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If you are looking to calculate exactly How much can you make on Airbnb from your rental, then please use this calculator to get an exact number!
Most people when they start their STR(Short-Term Rental) journey, it’s usually as a side hustle. Many are looking to rent out a spare room, a second home, an attic, or a vacation home. On average, most Airbnb hosts make roughly $1000/-month on Airbnb as a side hustle. But there are many doing STR as a full-fledged business and making a fortune. In Fact, most people making a fortune doing Airbnb full time are mostly doing Rental Arbitrage
Let’s hear from some hosts to see what their experience is like.
Jennifer Ward, an Airbnb host in Tallahassee, Florida(Link Florida Rental Arbitrage Here). She was living with her dog in a 4 bedroom house working a 9-5 job. She decided to rent out 2 rooms as she was having a financial crisis due to her poor health. Also, she was worried about not having any source of passive income in case she’s unable to work any longer.
So in 2018, she started renting 2 bedrooms on Airbnb. Being new to the business she was quickly crushed by the competition. She told us that she used to get some bookings here and there but it wasn’t predictable. As a result, the income was not stable. She was averaging $650 to $920 a month during that time. Also, the competition was very professional and was beating her by providing better amenities at cheaper prices. Furthermore, she wasn’t aware of what amenities she should provide and how to price the property correctly in different seasons.
This led her to struggle for a while, but she slowly started talking to other hosts on FB Groups and Community. This led her to understand what she needs to improve and what others are doing in the industry. She upgraded the amenities and changed the decor of the house to make it more clean and professional in photos.
She also started using data to plan her pricing strategy to help her keep track of the competition. After 4 months of struggling, she saw an increase in the booking and also consistency. This happened after learning all the minute details of this STR business
Like Jennifer, there are many success stories out there. But as many success stories are out there so are unsuccessful ones. What’s the difference? Let’s take a look at what separates successful hosts from unsuccessful ones.
Why Renting out on Airbnb is great!
Renting out on Airbnb is a great idea as it allows you to use an existing asset, your house, and make money from it. If you set up things properly it can even be a very passive source of income with little to no involvement of yours. This is the reason which makes Airbnb STR very lucrative.
On average, you can be making $1000 a month. But this number can be very different based on your location, property, and your hosting skills. If you are able to provide some kind of unique experience to your guests. Then you can even look at making 6 figures just from this side hustle of yours.
Get a realistic idea of the upfront cost.
Most travelers are used to luxury hotels and homestays when they are traveling. Your house might be a perfect abode for you and your needs, but you’ll have guests with different expectations. You might need to invest in the decor and remodeling of the house when you start your STR business. This can be very expensive or super cheap depending upon the current condition of your house.
Also, as you are competing with other hosts, some of whom are doing it full time professionally. This results in people having higher expectations after staying in different homes. And if you aren’t able to match those expectations then you might end up getting average reviews and unsatisfied customers. This will impact a lot on your overall revenue in the long term.
How much can you make on Airbnb in your neighborhood?
Once you have made up your mind to start your own STR business. You might start thinking to yourself. Is my neighborhood good enough to attract a decent amount of tourist traffic? Also if it does where does your house stand compared to the others?. And, exactly how much revenue other houses are generating in the neighborhood.
To answer all your doubts and give you an accurate estimate of revenue and occupancy rate in your neighborhood you can use our tool. Just enter your city in the search bar and zoom into your neighborhood.
How much will Uncle Sam take?
If you rent out your property for more than 14 days in a calendar year then you need to disclose your Airbnb Revenue to the IRS. Also if 10% of the total days it’s rented out to visitors, then you’ll need to disclose your Airbnb revenue and costs to the IRS. If you earned more than $20,000 or made 200 or more reservations in a calendar year, you’ll need to submit Form 1099-K. If you fail to submit the 1099 form then the company you are using to do STR can withhold 28% of your revenue generated. So it’s better to do the proper paperwork as you’ll pay far less than 28% if you file your taxes.
Apart from paying Uncle Sam, hosts also have to pay a fee of 3% to Airbnb. There are some variations to this. If you’re an Airbnb Plus host, live in Italy, or have an exceptionally rigorous cancellation policy, your fee percentage will be higher. For all hosts with Airbnb listings in China, the fees will be a whopping 10%.
When planning out your first Airbnb it’s very important to keep all these costs in mind. Keep in mind all the taxes and service fees, this will help you calculate accurate profits when planning out.
It’s easy to get excited to see booking come in and revenue go up after you get better at hosting. But the real profit is after paying off the IRS, Cleaners, Repairs, and Maintenance and replacing Damages.
After talking to many hosts we found out that you can expect to spend anywhere from 10 to 20% on repairs, cleaning, and other business expenses. Many new hosts don’t factor in all these expenses and end up not generating a profit in the long run.
To manage this one shouldn’t go all in at once. Start slowly, rent out 1 room and see if you were able to generate a profit after all the expenses paid off. This progressive method will save you from making a huge loss that will take a long time to recover from.
Always keep a rule of thumb to keep aside 30% of revenue for the operational costs. That relies of course on the volume of reservations and the quantity of the procedures, such as the management and cleaning services.
The hosts that often make the most are those who have an entrepreneurial mindset and treat their rental as a company. There are many advantages to becoming a host, but it’s important to remember that doing it well requires some effort and possibly some money.