How to turn your vacation home into an Airbnb
Since the pandemic, demand for Airbnbs has increased. According to AirDNA, the average occupancy rate for short-term rentals in the United States has increased by 10% since 2019 and short-term rentals have earned on average 39% more per year than before the pandemic. With such encouraging numbers, you might be considering convert your own vacation home to Airbnb.
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Before doing so, however, Here’s what the experts say you need to know first.
Analyze the local market
Although Airbnbs can generate substantial passive income, not all markets are ideal. If your vacation home is in an area with strict short-term rental regulations, it might not be worth converting it to an Airbnb, said Avery Carl, a real estate agent who owns nine short-term rentals and founder of the short term shop.
Instead, she recommends Airbnb-friendly markets that are more resilient to recessions.
“It should be in a regional driving vacation market, not an expensive flying vacation market like Aspen,” she said. “If you’re down south, think Tennessee Smokies, or if you’re in California, maybe it’s Big Bear.”
According to AirDNA’s 2021 Market Report, small towns or rural areas provide the highest average annual income for short-term rental owners, followed by mountainous or lakeside destinations.
Configure your financial systems
Carl recommends setting up separate bank accounts before listing your vacation home on Airbnb. This will make it easier to pay and file taxes in the long run.
“You don’t want your short-term rental income going to the same bank account as your W-2 income,” she said. “Have separate bank accounts and separate debit cards so you can track your spending.”
Don’t forget lodging taxes and renter’s insurance, said Chris Cook, senior sales manager at To evolve“Once you’ve confirmed that you have the required permits to operate a short-term rental in that area, you want to make sure that you’re charging the appropriate amount of tax and that you have a plan to remit those taxes accurately. “
Provide a great experience to get 5-star reviews
As demand increases, Airbnb owners can charge higher rates. But with higher rates comes higher expectations, which means owners have to work even harder to earn those crucial five-star reviews.
“I encourage landlords to keep in mind the importance of review ratings in short-term or vacation rentals,” Cook said. “Reviews play a crucial role in the performance of your rental, and the owner or property manager plays an important role in delivering a five-star experience. This includes accurate photos and descriptions of your property, a well furnished, cleanliness and fast and responsive communication.
Cook also recommends responding to all reviews, even if they’re not positive.
“The reviews your hospitality experience brings back are really important,” he said. “In the event that you have anything less than a five-star review, ideally you respond and process every opportunity that arises.”
Decide if you will manage yourself or hire a property manager
Before launching your Airbnb, decide whether you will manage your rental yourself or hire a property manager.
Self-employed owners must market their rental, manage the property’s handymen and cleaners, purchase supplies, and communicate with guests, which includes responding to texts and phone calls if a problem arises during a stay. They must also determine their rental rates per night, which must fluctuate seasonally to increase occupancy and revenue.
“If you’re making your home available 365 nights a year, you’re going to be very busy,” Cook said. “It can be a full-time job.”
The alternative is to hire a property manager. Short-term rental property managers charge between 10% and 50% of an Airbnb’s total bookings, with all-inclusive management at the higher end of that range.
If you don’t want a full-time job but also don’t want to give up your profits, a hybrid property management company may serve you better, Cook said. For example, Evolve charges landlords 10% of all bookings to handle marketing, guest communication and support, pricing, and renter insurance ($3,000 in damages materials and $1 million in liability).
Carl, however, said self-management shouldn’t consume all of your time. Owners can use channel managers (to sync calendars across multiple booking sites and manage communication with customers), smart pricing software, and scheduling managers that automatically notify cleaners after a booking.
“If owners are using technology correctly, self-managing an Airbnb should take about 30 minutes per week for a property,” Carl said. “It doesn’t necessarily double when you buy a second property, it’s more like a 10% increase. The first week you will be tearing your hair out. This is the most stressful and laborious period. But once you have everything set up, you don’t really manage the property anymore. You simply manage your systems at a higher level.
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This article originally appeared on GOBankingRates.com: How to turn your vacation home into an Airbnb
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