Is hosting Airbnb worth it? Yes,
hosting Airbnb is worth it if you already own a fully furnished property in an area without strict short term rental (STR) laws. It’s also worth it if you qualify as a real estate professional with the IRS because you get tax benefits like deducting rental losses and exemption from the 3.8% net investment income tax (NIIT) for some rental activities. If you want someone else to cover your mortgage while you accrue equity, then it is worth it to Airbnb your house, according to hosts Kristen and Michael (from the California Dreaming with Kristen & Michael YouTube channel), who’ve never once paid their mortgage out of pocket since they listed their Joshua Tree property on the platform.
Suppose you live in a heavily regulated city like Las Vegas or San Francisco. You can still host Airbnb by complying with your local STR requirements, such as applying for a business license, registering for permits, or being physically present in your Airbnb rental property during the entirety of your guests’ stay. If you’re a real estate investor targeting these major cities, Airbnb isn’t the best choice. Consider long term rental strategies instead.
Airbnb hosts are quitting in droves because of recent fears around market saturation, government STR crackdowns, low ROI, high interest rates, and recession. Even the biggest names in the industry, like Vecasa, Stay Alfred, and Evolve, report losses in inventory and income. Sonder, who went public at $1.8 billion, also saw a dip in stock performance.
Online influencers call this the “Airbnbust” phenomenon, and famous YouTubers in the space, like Shelby Church, don’t recommend that you become an Airbnb host because of it. Reventure Consulting also says revenues are 50% down, so be prepared for a market sell-off. If you lurk around local Facebook communities for Airbnb hosts, you’ll find property owners who’ve only been in the game for 4-9 months listing their furniture and quitting Airbnb.
Despite this, Airbnb’s first quarter report in 2023 shows a revenue of $1.8 billion, their highest first quarter ever, and a net income of $117 million. Q2 was even better, with $2.5 billion in revenue and $650 million in net income. So, what does this mean? According to short term rental expert Sean Rakidzich, this discrepancy is caused by a surge in supply for Airbnb’s listings globally, resulting in high revenue for the platform but higher competition and, therefore, fewer guests for individual hosts. So, it has become challenging for many hosts to remain profitable, and they just quit.
However, Sean also says that this exodus of supply in the market is an excellent opportunity to expand your portfolio and shore up your business operations to prepare for the future. So, if you’re an existing Airbnb host or want to get in the space, read on to delve into the key factors to consider before listing your property, firsthand accounts from hosts in 2024, and essential tips to ensure a successful Airbnb business.
Is Hosting Airbnb Worth It? (Pros and Cons of Airbnb Hosting)
Reasons Hosting Airbnb Is Worth It
Cash Flow: Hosting on Airbnb often results in a higher income than traditional long-term renting.
Meeting New People: Airbnb hosting provides opportunities to interact with guests from different backgrounds and cultures.
Tax Benefits: You’re eligible for certain tax deductions for your rental property.
Passive Income Potential: While it requires initial setup and ongoing management, Airbnb can offer a hands-off income stream once systems are in place.
Platform Assitance: Airbnb assists with guest bookings and communication.
Guest Preference: Some travelers prefer Airbnb’s homely feel over hotels.
Guaranteed Payments: Payments are processed through Airbnb and generally released within 24 hours of a guest’s arrival.
Control Over Hosting: You can choose your availability and vet your guests.
Reasons Hosting Airbnb Isn't Worth It
Security Concerns: There’s a risk of property damage, theft, and guest misbehavior.
Neighbor Complaints: Hosting can result in noise or other disturbances, leading to complaints from neighbors.
Inconsistent Income: Unlike long term rentals, Airbnb bookings are often sporadic.
Regulatory Issues: Some areas have regulations or bans against short-term rentals.
Increased Expenses: Often, hosting an Airbnb requires more spending on amenities, cleaning, and maintenance than traditional renting.
Economic Factors: Increases in interest rates and economic downturns can increase costs and reduce demand.
Demanding Work: Managing guest expectations to ensure positive reviews can be demanding.
Platform Fees: Airbnb charges hosts a percentage fee on every booking, which costs more than you’d spend on a direct booking website.
Insights from Real Airbnb Hosts: Do They Think Hosting on Airbnb Is Worth It in 2024?
1. Christina Dennis
Christina Dennis, founder of “The DIY Mommy,” launched a renovated lake house project in Canada. In the six months since she started renting it as a short-term accommodation, she faced various challenges and learned a lot. The house required more investment than anticipated, both in renovation costs (approximately 50,000 CAD) and in furnishing it with every amenity a guest might look for—from essential appliances to small details like coffee pods and dog treats.
Christina also emphasized the significance of choosing durable finishes; she commended her choice of luxury vinyl plank flooring but regretted not extending it to the bathroom and installing a white sink in the kitchen. To ensure guest satisfaction, she invested in communication tools like guidebooks and instruction signs while providing prompt responses to queries.
Christina Dennis's Verdict:
Hosting on Airbnb is worth it. Though she hasn’t recouped her investment yet, the experience of hosting and interacting with guests has been incredibly rewarding. If you want to host, be prepared financially and mentally for its challenges and responsibilities.
2. Kristen and Michael
Kristen and Michael saw an increase in their Joshua Tree property’s bookings in 2023 compared to 2022. After adding a hot tub to their property in February 2023, their earnings rose to $3,620 from $2,411 in February 2022. They observed similar patterns in the following months, with April 2023 fetching them $6,560 against $5,186 in April 2022.
The couple credits their Airbnb’s continued success to reinvestments in the property. While the hot tub led to a few issues, it also boosted their competitiveness in the market. They’ve also been diversifying on Vrbo and Lodgify, as well as their own direct booking site. Despite changes to Airbnb’s website affecting hosts, they’ve been able to adapt and maintain consistent bookings.
Kristen & Michael's Verdict:
Airbnb is worth it in 2024, especially if you’re strategic and open to reinvesting in your properties. While now might not be the ideal time to buy a short-term rental, you’re positioned well if you already own one.
3. Lydia Patel
Lydia Patel is an Airbnb host from Jacksonville Beach, Florida. Here’s a partial comparison of her earnings in 2022 and 2023.
Lydia attributes the drop in May to an exceptional month-long booking, which she thinks is a rare occurrence. She also just launched her property that year, so she believes it was boosted by the Airbnb algorithm since it was a new listing. In total, over the three months of May, June, and July, her 2022 earnings were $34,833, whereas in 2023, she earned $32,057—a difference of nearly $2,800 or an 8% decrease, not accounting for inflation. Overall, she says her experience was neither disastrous, with 50% drops as some Airbnb hosts experienced, nor exceptionally positive.
Lydia Patel's Verdict:
Airbnb can still be profitable in 2024, but it’s not the time to be complacent. You should continually enhance your listings to remain competitive in the market.
7 Tips to Make Hosting Airbnb Worth It
1. Choose a Strong Market
National parks like Joshua Tree and Yosemite are proven favorites among travelers. People frequently seek accommodations near these attractions, so areas around popular vacation destinations—lake towns, beach towns, or ski resorts—can guarantee a steady flow of guests.
As usual, be wary of cities with stringent short term rental regulations, such as Dallas and New York. You should opt for vacation areas with a historic reliance on tourist traffic or go the owner-occupied route with fewer restrictions. Avoid locations with no existing regulations; they’ll likely introduce them sooner or later, and there’s no way of knowing the rules.
2. Build a Unique Stay
Building a unique stay significantly enhances your Airbnb’s profitability. Rather than opting for mundane designs and facilities, creating an Airbnb that stands apart from the rest ensures guests choose your listing over competitors.
For instance, an Airbnb in Yucca Valley, California, distinguishes itself from nearby rentals with its secluded hilltop location and floor-to-ceiling windows offering panoramic views. Another cost-effective avenue to create distinctiveness is through glamping setups, such as tents, yurts, or domes. Your primary objective should be to offer guests an unforgettable experience, not just a place to sleep. By doing so, you avoid competing solely on price and can charge a premium for the unique experience you’re providing.
3. Sell Time, Not the Property
By focusing on selling time, you’re ensuring higher occupancy rates, which means increased profits. For instance, if you usually earn $1,000 a night but have this 3-day gap between two weeklong bookings, a good strategy is to drop your rate to $200 a night for those days, securing an extra $600.
You can also make extra money upselling certain perks, like late check-outs, early check-ins, curated experiences, or specialized kits like movie boxes. Keep this in mind, especially during busy days. Labor Day Weekend, Fourth of July, and Memorial Day Weekend are the most profitable for Airbnb hosts, with Airbnb data reporting significant earnings during these periods.
4. Save Your Profits and Build a Reserve
Consistently saving profits and building a financial reserve will protect you from unforeseen expenses like maintenance, property tax, and other associated costs that arise. High-season months often bring higher profits, but you must efficiently manage this to bridge the income gaps during off-peak periods. By maintaining a dedicated reserve, you’ll avoid overspending during profitable times only to be financially strained by taxes and upkeep later.
5. Diversify on Other Platforms
Diversifying beyond the Airbnb platform opens new revenue streams. Platforms like Vrbo have introduced competitive advantages like the One Key loyalty program, created in partnership with Expedia and Hotels.com. This program allows hosts and guests to earn rewards from vacation and car rentals. Listing properties on multiple platforms increases your visibility as you tap into different guest demographics.
6. Find a Real Estate Agent with Short-Term Rental Expertise
STR-specialized real estate agents understand the local market and can help you pinpoint properties that would make great Airbnb listings. They can help verify your financial projections and insights on local trends to ensure profitability.
7. Take Advantage of Failed Short Term Rental Leftovers
Some hosts exiting the market are selling furniture at discounted rates. If you’re savvy enough to buy these properties for $2,500, significantly less than the usual $6,000 furnishing cost, you’ll save a lot of money. You can negotiate monthly payments of $300-$400 for ten months if you can’t do the $2,500 upfront. You can find hosts that are quitting Airbnb on local Facebook groups.
9 Deciding Factors Before Listing Your Airbnb Property
1. Local Short Term Rental Laws
If you can’t comply with local regulations, hosting an Airbnb is not worth it. Not every city welcomes Airbnb. Many have specific laws governing short term rentals, with some even banning specific short-term bookings. You should review your area’s STR codes to avoid hefty penalties that could cost you $1,000 to $5,000 in fines.
You should also stay updated with changes because states and counties pass new STR laws from time to time. For instance, New York City’s Local Law 18, which mandates Airbnb hosts in the city to register their listings, has just taken effect on September 5, 2023. This law limits you (if you’re a landlord in NYC) to host only two guests at a time, and you’re also required to live in the same unit and be present during the guests’ stay. Furthermore, your guests must have unrestricted access to your entire home. According to Christian Klossner from the NYC Mayor’s Office, this move aims to keep travelers safe from unlawful accommodations while curbing illegal short term rentals. But as a host, this limits your capacity to scale your Airbnb business.
Combine the ongoing STR crackdowns with the industry getting more competitive, and it’s no wonder Airbnb hosts are struggling. AirDNA data shows that the supply of Airbnb listings in the U.S. alone saw a 23.2% year-over-year increase to 1.38 million listings in September. This surge caused a decline in occupancy rates for many hosts, and many ended up shutting down their operations.
2. HOA, Condominium, and Co-op Rules
Even if your city allows Airbnb, your housing association might not. Homeowners’ associations (HOAs), condominium boards, and co-ops often have declarations prohibiting subletting or short term rentals. So, before you dive into hosting an Airbnb, review your association’s bylaws or consult directly with the board. If you’re renting your residence, ensure you have your landlord’s explicit approval to host. Adding a hosting clause to your lease agreement is usually enough.
3. Profitability
You can make good money hosting an Airbnb, but it’s harder now than ever. Factors like increased competition, seasonality, and even external elements such as rising airline ticket prices—up by 25% according to CNBC—can affect your Airbnb income.
Your business’s profitability is highly reliant on the short term rental market you’re in, as some markets are more lucrative than others. That said, an extremely unique stay in a great location, complete with high-demand amenities and “Instagrammable” aesthetics, is the type of Airbnb that makes the most money. Great locations are usually vacation destinations, like Joshua Tree National Park, where travelers visit all year round. Airbnb hosts Kristen and Michael testify to this, as they have a Joshua Tree listing that remained profitable despite other hosts reporting a drop in profits.
Is Airbnb Profitable for Hosts?
Yes, Airbnb is profitable for hosts who are strategic about where they start their Airbnb business and how they manage it. Vacation rental profits vary by location. For instance, in Canberra, Australia, you can earn between $4,000 to $6,000 per month per Airbnb rental, with mortgages averaging $1,500 monthly, so your profit margins are favorable. You’ll also make more with Airbnb than traditional renting because you can adjust your rates dynamically. In Seattle, the average apartment rents for $2,197 monthly, translating to $26,364 in gross revenue for a 12-month lease. On the other hand, the occupancy rate for Airbnb rentals is about 77%, and the average daily rate (ADR) is $157, so if you rented short-term, you can gross approximately $42,000 annually—which is over $15,000 more than you would with a long term tenant.
Airbnb hosts make $924 per month on average, according to fintech lender Earnest. However, the average Airbnb income for hosts varies depending on location. For instance, in the US, hosts can earn an average of $44,235 annually, significantly higher than their Australian and UK counterparts, who make $27,988 and $22,196, respectively.
To calculate your Airbnb income potential and operating costs, use Airbnb calculators online, like AirDNA’s Rentalizer, that provide estimates for your Airbnb unit based on property details and past booking data specific to your location. For a hands-on approach, use this formula:
Average Daily Rate (ADR) x Year-Round Occupancy Rate = Annual Revenue Potential
Remember to account for significant expenses like utilities, cleaning, maintenance, and the Airbnb fee. Airbnb takes 3% of the booking subtotal from hosts.
4. Startup Costs
It costs an average of $6,000 to start an Airbnb, though it can be as low as $3,900 or as high as $30,000, depending on your choices and the location of your rental property. Furniture usually ranges between $2,000 to $3,000, and professional photography services start at $100. Integrating amenities, such as a hot tub or mini-golf course, could range between $8,000 to $25,000. You can leverage a credit card to manage these expenses.
5. Taxes
With Airbnb hosting, your rental income is subject to various taxation laws that influence your earnings. This income isn’t taxable when renting out your residence for less than 15 days a year. But for periods exceeding this, you must report your income on Schedule E of your tax return. You’re also responsible for local taxes that apply to your state or county, such as transient occupancy tax (TOT), which is common in many areas, though Airbnb handles this for you. Occupancy tax collection and remittance by Airbnb works by automatically collecting occupancy taxes on your behalf at the time of booking. This service ensures compliance without altering your total payout as a host, but it’s only available in certain jurisdictions.
6. Risk and Liability
You’ll also have your fair share of liability concerns when you become an Airbnb host. While Airbnb’s AirCover offers impressive coverage, including up to $1 million in damages and guest liability, you shouldn’t treat it as a substitute for personal homeowner’s or renter’s policies. If you’re already insured, verify if your current policy covers home sharing or if a supplementary fee allows you to add it. If not, Proper Insurance is an optimal choice for hosts, providing $1 million in business liability and unique benefits like unlimited theft coverage. You can also look into other insurers like Allstate and CBIZ. Beyond these, consider establishing a limited liability company (LLC) for added protection against legal actions. Running an Airbnb is stressful sometimes, but the financial rewards can outweigh the challenges if you’re prepared and proactive in managing potential risks.
What Are Airbnb Risks for Hosts?
Property damage, theft, inappropriate guest behavior, and potential squatting are Airbnb risks for hosts when renting Airbnb properties. When you host a rental, you’re opening your home to strangers, so you’re vulnerable to potential damages, ranging from minor wear and tear to significant property destruction. And unlike traditional long term rentals, Airbnb accommodations are usually furnished, which makes theft more likely to happen. If you live in the property, there’s the inherent risk of strangers violating your private space. Legal loopholes also allow guests to overstay and claim residency rights, which can trap you in prolonged legal battles.
7. Cleaning and Maintenance
Guests nowadays expect hotel-quality cleanliness when booking Airbnb rentals. Consequently, the platform penalizes hosts with low cleanliness ratings. So, maintaining a clean property is non-negotiable to sustain your Airbnb business, and you have three options: Clean the property yourself, build your cleaning crew, or hire professional cleaning companies through Turno or TIDY. Out of all those, having your team is the most cost-effective. Here are some basic tasks to do between every guest stay:
- Clean the dishes
- Dispose of waste
- Make the beds
- Mop and vacuum the floor
- Wash toilets and bathrooms
- Sanitize high-contact surfaces
Also, make sure to deep-clean the place every month, wash linens, and take inventory of all furniture, decor, and amenities, in case you need to report property damage. You’re also responsible for broader property maintenance tasks like leak repairs, roof inspections, and pest control.
8. Guest Communication
Communication is pivotal for enhancing guests’ Airbnb experience. As soon as a potential guest expresses interest in your listing, effective communication can set the tone for their entire stay. Firstly, ensure you’re transparent to each Airbnb guest. It’s also vital to always be available for any concerns, whether about the amenities or any potential issues arising during their stay. Always check the Airbnb app and keep a record of all your conversations in case of disputes. Moreover, be responsive and aim to answer all inquiries within 24 hours.
The post-departure phase is also equally important because this is the point where you can encourage reviews from your guests and address any criticisms head-on. But be constructive about it, not defensive. After all, the biggest problem with Airbnb is poor customer service. A 2021 Twitter study found that 72% out of 125,000+ complaints on Airbnb were tied to lousy customer service. So, making your guests feel valued can make all the difference, even if they had a negative experience.
9. Airbnb Algorithm Changes
Airbnb is an online platform, and just like other online platforms, it updates its algorithms occasionally. This can affect your property’s visibility, booking rates, and overall success. Various factors influence Airbnb’s search algorithm. Listings that rank high in search results tend to be priced competitively, maintain a high quality, and exhibit popularity among users. Increasing your listing’s availability, responding promptly to reservation requests, and minimizing booking restrictions also boost visibility. While having superhost status doesn’t necessarily guarantee improved rankings, guests can specifically filter their searches to view listings from superhosts, increasing the chances of these listings being booked.
Separate from the algorithm, Airbnb Plus is a special program where homes are vetted for quality and comfort. Joining this program can help you stand out with benefits like premier placement. However, to be eligible, you must meet specific requirements, including a top review status, a high acceptance rate, and no last-minute cancellations in the past year.
Related Airbnb Posts
Why Digital Real Estate Is Better Than Hosting Airbnb
Digital real estate is better than hosting Airbnb because it’s more stable, less competitive, and more profitable. So, is being an Airbnb host worth the effort after all this? Initially, Airbnb hosting seems promising, especially if you own a furnished property in a high-traffic tourist destination. However, staying competitive is hard. According to Search Logistics, the market is saturated with over 4 million hosts and 6 million listings. So, you must continuously update and invest in your property to maintain steady revenue. In short, it’s not the easiest side hustle if you’re looking to make some extra income.
If you’re one of the 39% of adults engaging in side hustles to seek more lucrative avenues, then local lead generation is a great option. Unlike Airbnb, where the average host earns $13,800 annually, excluding operational costs, local lead gen can yield between $3,000 to $5,000 monthly per website. With startup costs averaging only $500, you can profit quickly without years of waiting to break even.
Local lead generation focuses on driving traffic to local businesses by ranking a lead gen website on top search results in Google. Backlinko says the top 3 results get 75% of organic traffic from searches. So, if you manage to turn your websites into prime digital real estate with this method, they become valuable assets for businesses that are willing to pay a premium for generated leads. Dive into local lead gen training to build a sustainable online business.
