By The Hospitable Team
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 has the potential to 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 that will allow you to run your rentals effectively and scale. It also requires significant time and commitment because there are many things you need to consider and many things that need to be done.
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.
Table of Contents
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 receive many visitors, for example, popular travel destinations with a strong demand for short-term rentals.
Other important factors to consider when choosing where to buy an Airbnb property are public transportation, the presence of such amenities as restaurants, nightclubs, shops, etc., 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 help you make an informed 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.
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, considering 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 or friends.
- 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 take into account the actual or projected future income of the property to decide 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.
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, you should define your ideal guests and base your marketing efforts around them. Consider 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 looking for a unique experience, couples looking for 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 looks appealing for those travelers who are 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, considering their comfort and convenience. 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 bad condition, consider revamping it to make it suitable for the stay of 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 such as carbon monoxide detectors, smoke alarms, and functioning fire extinguishers. Provide a well-stocked first aid kit that your guests can 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, choose décor that could appeal to a broad spectrum of guests, and go for colors that never go out of style.
You may also want to design your décor around a specific theme to give it a unique feel and attract guests who are looking for a unique experience. Check out our blog post for tips and some amazing Airbnb theme ideas for your vacation rental.
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, you should aim to provide something special on top of the basics to appeal to the types of travelers you want to attract. For example, if your target guests traveling with pets, it would be helpful to provide litter boxes, bowls for pet food and water, 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 understand better what items you should provide to ensure a comfortable stay for your guests. The good idea is to check out local Airbnb listings to see what 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, cleaning your property thoroughly during each changeover is crucial. Cleaning for 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 Airbnb cleaning checklist they should follow to ensure that your place is neat and tidy for every guest.
You’ll also need help performing ongoing rental property maintenance to keep your home in mint condition and avoid significant problems that may require extensive and costly repairs. You may need to hire a co-host and local professionals, such as a plumber and an electrician, to help you handle these responsibilities.
Managing your team will be easier if you automate this process using vacation rental software like Hospitable.com. With Hospitable, you can set rules and let the system assign tasks to your team members automatically based on booking information.
Take your team management to the next level
Install a Smart Lock to Offer Your Guests Self-Check-In
Installing a smart lock to offer your Airbnb guests self-check-in is a great way to improve their experience because it gives them more flexibility around arrival times. Self-check-in also helps attract travelers who are searching for this popular amenity on Airbnb, and it saves time for everyone.
A smart lock uses a security code that you can generate, activate and change remotely using your smartphone, giving you complete control over who can access your property. There are smart locks that integrate with security cameras, meaning you’ll be able to monitor who enters your home. And the best thing is that smart locks integrate with vacation rental software like Hospitable and allow you to automate the self-check-in process.
Set Your Price
Setting the right price is one of the tricky parts while running an Airbnb business, so it requires a lot of forethought and consideration. It’s essential to ensure that your nightly rate covers your operating costs and allows you to generate a profit. And you also need to set a fair price that the travelers will be willing to pay for your property.
So to determine the right price for your rental space, you need to consider multiple factors, including the location of your property, the property type and size, the amenities you offer, your target guests, and seasonality. You should also consider what other Airbnb hosts in your area are charging for short-term rentals similar to yours. This info will help you set a competitive rate and attract guests.
An easier way to manage your pricing is to use a dynamic pricing tool like PriceLabs and Beyond that can help you set the right price to get more bookings and maximize your revenue. Its algorithm analyzes each listing’s historical and current booking data and recommends prices based on several factors. They include market supply and demand data, seasonal and day-of-week trends, special events and holiday predictions, and the number of days left to book.
List Your Rental Property on Airbnb
Once you have taken care of all the setup, the next step is listing your property on Airbnb. You’ll need to invest some time in making your listing perfect because how you present your property will influence the number of bookings you get and your occupancy rate.
Add stunning photos that have the potential to inspire travelers and highlight the best features and amenities that make your rental space unique. This way, you can help ensure that your listing will be shown in the relevant Airbnb categories and increase your chances of catching the attention of target guests and getting more bookings.
Communicate Effectively with Guests
It’s the first step toward a positive guest experience and building relationships with guests. Communicating clearly and promptly with a traveler from the moment they express interest in your rental space can help them feel comfortable and encourage them to leave good reviews.
You should always be willing to answer your guests’ questions and be proactive during all the stages of the communication process:
- Before booking—the faster you respond to guests’ inquiries, the more likely they are to book your place.
- Before arrival—send a message to give your guests clear directions and check-in instructions to help them have a stress-free check-in.
- After arrival—contact your guests to welcome them at your rental property and ensure everything is OK.
- Before check-out—send your guests the check-out instructions and double-check they enjoyed staying at your place.
- After check-out—send your guests a thank-you message and ask them to leave you a review.
Being available to your guests 24/7 can be challenging. Still, you will never forget to contact them at key moments if you automate communication processes using tools like Hospitable.
Have conversations with your guests even when you sleep.
List Your Property on Other OTAs
Airbnb is not the only platform you can use to reach your potential guests. Many booking sites are out there, so you should explore them to learn more about their benefits. To maximize your profits and build a successful STR business, you should create listings on other top OTA platforms, such as Booking.com and Vrbo.
Using different distribution channels will allow you to increase your visibility, reach a wider audience, and get more bookings. You should also consider building a direct booking website to drive repeat direct bookings and save on OTA fees.
Automate Your Business Using Vacation Rental Software
Once you start making money from your Airbnb, you’ll notice that managing your business can be time-consuming. There are a lot of routine tasks that need to be done every day—guest messaging, updating calendars on all your channels, coordinating with cleaners and the maintenance team, and more.
If you don’t have the time to manage your rental independently and don’t want to hire a property manager, the perfect option is to use vacation rental software like Hospitable.com. With comprehensive features, Hospitable can help you automate almost all your routine operations.
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Automation can help you stay organized, keep your business operations under control, and provide your guests with a seamless experience from booking inquiry to check-out. It will also allow you to focus on growth and scaling your business.
With opportunities to meet new people and learn new things, running an Airbnb can be very lucrative and may bring more revenue than a traditional rental. But building a successful short-term rental business is not as simple as purchasing a home or apartment, listing it on Airbnb and other OTAs, and waiting for the money to roll in.
You need to follow the key steps, which involve careful consideration and knowledge to ensure success. Hopefully, our guide will help you get a better idea of how to start and run a short-term rental business so you’ll reap the full benefits of an Airbnb strategy.
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