If you own a property that is vacant for at least part of the year, you might be able to make some good money by renting it out as a vacation rental on sites like Airbnb. But while there is certainly some profit potential associated with using a service like Airbnb, there are a number of considerations that should be made first before you open your doors to the masses.
Here are some important things to consider before you list your property on Airbnb.
1. Safety Comes First
You obviously want to make some extra cash by opening up your home to guests through Airbnb, but it’s absolutely critical that you thoroughly screen guests before you hand them the keys. Safety should always come first, especially when you allow complete strangers to take up residence in your home for a brief period of time.
You might be excited to get an interested party, but don’t be afraid to turn them down if anything seems a little unsettling about them. Be sure to put potential guests through a screening process. You might insist on having guests provide a copy of government-issued ID or only agree to take guests who have a certain number of positive reviews from other hosts. Whatever your particular process may be, make sure it’s thorough enough to prevent any sketchy individuals from occupying your home.
2. It Takes Time
You will need to dedicate a certain amount of time to your Airbnb listing, so make sure you’ve got a few hours to spare each week for this purpose. You’ll need to take calls, respond to emails, screen potential guests, prepare contracts, deal with emergencies, and clean the property between each guest. Make sure that you have the time to commit to hosting an Airbnb before you decide to put your property up for rent.
Of course, you can always hire a property management company to handle all of these time-consuming tasks for you, but that will eat into your profits, which can be a problem if you’re just barely making any money from this endeavor.
3. Insurance Will be Required
Letting strangers occupy your property is a risk, not just safety wise but also in terms of theft and liability. You could unknowingly allow a guest in who ends up stealing from you or damaging the property. You could also be faced with a situation whereby a guest hurts themselves on your property.
There are so many different situations that can arise that can put you at legal and financial risk, and the best way to protect yourself is by having the appropriate insurance policy in place. You might have homeowner’s insurance already, but it will likely be limited. Look into Airbnb liability insurance coverage to minimize your risks.
4. You’ll Need to Revisit Your Listing Price Regularly
It’s a good idea to see what the comparable properties in your area are being listed at on Airbnb so you can establish a competitive price. The price is one of the most important factors involved in being successful on Airbnb, so it’s essential to get the price right.
But once you establish an appropriate price, that doesn’t mean you can just set it and forget it. The price will need to be revisited every so often, especially as the market changes.
5. Your Neighbors Might Have a Problem With it
As you can imagine, some homeowners might have a problem with having a slew of different people set up shop in the neighborhood every few days. As such, many communities across the country have petitioned local city councils to restrict or even ban Airbnbs in the area. Make sure to find out whether your particular area has any current petitions against Airbnb listings. If so, you may want to tread lightly and decide if all the trouble is worth it.
6. You Might Not Be Allowed to List Your Place
Not only can neighbors give you a hard time about renting out your home on Airbnb, but you might not even be legally permitted to do so, especially if you currently rent. Many leases clearly stipulate that sub-leasing is strictly forbidden, and collecting rent from guests through Airbnb certainly falls under this category.
If you rent your unit, it is critical that you discuss your intentions to list on Airbnb with your landlord beforehand. If your rental unit is in a condominium, you will also need to get approval from the HOA before listing.
7. Extra Expenses Should Be Budgeted For
You may be collecting a rental fee from each guest that you host, but there are expenses that will deduct from your profits. Being a host on Airbnb will come with several costs, such as cleaning fees, repairs, and even Airbnb’s service fee.
8. There Are Laws You’ll Need to Understand
You’re responsible for finding out what the regulations are in your city and act accordingly. Some Airbnb hosts have faced hefty fines for renting their units that are not according to local law. For instance, there may be certain zoning laws that need to be followed that could deem your property a rooming house or even a bed and breakfast. If your zoning laws do not allow for such properties in your neighborhood, you could be slapped with a fine.
9. Uncle Sam Will Want a Cut of Your Earnings
Any profits that you make from renting your property will have to be reported to the IRS come tax time. That said, you should be able to claim any expenses against it in order to minimize the amount of taxes you will responsible for paying.
The Bottom Line
You definitely stand to make some extra money by renting out your property on Airbnb and other vacation rental sites like it. But it’s not as simple as listing your property and collecting rent checks. There are some important considerations that should be made before you embark on this journey in order to ensure you’re making an informed decision.