AIRBNB AND SHORT TERM RENTALS

Airbnb And Short Term Rentals

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14 Steps to Building a Thriving Airbnb Business

Starting an Airbnb business can quickly become overwhelming if you do not follow a step-by-step process. By breaking it down into simpler and more manageable steps, there is a smaller chance that you will make a costly mistake along the way. To help you start an Airbnb business, we have identified the following 14 tasks that will help you to kickstart and grow your new venture into a successful Airbnb business. 

1. Define your budget

Before you get down to property search, you should first figure out how much you are ready to spend on acquiring it or setting up an existing one. You should also remember that you will have to furnish the property and that there will be running expenses like vacation rental insurance or cleaning costs. So, keep these expenses in mind when you calculate what you can afford to spend.

2. Find a suitable real estate market 

There are a couple of factors that you should take into account when searching for a suitable market to invest in a vacation rental property. These include: 

  • Tourist demand

It is key that you research how a specific location can impact the demand. For example, cities with unique features and tourist attractions can boast all-year demand. Though, this is not always the case. 

For instance, if the reason why travelers visit a city is to attend a particular event, your demand will correspond to these dates on the calendar. In most cases, though, demand will fluctuate as the seasons change. 

  • Local rules and regulations

Local authorities all across the globe have started to introduce rules and regulations regarding short-term rentals. In some cities, vacation rentals might be banned altogether, while others have tightened their laws. So, before you start an Airbnb business, it is best to check local government websites and other online sources to work out the feasibility of your venture.   

3. Search for a property with great income potential

Not only will the real estate market impact your income potential, but also the property itself. To help you find the most appropriate property with great earning potential, factor in the following points: 

  • Property’s location 

Is the property in question easy to reach? Is it accessible by different sorts of transport? Is it close to tourist attractions or stores, shops, cafes, and bars? You need to answer these questions before you start investing in a specific rental. Accessibility to your property, its proximity to amenities combined with stable demand will have a positive impact on your cash flow throughout the year.   

  • Property’s type and size

As soon as you have defined your budget, you can use it to guide you with regards to the type and size of the property that you can afford. A studio apartment and a triple-story family home can both make profitable vacation rentals. In short, the type and size of the property should not exceed your budget. While you can charge more per night for bigger accommodation, you can also add a bunk bed or sleeper couch to create additional sleeping for smaller properties. 

  • Type of travelers the property will attract

Different types of properties attract different kinds of travelers. For example, if your goal is to host families traveling with young kids or larger groups, it is better to invest in bigger properties, preferably in a quiet neighborhood. 

On the other hand, a smaller apartment or condo in a bustling urban location will be better if you want to attract younger travelers or couples. And, if you want to attract business travelers, you will want to look for a property that is close to public transport and convention centers yet can still offer a quiet space.

4. Analyze the projected ROI

The next step is to estimate how much you can potentially earn on the selected property by comparing competitor listings in a certain area. Not only should you keep an eye on what others are charging, but you should also analyze startup costs, ongoing expenses, and projected monthly occupancy rate. This way, you will be able to work out if the property will bring in a positive cash flow. 

Data analytics tools such as Alltherooms, AirDNA, and Transparent can help with competitive analysis and ROI estimation. In short, these software solutions can help you to stay up to speed with the latest trends and developments in the industry. From analytics to property forecasts to market insights, these tools will help you to understand the industry much better. 

5. Decide how you will finance your property

There are a couple of options available if you need to secure financing to buy an investment property. These include:

  • Cash-out refinance

This approach is best if you have built up significant equity in your primary residence and have a good credit score. In this case, you can use a cash-out refinance to buy a vacation rental property. With a bigger mortgage, you can then use the difference in cash and put it toward a down payment on your short-term rental property. 

  • Reverse mortgage

A reverse mortgage might be the best approach for those who are aged 62 years or older. Unlike a regular mortgage that requires you to pay back the loan in monthly installments, a reverse mortgage gives you access to the entire amount, and you don’t need to pay it back until you sell the property or move out. Just remember that the mortgage interest owed will also continue to grow the longer the loan remains unpaid.

  • Home equity lines of credit

If you have enough equity in your current property, you can take a home equity line of credit to purchase a short-term rental property. This way, you can leave your current mortgage rate unchanged while you take on a separate mortgage with different Ts and Cs.

  • Traditional vacation rental financing

For a more conventional approach to financing a property, you can always apply for a loan from a bank or credit institution. You might need to pay a down payment upfront and then pay the outstanding balance in monthly installments over the next 15 or 20 years.

6. Obtain legal permission and licenses 

Before you get into Airbnb hosting, you need to make sure that you have the legal certification to rent out a short-term rental property. Here’s what you need to do to be on the safe side:

  • Check the Airbnb legal regulations in your city and find out if there are any restrictions

  • Research zoning regulations and guidelines of the area in which you want to operate

  • Consult a business attorney to help you start your Airbnb business 

  • Register your business and make sure you’re certified to host short-term rental stays.

7. Register for taxes 

Just like any other business owner, an Airbnb entrepreneur will also have to pay taxes. It is important to research tax amounts and types of taxes to be paid, as well as deductions that short-term rental owners are eligible for. So make sure to consult a tax advisor who specializes in short-term rentals to assist you in identifying any taxes and fees you will need to pay.

8. Get vacation rental insurance 

While platforms like Airbnb and Vrbo offer basic protection, there are still many situations that are excluded, like theft of cash or intentional property damage. In short, these protection policies do not offer enough protection, especially when it comes to more serious issues. 

While you can pay as much as three times higher than your homeowner’s insurance, it is best to invest in insurance that is specifically designed for vacation rental businesses. On average, the cost of vacation rental insurance varies from $2,000 to $3,000 per year in the USA. Though, if your property is located in a popular tourist destination like Florida, it can be even higher. 

9. Prepare your vacation rental for guests

Before you can welcome guests, you need to complete maintenance works, property repairs, and deep cleaning. You will also need to set up a smooth check-in process before accepting bookings.

 

If the check-in process becomes confusing or frustrating, guests may be put off. Here are a few key steps to ensure a smooth and seamless arrival for your guests:

 

  • Install an Airbnb lockbox or a smart lock for providing a self-check-in option

  • Edit and change your lock box or smart lock’s passcode before your next guests arrive

  • Share clear and concise check-in instructions with your guests so they can access your rental.

10. Invest in high-quality essential amenities (and add extra touches)

Your vacation rental needs to offer a full range of supplies to help your guests enjoy their stay. Guests should not need to worry about bringing their own supplies. If your rental is missing amenities, such as kitchen essentials, bathroom supplies, or even a high-quality mattress for a good night’s rest, guests may get frustrated. A poorly-equipped accommodation will lead to a mediocre guest experience and negative reviews.

While providing basics is a must, extra amenities are no less important to ensure a delightful stay. Going the extra mile in terms of your amenities will help you to present yourself as a thoughtful host. Here are some of the amenities that can be included as extras:

  • A hot tub

  • Wi-Fi boosters

  • A workstation

  • Board games

  • Smart devices 

  • Bathrobes and slippers 

  • Luxury toiletries. 

It is also a good idea to create a welcome package. It is this type of extra touch that sets experienced hosts apart from beginners. A welcome basket with a few snacks can turn an ordinary stay into a memorable one. Think of it as a chance not only to dazzle your guests but also to put your creative skills to good use. 

For a thoughtful arrival pack that will help guests have a great stay with you, follow this checklist:

  • Draft a welcome letter that will make guests feel personally invited by you into your rental

  • Create a welcome book that provides information like the Wi-Fi password, your cellphone number, and email address, as well as necessary instructions for how to set the alarm or use the oven

  • Prepare a list of house rules that explain the dos and don’ts at your property

  • Leave a welcome gift for an extra special touch that will make guests more likely to leave a great review.

11. Find the most suitable vacation rental platform

Once your property is all set up and ready, you can turn your attention to listing it on a vacation rental platform(s). For this step, you will let the type of audience you are trying to attract and the targeted market guide you. 

However, a word of warning, the process of creating an Airbnb listing takes time, and you will need to apply a bit of thought and creativity into crafting it. You want it to be a true reflection of your rental, and it should look as professional as possible. When creating your listing, make sure to complete the following tasks:

  • Take professional photos of your property or hire a photographer to take photos that highlight your rental’s key features and amenities

  • Compose a detailed property description that will resonate with your potential guests by highlighting your property’s unique features

  • Give your listing a creative and catchy title that summarizes what your rental offers to guests

  • Create a host profile with a description of yourself.

12. Automate your routine hosting operations

Employing automation to streamline multiple hosting operations will help you focus on what really matters. By using vacation rental software, like iGMS, you will be able to ensure that your business runs smoothly while you can work on refining the guest experience and scaling your business. iGMS will help you save time and effort by:

  • Managing multiple accounts and listings on the major vacation rental platforms

  • Using the unified inbox to organize your messages into a single feed and automated templates and triggered messaging to improve guest communication

  • Automating the process of guest reviews 

  • Managing direct bookings using a direct booking management toolkit

  • Receiving payouts and creating invoices by connecting your Stripe account to iGMS

  • Sharing daily schedules with your team and auto-assigning tasks.

13. Monitor your business performance 

It is crucial to have a business plan and outlined goals to propel your business forward. However, monitoring your metrics and measuring results is not a one-day task. You need to define your metrics and establish a process to be sure your business is running as intended. The good news is that vacation rental software like iGMS also allows hosts to make use of reporting tools and the Dashboard feature to get insights into how the business performs. 

The benefit of using such a tool is that you can keep track of the most critical metrics relating to your overall business performance and guest communication. These include:

  • Occupancy rate

  • Average daily revenue (ADR)

  • Revenue per available property/listing (Rev PAL)

  • Number of inquiries for the current month

  • Average response time.

This real-time data is presented in a way that’s simple to digest at a glance allowing you to draw the right conclusions easily. 

14. Build your brand and market your short-term rental to reach new heights

One of the most crucial steps to long-term success lies in well-thought-out and consistent marketing. To make money on Airbnb, you need to remain competitive. So, it is necessary to keep an eye on competitor listings. Research what they are doing and how they are positioning themselves when planning your branding and marketing strategies. 

You can, for example, consider the possibility of creating a business website and brand logo. Another idea is to use PPC ads on Google and social media, implement an email marketing strategy, and set up partnerships. 

Here are some other practical ideas to generate more exposure for your vacation rental:

  • Create listings on several short-term rental platforms to increase your chances of getting reservations

  • Create business pages on social media platforms to market your rental online

  • Build your own business website to receive direct bookings

  • Partner with local businesses to expand your market reach and offer experiences for your guests that will help your rental stand out.