Airbnb Strategy: Building a Successful Short-Term Rental Business

The Airbnb strategy is a crucial asset for real estate investors and short-term rental hosts because running an Airbnb can be a great source of passive income. With good planning and management, a short-term rental property can generate significant profits. But simply buying a property and listing it on Airbnb doesn’t guarantee you’ll make a lot of money.

Running a successful STR business requires research, planning, financial investment, and the right tools to run your rentals effectively and scale. It also requires significant time and commitment because there are many things to consider and many tasks to complete.

To help you get the most out of the Airbnb strategy, we’ve created this step-by-step guide that covers the basics of starting a vacation rental business.  

Find a Desirable Location and Research Local Laws

If you are considering starting an Airbnb business, research and find a suitable location. It should be your priority because the profitability of your rental will significantly depend on its location. The best places to look for properties are areas that attract many visitors, such as popular travel destinations with strong demand for short-term rentals.

Other important factors to consider when choosing where to buy an Airbnb property include public transportation, the availability of amenities such as restaurants, nightclubs, and shops, and affordability. These factors will determine your STR property’s occupancy rate and the expected return on investment.

To be effective, your Airbnb strategy should be based on reliable data to inform your decision. If you don’t know how to start your research, you may want to check out our article about the best cities for Airbnb investment in Europe and the US.

When you have a few locations in mind, it’s time to project core financial metrics. Tools like Mashvisor and AirDNA will help you assess your potential earnings and estimate the return on investment.

You also need to check the local Airbnb laws and regulations to ensure it’s legal to rent out on Airbnb in the city of your choice. Unfortunately, not all cities have friendly STR regulations and may restrict or prohibit Airbnb rentals. Some cities may require short-term rental hosts to get business licenses or special permits. Besides, there are fees and taxes that you are expected to pay.

Keep in mind that STR regulations are constantly changing. That’s why you should check out local government websites and consult a local lawyer to find out what requirements you need to meet as a host in the city of your choice.

You may also want to check out our blog post about STR laws in some popular locations for Airbnb investments in the US.

Set Up Your Budget and Plan Your Financing

After you make sure that running an Airbnb in your city of choice is legal and lucrative, you can start searching for beneficial properties for sale. Once you’ve identified a property that fits your preferences, you should decide whether buying it makes financial sense.

You need to consider all the expenses of owning an Airbnb rental and estimate the expected profit. You should also budget carefully, taking into account all your regular sources of income, ongoing expenses, and savings. Don’t get tempted by perfect-looking properties you can’t comfortably afford with your budget.

Of course, you can also investigate financing options available for short-term rental hosts. Traditional financing options include:

• A private loan from a family member or friend.

• A pension loan—if you have a personal retirement fund, you can borrow money from it, depending on its terms.

• A conventional bank loan for a second or third property.

• Commercial rental-specific loan, commonly referred to as a Debt Service Coverage Ratio or DSCR loan.

Remember that traditional financing for short-term rentals has severe limitations, so it may not be your best option. It’s challenging to qualify for a conventional bank loan, and mortgage rates for second homes and investment properties are much higher than primary home mortgages. Additionally, it isn’t easy to scale with traditional financing.

That’s why taking advantage of dedicated STR lending programs that use the asset-based lending approach is better. Such services consider the property's actual or projected income to determine whether it qualifies.

It’s also possible to start an Airbnb business without owning a property. This popular business model is called rental arbitrage, when you sign a long-term agreement with a landlord and then rent out the property on Airbnb. Rental arbitrage allows you to get income without significant capital. You may also want to explore the Airbnb-Friendly Apartments program.  

Choose Your Target Audience

You have bought a property in an attractive location and want to turn it into an Airbnb rental. Before you create your listing, define your ideal guests and base your marketing efforts on them. Identify the specific types of travelers most interested in renting your home or apartment, and create your target guest personas. Think about who your perfect guests are, what they do, and their vacation-specific priorities and concerns.

For example, you may target digital nomads, business travelers seeking a unique experience, couples seeking a romantic retreat, families with children, pet lovers, reunion groups, or solo travelers who want to live like a local. Pick a specific type of guest, and always ensure your business decisions align with them.

Understanding the needs and preferences of your target guests will help you better understand what you need to do to offer a perfect experience for them. Then you’ll be able to create a listing that appeals to the travelers most likely to book a stay at your property. This way, you can increase the number of booking requests from guests who are more likely to enjoy their stay and leave positive reviews that can help you win more bookings.

Prepare Your Property for Short-term Rental

Now you can start preparing your property for guests, keeping their comfort and convenience in mind. Remember that modern travelers have high expectations when looking for vacation accommodation, so you need to get your home ready for them.

If the property is old or in poor condition, consider renovating it to make it suitable for Airbnb guests. You may need to repair and repaint your house or even change the overall design. Do your best to create a welcoming atmosphere to help your guests feel at home.

Make your place safer for guests

Equip your home with safety items, including carbon monoxide detectors, smoke alarms, and functioning fire extinguishers. Provide a well-stocked first-aid kit for your guests to use if they have an accident during their stay.

Ensure there aren’t any exposed wires and that stairs are safe and have railings. Provide your guests with contact details of local emergency services and provide clear instructions on using home appliances safely.

Check out our article for more tips on ensuring the safety of Airbnb guests.

Decorate and furnish your home

Select the right furniture and décor to make your Airbnb rental more attractive to your target guests. Your furniture and style choices will differ depending on whether you want to attract business travelers, budget backpackers, seniors, or families with kids.

Making your rental space look incredible will help your listing stand out and can get you more bookings. But it’s important to balance a stunning interior design and durability to create a cozy space without spending much money. Invest in practical, durable furniture and flooring materials, and choose décor that appeals to your target guest persona.

Equip your rental with amenities and stock it with essentials

Whether you want to provide a luxurious place to stay or something more fundamental, guests expect essential amenities, such as bed linen, pillows, towels, hand and body soap, shampoo, and kitchen utensils to feel comfortable. Guests often filter their search results to find popular amenities like a pool, Jacuzzi, WiFi, air conditioning or heating, a washer or dryer, and free parking.

And if you want to stand out from other Airbnb listings, aim to offer something special beyond the basics to appeal to the types of travelers you want to attract. For example, if your target guests are traveling with pets, it would be helpful to provide litter boxes, pet food, water bowls, and scratching posts. Whatever it may be, highlight extra amenities and special features in your listing’s description.

You may want to check out our list of Airbnb supplies to better understand what items you should provide to ensure a comfortable stay for your guests. A good idea is to check local Airbnb listings to see which amenities your competitors offer.

Your guests will appreciate it if you offer them something your competitors don’t—they will likely leave positive reviews and book your property next time. But it’s crucial not to overspend in this step to avoid eating into your future profits.

Gather a Team to Help You with Cleaning and Maintenance

Since short-term rental guests value cleanliness above almost everything else, thoroughly cleaning your property at each changeover is crucial. Cleaning for vacation rental guests requires a lot of attention to detail, so it makes sense to outsource this task to professional cleaners. You should also provide them with a detailed cleaning checklist to follow, ensuring your place is neat and tidy for every guest.

With the Marketplace Cleanings feature activated, we will find you a reliable cleaner for every turnover. Watch the interactive demo to learn how the feature works.