Sites like Airbnb and now Vrbo have been exploding in popularity.
And, you may have heard about a friend or an acquaintance raking in some extra money as a Vrbo pr Airbnb host. As a real estate agent I have been fielding questions from clients who are considering buying a home and wanting to take advantage of hosting part or all of their new space on Airbnb.
Maybe you have an extra room, a small apartment or your willing to rent your entire home short term. Many are turning to Airbnb to convert that space into cash. So what do you need to know as an Airbnb host?
What Is Airbnb?
Airbnb started in 2008. It is a website that allows a host to share their living space with guests. It is a great way to possibly convert your extra living space space for a short period of time into cash.
You will find tents, yurts, rv’s, extra bedrooms, small suites or even an entire home. Everything from the extremely unique to just a downtown condo can be available in a given area on Airbnb.
Airbnb basically is a warehouse of living space available. The unit are provided as short term rental that gives guests more of an experience than just a hotel room.
What Do You Need To Know As A First Time AirBnb Host?
Before you run off and buy a place to rent on Airbnb or start renting existing space know what you are getting into by being a host.
Know Your Local Laws Regarding Short Term Rentals
As Airbnb and others have become quite commonplace, states and municipalities are realizing a need to start regulating short term rentals in their communities.
Here in Massachusetts legislation regarding short term rentals of Airbnb, Vrbo and others starts July 1st this year regarding short term rentals. The legislation covers taxation, registration and impact fees for short term rentals.
You also need to be aware of laws for the town your short term rental is in. Individual towns can have drastically different laws on short term rentals and before you pull the trigger on a purchase you need to understand the laws in that community.
Newburyport MA has banned short term rentals from Airbnb in single family neighborhoods after a slew of noise and parking complaints.
Salem MA restricts short term rentals to neighborhoods zoned R2 and prohibiting such in R1 neighborhoods.
Other communities restrict short term rentals to owner occupied properties only, where the owner is just renting out a room or small suite where the owner must lives on premise.
Be assured that as the short term rental market becomes stronger more laws will be coming.
What Is The Time Commitment To Being An Airbnb Host?
Like any money making venture there will be a time commitment to renting out your space on Airbnb. I think it is easy to overlook some of the time commitment it will take to be successful on Airbnb.
You don’t just make your unit available and the money rolls in. You will have to find the sweet spot for pricing, prepare your unit for guests, prepare your listing, clean in between etc…
But one area first time hosts overlook is managing the inquiries. You can spend hours every week just handling questions and inquiries. It is also important to handle them in a timely manner.
Tax Implications An Airbnb Host Should Be Aware Of
Speak to you accountant about tax ramifications of collecting rents from Airbnb guests. Of course you will have to pay income tax on any profits from your short term rental over 14 days.
But also ask about capital gains tax if you should ever sell your house that you used for Airbnb rentals. As a personal residents that is occupied by the owner for 2 years or more there would be no capital gains on the sale of the home. But if you use a percentage of the home for rental there now could be capital gains owed on the percentage of the property used as rental upon it’s sale.
But now many states and communities may charge you an excise or lodging tax in addition to your income and property tax. Make sue you understand your financial obligations with your city and state before deciding to jump into the short term rental business.
Inviting The Unknown
If you are renting out part of your home while you are occupying the home as well realize you really don’t know who you are inviting into your home.
Is the thought of putting a few bucks in your pocket worth the hassle of dealing with unknown guests? At the very least they can be rowdy, noisy or messy. But what if there is theft or personal safety issues involved is it worth it?
While as an owner occupant of a short term rental you have some lee way screening guests you still need to be aware of discrimination laws that can get you into trouble. If the property is not owner occupied ( occupied by the owner at the same time as the guest) you will have to learn fair housing laws for your state to avoid any discrimination lawsuits.
Marketing Your Short Term Rental
The most successful short term rental units on Airbnb and Vrbo have several things in common.
First off they create a unique experience you can’t get most places. Crafting a description of what your unit provides and what the surrounding area provides is important. Following up with high quality photos is also instrumental in the success of your short term rental. You need to paint a picture for your guests.
Second the devil is in the details. Let them know exactly what they are getting and what they are not getting so there are no disappointments from your guests.
The disappointment comes when a guest is expecting one thing and gets another.
Risk and Liability
By opening up your home to many different people you are increasing your risk and opening yourself up to liability. The first thing is to get the proper insurance in place in case something does arise.
The second line of “defense” is to scrub your rental unit. Make sure there are no unsafe conditions. Trip hazards, furniture falling over, the electrical is safe, etc… Minimize as many risks as you can.
At the end of the day, as multiple people move through your unit, things will happen. Minimize the risks and get great insurance and be over vigilant in seeking out any potential hazards. If you are not on premises and never rented before think about, what if it snows? Legally it is your job to provide safe, slip free access to and from your property. So who is going to clear the walks and plow the drive?
The Experience and Reviews Are The Key To Airbnb Success
When you book a Marriott or Hilton hotel room, the brand itself gives you a good idea of what you are getting. Whereas an Airbnb room or home is unbranded and each property is unique to themselves.
We talked earlier about providing exacting details about the experience your guest will have when they arrive. So, now, you have booked your first guests.
But the real work now begins on delivering that experience you described. Ill be honest with you, an Airbnb is not much cheaper than a hotel room by the time all the fees and taxes are paid as a guest. So a guest could really go just about anywhere for the money.
Airbnb guest are looking for that homey, unique experience they cannot get in a hotel and you need to deliver on it. Being truthful about what you don’t have is as important about describing about what you do have. Be honest about what you don’t provide and over deliver on your promise of what you do provide.
At the end of the day your success will rely on getting a book of great reviews and possibly obtaining superhost status. By doing so, you will show interested guests that you deliver on what you promise
Be Realistic About The Areas Draw
I have had a few buyers looking at buying places for short term rentals without giving much thought to the draw to the community. Just because you can list it on Airbnb doesn’t mean the guest will come.
Asses first if the community your rental is in will provide enough income to be viable and make it worthwhile. What would draw short term rentals to the area? Are there festivals, major colleges or prep schools, is the community a tourist destination?
Here in my area I have had people look at condos in Newburyport to use for Airbnb. It makes sense its a tourist town with beaches. But I also have had people talk about using properties in Methuen or Lowell for short term rentals. I am not sure those communities have enough of a draw to provide a thriving business.
Also look at the rental unit itself. Is the property unique enough to draw in visitors. Maybe you have a small guest house on a working farm. Or a small studio on a winery with great views. Is there possibly something unique about the property itself?
Be realistic of why your rental will draw a steady flow of guests.
Rental sites like Airbnb and Vrbo have really only taken hold in a few short years. They are becoming part of the growing sharing economy.
But while it is in its infancy, communities are finding there are some problems that come with short term rentals and are starting to address these issues with laws that restrict and ban the shot term rental entirely.
On the other hand. If you have some unused space in or around your home, an extra room, an unused carriage house, a studio above a garage, etc… Airbnb may be the perfect place to put some extra cash in your pocket from some unused living space you may have.
Just make sure you know what you are getting into before becoming an Airbnb host. Don’t buy a property for short term rentals without checking your local laws.
- Find the top cities for Airbnb rentals– REALTOR.com
- Is buying a vacation home a good investment? Bill Gassett
- What do landlords need to know? Xavier De Buck
- Vacation Home Decor Ideas– Joy Bender
What Do You Need To Know As A First Time AirBnb Host is provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell your home give me a call at 978-360-0422 and let’s get the process started.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford