home? Either way, listing your space on Airbnb is a “must do!”

 

 

 

 

how does airbnb work

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Jonathan Sanchez

Jacqueline and Jonathan are real estate investors and personal finance bloggers for Parent Portfolio. They own a small real estate business that manages a couple of investment properties in their local market. They’ve also been featured in Business Insider, USA Today, and FOX Business.

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