Becoming an Airbnb host is an excellent way to make extra money and generate a new income stream. Whether you want to rent an extra room in your home to help pay the mortgage or build up a portfolio of rental properties for Airbnb, this is one of the most popular (and accessible) ways to make money through real estate.
Consider some of the benefits:
- The average Airbnb host makes $924 per month. The top hosts can make as much as $2,000 a month or even more. And this is just for people renting spare rooms in their primary residence! While the exact amount you can earn will vary on your living location, an additional $924 per month is nothing to flinch at.
- Airbnb does the marketing for you. In traditional forms of real estate investing, you have to do all of your marketing. For example, if you're looking for a renter or a roommate to rent the guest bedroom, you have to actively search for potential candidates. On top of that, you have to vet people to make sure they can pay on time and respect your property. The Airbnb platform takes care of that for you, promoting your property while utilizing a review process so you can easily accept or deny booking requests.
- Airbnb automatically withholds 30% of payouts for most people. Why? Because they are required to report any US-earned income to the IRS. In other words, Airbnb by default holds what you have to pay in income tax for you. Here's the good news: this is usually more than what you actually owe, so you'll likely receive a tax refund when all is said and done! This simplifies the tax process and helps provide peace of mind.
There are so many benefits to becoming an Airbnb host, that it's no wonder that the platform has almost single-handedly disrupted the hotel and rental industry.
Airbnb has simplified the process as much as possible, which allows potential hosts like you to focus on what you do best: providing an excellent and memorable experience for your guest!
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How to Become an Airbnb Host: The Basics
Airbnb is a platform that connects people who need places to stay with those willing to offer their homes as short-term rentals. If you’re looking to earn some extra cash by renting out your spare bedroom, living room, or even your entire house on Airbnb, then you can do so legally and safely without having to worry about collecting and paying taxes. It’s also a great option if you’re planning on moving into a larger place but don’t want to deal with the hassle of finding renters and managing your property.
To start, you must first register on Airbnb as a host. Once registered, you’ll be able to create listings for each space you wish to rent out. You can either list your own personal spaces or choose from a wide selection of pre-made listings. The three types of listings are:
- Shared rooms. This is where the guest will share the room with another guest or even the host. If the guest will not have a private room, then you'll want to select “shared room.”
- Private rooms. In this situation, guests will share common spaces such as the kitchen and bathroom with other guests or with you (if you're renting out part of your primary residence). However, they will have their own private room for the duration of their stay.
- Entire home/apartment. If guests will have the entire place to themselves and won't be sharing it with anyone else, then you'll want to list your property as an “entire home” or “entire apartment/condo” listing.
Once you’ve created a listing, you’ll need to fill out a profile that includes photos of your space, details about the area where you live, and information about yourself. When someone books a reservation, you’ll get a notification via email or text message.
From there, you can accept or decline the request. If you decide to accept the request, you’ll have 24 hours to confirm before the guest checks in. After the confirmation, you’ll see detailed information about them including their name, email address, phone number, arrival date, departure date, and whether or not they paid through Airbnb.
You can also set up your own unique pricing structure. For example, you could charge $100 per night for a shared room, $150 per night for a private room, and $200 per night for an entire home. You can also set different rates depending on the time of year, days of the week, and length of stay.
It's not uncommon to charge extra fees such as a “cleaning fee,” though many Airbnb hosts factor this into the total cost of the stay. Depending on how competitive your market is, you may want to experiment with different pricing structures to see what works best for you.
You can also add additional amenities to make your space more appealing. These range from free Wi-Fi access, TVs with Roku for entertainment, snacks, and local guidebooks.
Property Maintenance Tips for Your Airbnb
Just like anything else you own, your property will experience wear and tear and more and more guests stay at your listing. From bedding sheets to bathroom towels, burnt-out lightbulbs to broken appliances, you'll be responsible for cleaning and maintaining your own Airbnb.
Here are some tips to keep in mind when managing your Airbnb property:
- Clean regularly. It sounds obvious, but if you don't clean your property regularly, it will quickly look dirty and unkempt. Cleaning once a day is enough, but if you're hosting multiple people, you might want to do it every two to four hours in the common spaces.
- Keep everything tidy. Make sure all trash cans are emptied and all surfaces are wiped down. Also, make sure any food leftovers are put away. Not only does this help prevent nasty smells, but this also eliminates the potential for ants and other critters to search out human food.
- Maintain your listings by checking the essentials. Check each listing to ensure it looks good and is in tip-top shape. This means checking the exterior of the house, making sure all lights work, ensuring doors and windows are locked, and double-checking the bathrooms. In our day-to-day lives, we take the essentials (such as working lightbulbs) for granted, but if they don't work, it ruins the experience. Your guests will feel the same way.
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Just make sure there's enough turnaround time for you to go through your cleaning and maintenance checklist in-between one guest's checkout time and the next guest's check-in.
How Do Taxes Work for Airbnb Rentals?
Airbnb has been very transparent about its tax reporting policies since the company launched. Since then, the IRS has issued guidance on how to report income earned from short-term rentals. As long as you follow these guidelines, you should be fine. You can view Airbnb's tax policies here.
To help you manage your taxes, Airbnb will issue a 1099 if you meet certain requirements. Here's how it works:
“The US Internal Revenue Service (IRS) requires US companies that process payments, including Airbnb, to report gross earnings for all US users who earn over $20,000 and have 200+ transactions in the calendar year. If you exceed both IRS thresholds in a calendar year, Airbnb will issue you a Form 1099-K.
Starting January 1, 2022, the IRS requires US companies to report gross earnings for all US users who earn over $600 in the calendar year. If you exceed the IRS threshold in a calendar year, Airbnb will issue you a Form 1099-K.”
In addition to the 1099 forms, don't forget that Airbnb may withhold 30% of your rental income.
When you consider all of these factors, it's clear that Airbnb is trying to make the process as simple as possible.
While Airbnb simplifies federal taxes, the one area where you have to pay special attention is local and municipal taxes. Because different jurisdictions have different laws, zoning requirements, and local and state taxes, Airbnb isn't able to provide as much guidance. Unless you don't mind handling this part of taxes, you may want to hire a tax adviser.
What Is It Like to Be An Airbnb Host?
Becoming an Airbnb host can be a fun side hustle, but for many people, it also grows into a blossoming full-time business!
Since Airbnb is a public-facing platform, what you put in is what you get. If you put in the work and live in a market where people are visiting, you can make a lot of extra money.
Furthermore, many hosts report that the bulk of the work is upfront. Setting up your space for guests and getting your listing approved and published on Airbnb is the “hard” part.
Once that's published and you begin getting guests, hosts say that they feel like they get into a routine. You'll consistently learn from each hosting experience, and before you know it, you'll start earning positive reviews, which in turn brings in more guests!
If you haven't already, I invite you to join TBM Family on Facebook! We've built and fostered a community where like-minded people like you are exchanging ideas, sharing stories, and providing inspiration for people on their financial journey. I hope to see you there!