Every year, many homeowners worldwide join the vacation rental industry to earn extra money from opening their spaces to travelers. The easiest way to rent out your home or a spare room is to list it on Airbnb, a popular online marketplace connecting travelers with hosts.
Anyone can become a host on Airbnb to generate passive income from their rental property to supplement their regular earnings or achieve financial independence. However, how much you can make can vary and depends on many factors.
Still, running an Airbnb can be lucrative if you approach it strategically. So, what can you do to maximize your earnings?
Airbnb Passive Income: What Are Your Options?
Airbnb opened up new avenues for ordinary people to earn real estate passive income by turning their unused spaces into profitable assets. Short-term rentals are passive in nature, meaning that if you have a property, you can still earn with minimal ongoing effort, even if you're not around.
However, hosting on Airbnb is more than just creating an attractive listing with stunning photos and an engaging description; it's not exactly passive. It requires active involvement in managing bookings, turnover cleanings, communication with guests, etc., and may feel like a part-time job.
If you don't want to handle everything yourself, you may hire a property manager to handle your daily operations. But remember that property managers charge high commission fees that can be a significant portion of your rental income.
So, if you prefer a hands-off approach, a smarter option is to automate your routine operations using vacation rental software like Hospitable. Although it's not a completely passive income, you'll keep all your money and won't have to perform repetitive daily tasks manually.
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Renting a property on Airbnb can potentially be more lucrative than traditional long-term rentals since short-term stays often command higher rates. So, there is a way to get a "passive income" on Airbnb without owning a property. You can use such a popular business model as short-term rental corporate leasing, or subletting.
The corporate lease on Airbnb means you need to find the right property in the right location, sign a long-term agreement, and obtain a permit from your landlord to rent it out on a short-term basis on Airbnb or other OTAs. This strategy is absolutely legal, but you should remember that it's not easy to find landlords who allow subletting.
Airbnb Passive Income: Can You Make Good Money?
In 2022 alone, Airbnb hosts in the US collectively earned approximately $22 billion by renting out their spaces to travelers, with the typical host earning more than $14,000 over the year. And in 2023, Airbnb hosts from around the globe earned more than $57 billion. Interestingly, most hosts (more than 75%) share just one home.
As a host, you can expect to earn from a few hundred to several thousand dollars per month. Yet, it's important to remember that, as with any sort of side business, the success of hosting on Airbnb will depend on many factors, including
- The location of your vacation rental property
- Market rates per night in your area
- The current state of your property and the amenities you offer
- Seasonal variations in demand
- The property's average occupancy rate
- The maintenance and upkeep costs and many other considerations
The Negative Consequence of Passive Income
There are multiple ways of tax optimization in the short-term rental business. All of them are completely legal. It’s all about knowing the legislation and doing what’s good for you based on this knowledge. One of the famous strategies is avoiding passive income, as it is taxed at higher rates vs. active income.
We cannot give financial or legal advice, but we hosted Amanda Han, Tax Strategist and Managing Director at Keystone CPA, on our podcast. She distilled all the popular STR tax optimization strategies, and we highly recommend reading the recap or listening to the full episode.
What Can You Do to Increase Your Income Potential?
If you want to make more money with your short-term rental property, you need to focus on maximizing your revenue and minimizing your expenses. Here are things you can do to increase your Airbnb passive income.
Optimize your listing
The Airbnb market can be incredibly competitive, especially in popular tourist destinations with many listings. The best way to stand out is to create a compelling listing with professional-quality photos and a detailed description to let guests know what they are booking.
Highlight unique features and amenities that set your Airbnb rental apart and look appealing to your target audience. Use relevant keywords and phrases to increase the chances that your listing will appear in the proper Airbnb categories.
Complete your Airbnb profile to make a positive first impression and establish trust. Turn on Instant Book to ensure a seamless booking experience and be strategic when setting your minimum stay requirements.
Provide outstanding guest experience
Do your best to make your guests happy with their stays. This will help you earn more 5-star reviews and ratings for your Airbnb listing, boosting your visibility on the platform and may result in more bookings.
Respond to guest inquiries as fast as possible and be available to address any issues or concerns immediately. Ensure consistent communication with guests via messages to provide them with the necessary information and prevent misunderstandings.
Typing and sending each message to your guests is very time-consuming, so successful hosts choose to automate this critical task using vacation rental software like Hospitable. Our system uses AI and can help you deliver personalized, human-sounding messages to each guest at the right time. You just need to set rules.
Have conversations with your guests even when you sleep
Provide amenities guests expect to have in your listing, such as quality towels, comfortable bedding and pillows, and essential toiletries. Consider adding thoughtful touches like extra blankets, a stocked kitchen, and a welcome basket to make your guest's stay more enjoyable.
Keep your property clean and tidy. Cleanliness is a top priority for guests and one of the categories in Airbnb ratings, so consider hiring professional cleaners to meet guest expectations and maintain high standards.
Striving for excellence to ensure a memorable guest experience may help you achieve a Superhost status and earn the Airbnb Guest Favorite badge awarded to individual listings. These badges will be displayed in search results and on your listing page, helping your property stand out and attract potential guests.
Strategically price your Airbnb
Research similar listings in your area to determine competitive nightly rates that will help you increase your booking rate. It's important to consistently adjust your prices, considering seasonal fluctuations, local events, and demand in your area.
Since doing market research and adjusting nightly rates manually requires a significant investment of time, the best way to get your Airbnb pricing right is to use a third-party dynamic pricing tool. Such tools use sophisticated algorithms to determine competitive prices based on market data and can adjust rates in real time.
Offer upsells to make more money while ensuring a great experience for each of your guests. Early check-ins, luggage storage, late check-outs, additional cleanings, and local experiences are just some add-on services you can offer your guests for an extra fee to enhance their stays.
If you opt for Hospitable, you can use our integration with The HostCo and easily create a digital store for your listing. Then, our system will automatically share a link to your store in your messages.
Use different channels to market your property
Airbnb can be a good source of passive income, but relying on just one OTA platform to market your property isn't the best strategy. If you want to grow your business, expanding your reach and attracting a wider audience is essential.
Consider listing your property on multiple platforms, such as Booking.com, Vrbo, and Agoda. Use social media platforms to showcase your vacation rental property and engage with potential guests. Create a direct booking website to build relationships with guests, drive repeat direct bookings, and save on OTA fees.
You don't need technical skills to build a direct booking website using our dedicated service, Hospitable Direct. Then, we'll list your property on Google Vacation Rentals. Travelers can discover your rental when they're using Google to search for accommodation, and you'll get direct bookings without paying high third-party fees.
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