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If you’re considering becoming a host with Airbnb, you may be wondering if it’s actually a good investment. The answer depends on many factors, for example, the size of your home, the location of your space and the amenities you provide.
Leasing and hosting your home on Airbnb could be one of the most successful and lucrative investments you’ve ever made.
Understanding your opportunities with Airbnb is the key to securing a successful investment with short-term rentals. Here are a few things you should know when you decide to lease your property with Airbnb.
Leasing Your Property With Airbnb
Airbnb is a well-known online service that offers an alternative option for short-term rentals. The company prides itself on being a simple and secure space, open to all types of homes and homeowners who would like to lease their space on a short-term basis. Hosts have the opportunity to share apartments, full houses, vacation homes, and residential spaces with travelers for a short period of time, usually less than six months. The Airbnb format gives homeowners full control of availability, rules, prices, and interactions with guests. For travelers, Airbnb is an alternative way to travel and save money on spaces that provide a home away from home, having more privacy and flexibility than a traditional hotel.
Airbnb is a safe way for people who want to enter the real estate industry to earn money and learn about the industry. It offers the opportunity for homeowners to rent their full home or even just a room or section of their home. It also offers flexibility and security for hosts and homeowners. To help secure the safety of homeowners and their homes, Airbnb offers $1 million (USD) in property damage protection for your home, as well as $1 million (USD) in accident insurance.
Managing Your Airbnb Rental Property Investment
When you decide to invest in leasing with Airbnb, you’ll need to be prepared to become a property manager. Managing your property is key to a successful and lucrative experience as an Airbnb host. When you manage your short-term rental, you’ll need to consider the non-financial aspects of the investment. Your short-term rental property will require you to invest your time and give your attention to the space. You’ll need to maintain the cleanliness and amenities of the space and you’ll also need to spend time screening and managing your guests.
The more effort you put into managing your property, the higher your return on investment for your property. When your space is well-kept and equipped with convenient amenities, and your customer service is up to par, you’ll have higher ratings on Airbnb which will secure more bookings and allow you to raise your prices.
Airbnb Tax Implications
When you rent your space with Airbnb, you have an opportunity to benefit with regards to taxes. Your Airbnb real estate property can come with tax perks. Keep track of your Airbnb expenses and the space you use in your property for the year. You have the opportunity to claim your expenses and the depreciation on your home.
Potential Tax Advantages
- Property – calculated portions of bills and home expenses.
- Internet, electric, and phone claims
- Depreciation of values and home space
- Mortgage interests
- Repairs and upkeep of the home
- Additions and amenities in the home
When you invest your property with Airbnb, you have the opportunity to make direct income from the guests throughout the year, and residual income from tax claims.
Maximise Your Airbnb Return On Investment
Every real estate investment requires action to maximise the profit. With Airbnb, following a few easy steps could drastically increase your income, ultimately making your Airbnb investment more beneficial to you and your finances. Here are a few tips that could help you maximise your Airbnb investment.
Record Keeping Is Key
Be sure to keep track of every expense related to your Airbnb investment. Create a spreadsheet and categorise your expenses. Having a spreadsheet will make it much easier to claim your expenses during tax season. You’ll also benefit from keeping a record of the spaces in your home used for your Airbnb rental.
Be Transparent With Your Taxes
Claiming your Airbnb expenses will benefit you. As a homeowner, the expenses on your investment are taxable by law. Do not be afraid to share your income. There are also ways for government agencies to track your income. You’ll save yourself a lot of time and money by being transparent and claiming your Airbnb expenses.
Save Your Receipts
Sometimes you may need more than just a list of your expenses. Keeping your receipts could save you money in times of accidents or incidents in your apartment. Saving receipts could also benefit you during and after tax season in the case of audits.
Learn From Property Managers
Hotels and traditional short-term leasing properties are essentially your competition when you lease with Airbnb. If you want to remain competitive, you’ll need to adapt to the role of a property manager. Your home should be cleaned and equipped with basic amenities to ensure a comfortable stay. You should also provide great customer service. Be ready to answer questions and communicate effectively.
Airbnb Leasing Investment Property Costs
Be sure to consider all costs when you begin your investment with Airbnb. Being prepared to tackle the residual costs for your short-term leased property will end up saving you money in the long run. Being aware of these costs will also allow you to think of the most affordable routes to take when purchasing items and services for your Airbnb property. Here are a few expenses to consider when listing your property on Airbnb.
Utility Bills
Do you have an air conditioner? Will your Airbnb guests need to use it? Are there multiple lights and electrical appliances throughout your short-term leased space? Will you need to get an additional internet router to secure a strong signal in your leased space? Will you be supplying a heated space? What will the water bill fees look like? These are all things to consider when calculating your utility expenses as an Airbnb host.
Landscaping
Depending on the type of property you own, the landscaping could play a major role in the pricing of your property. Maintaining a well-landscaped area could become pricey, but it could also increase the value and daily cost of your listing on Airbnb.
Services And Repairs
Your home should be safe and comfortable for your guests. A broken wooden panel on the staircase in the home could be a hazard for guests traveling with babies or small children. Making proper repairs in your home could drastically increase your home’s value and essentially increase your return on investment for your Airbnb property.
Scheduling And Down Periods
Be sure to calculate the loss you may see during low seasons and times when your space is unavailable. Mapping out and researching high and low seasons for travelers in your area could be highly beneficial to your Airbnb investment. You will earn much more money if your space is available during peak travel periods for your area.
Airbnb Fees
Be sure to consider the fact that Airbnb takes a 3% service fee on all transactions. The platform fee, although small, should not be forgotten. Monitor your calendar availability and your interactions when approving guests. Continuous host cancellations could accrue additional fees which could decrease your overall Airbnb return on investment.
Miscellaneous Expenses
Every financial investment comes with risk. Be sure to allocate a budget of money for unexpected expenses. Calculating a budget for miscellaneous expenses up front will relieve you of the stresses when issues arise. Airbnb’s insurance policy covers damages and other potential issues, but you should always be prepared in case of an emergency.
Cleaning Fees
Your Airbnb property should be as clean as possible. Hosts have lost money on their investment because of negative feedback about the cleanliness of the property. The property should be “sparkling clean” as suggested by the Airbnb rating standards. Consider getting professional cleaners or investing heavily in cleaning products to make the task more efficient when you are doing the cleaning yourself.
Best Time To Lease
As with any other investment, timing and situation is key to maximising your profit. Here are some timing and situational factors to consider when renting your property.
Laws And Area Regulations
Be sure to check with your city and state laws and regulations concerning Airbnb and short-term leasing. Being aware of all regulations could save you money on city fees and fines, and ultimately increase your return on investment.
Location, Location, Location
Your Airbnb location is key. Be aware of the pros and cons of your property location. When you secure a space in an ideal location, you will maximise your Airbnb profit.
Review Your Schedule
If you are leasing a property that you live in full-time, you may need to consider your personal schedule when renting with Airbnb. If you would like to be present or close by, you should adjust your schedule accordingly.
Planning to lease your property with Airbnb? Our Airbnb Investment Property Guide may be helpful. Still have questions? Drop us a message and we’ll respond within 24 hours.