How much money can an Airbnb host really make?

Airbnb income can help offset high cost of living

Although mortgage rates recently dipped below 5% for the first time since April this year, they’re still significantly higher than they were at this time last year.

On top of that, everything from gas to groceries are more expensive than they used to be, and the Fed hiking up interest rates means it’s becoming costlier to borrow as well.

A May survey from Airbnb showed that nearly 45% of hosts globally said their hosting income has helped them stay in their home in 2021, while 46% said their hosting income covered food and other necessities that have become more expensive.

Hattenbach notes that Los Angeles is pretty pricey to live in, so it was necessary for her and her husband to supplement their existing income to pay off their mortgage. The couple looked at properties that were either duplexes or had guest houses that they could rent out.

The duplex is situated near the iconic Los Angeles Hollywood sign and the Griffith Observatory, and she says she gets a lot of tourists.

The couple have a 30-year mortgage on the duplex and the payments come to around $4,000 a month. Hattenbach estimates they’ve been able to cover the full cost of the mortgage 85% of the time since they started hosting with the rental income alone.

When the COVID-19 pandemic hit in 2020, Hattenbach and her husband gave a short-term lease to some former Airbnb guests, but she says they plan on putting the property back on the rental platform once their current tenants leave.

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Costs to consider before becoming an Airbnb host

The first step in becoming an Airbnb host is getting to know the numbers, says veteran host Danny Rusteen, a former Airbnb employee and the owner of OptimizeMyBnb.com — a blog site and business designed to help hosts make the most out of being an Airbnb host.

If you do the math and find that your estimated rental income might not be enough to cover the costs of hosting plus your mortgage, you may want to think again. Your location is also important.

“I would suggest looking into the market to ensure it’s a good market,” Rusteen advises. “Measure your mortgage costs and your other fixed costs and variable costs.”

You’ll need to estimate how much you can reasonably earn off the rental income and whether this can cover all the costs of owning and hosting your property.

This could include the cost of upgrades and renovations, home decor, cleaning and maintenance (you’ll charge your guests a cleaning fee), a smart lock, keypad or lockbox and extra insurance. Airbnb offers its own free insurance, but you may still want to purchase your own.

Hattenbach says she learned some important lessons from when she first began hosting. “We kind of underestimated the cost of running it,” she admits, explaining that she and her husband initially charged a low cleaning fee and cleaned the apartment themselves, but later hired a professional cleaner and then raised the fee.

And don’t forget to consider the tax implications. You will have to report your rental income when tax season comes along, although you may be able to deduct expenses like cleaning, advertising and repairs.

Reasons short-term rentals might not be your best option

You may want to consider renting out your property long-term instead if you’re looking for consistent income.

And you aren’t as subject to the ups and downs of the travel industry, such as seasonal vacancies or pandemic lockdowns — the short-term rental business suffered during the first year of the COVID-19 pandemic.

And while with short-term rentals, you can benefit from flexible pricing and greater income potential, you’ll also need to deal with the upfront costs of cleaning and regularly stocking up on essentials like towels and toilet paper as well as keeping up with the wear and tear that comes from having so many people in the home.

There are some markets that can be a potential headache for an Airbnb host, Rusteen warns. This could be due to lack of rental demand in those areas, or issues with guests.

Rusteen also advises against renting out a home that has sentimental value to you, since there’s always the risk of damage. You can be at risk of theft or receiving complaints from neighbors as well.

Renting out your primary residence can get tricky. “If we're speaking to the family who just goes on one vacation a year — for two weeks, maybe a month — that's not ideal,” Rusteen says. The more time you can rent out your home (or part of it, as Hattenbach does), the better.

It’s more common to rent out a second home, for those who own one. Vacation home sales skyrocketed in the second half of 2020 and through April 2021, however demand has now fizzled out thanks to higher mortgage rates and home prices.

How to make money as an Airbnb host

The Airbnb website notes that holiday weekends, such as Thanksgiving and Labor Day, and the summer and fall travel season are popular times.

“It's really important for a host to start off strong — to start off with momentum,” Rusteen explains. “If a host starts in slow season, then their pool of — I call them FPGs — future potential guests is just tiny, because you're going up against existing hosts with reviews.”

He recommends charging less for weekdays and more for weekend stays, although beginner hosts will need to start their pricing low overall.

It’s also crucial to make your rental look as desirable as possible. Your online listing should be updated and appealing to potential guests, with great photos and a thoughtful description.

If you meet certain requirements, like high ratings and reviews and enough completed bookings, you could receive superhost status — which can attract more guests.

Rusteen advises creating a digital guidebook on Airbnb that answers some basic questions, like how to operate the washer or what the Wifi password is, and lays out the house rules. You can even include recommendations for what to see or where to eat in the area.

Hattenbach also listened to her guests — switching out the regular shades to blackout shades when they told her the light filtering in through the windows was too bright in the mornings.

It’s all about creating a space that you’d want to stay in, she emphasizes.

More: List your home on Airbnb and start earning income today