How to Triple Your Rental Profits with Airbnb

by | BiggerPockets.com

Like many real estate investors, I rent properties to long-term tenants and collect monthly payments. It’s an old property-rental model, but it works.

However, now that services like Airbnb have popularized independent short-term rentals, old-fashioned renting may not be the model that offers the greatest profit potential.

For a recent podcast, I sat down with real estate agent and investor Tyler Sheff, who is adamant that investors can make more money with short-term rentals than they can renting to long-term tenants.

After talking to him, even I’m thinking about making a change.

Tyler’s first rental property, a fourplex, was purchased in 2014. Now, less than three years later, it’s already a reliable source of rental income. Since Tyler turned two of the four units into vacation rentals, the entire property has consistently pulled in roughly $6,000 per month after expenses.

Tyler’s short-term rentals run for $100–$125 per night on Airbnb. These same units only generated $900-$1,000 per month when rented to long-term tenants.

Essentially, for each unit converted into a short-term rental, Tyler tripled his earnings.

According to Tyler, he didn’t have to do much to get his units ready for short-term guests. He believes other investors can implement the same strategy successfully without too much trouble. If you’re interested in giving it a shot, read on for a few key pieces of advice.

Prep Your Property with Short-Term Guests in Mind

People tend to have higher expectations for short-term rentals than they do for long-term leases. To ensure guests will be satisfied with your space, you need to take a moment to consider what they want.

Location is obviously important to guests, but it’s not something you can change with a rental property you already own. What you can change, however, are the amenities your short-term rental offers.

Tyler furnished his short-term rentals with everything one would expect to find in a hotel room, including flat-screen televisions. He also equipped both units with high-speed Internet and cable.

While furnishing your rental property with modern items and services may seem expensive, it pays off in the form of positive reviews and increased interest from prospective guests. Besides, if you intend to use your property exclusively as a short-term rental, unbooked nights will cut deeper into your profits than monthly cable and Internet subscriptions ever will.

Related: Airbnb vs. Traditional Rental Income: A Creative Way for Investors to Cash Flow in Expensive Cities

Create a Competitive Listing for Your Short-Term Rental

The work you put into prepping your short-term rental will be in vain if you don’t advertise it effectively. There are three things in particular your listing should include to make it stand out to prospective guests.

1. A Detailed Description

A vague description is a red flag in the eyes of most prospective guests. Write a description that’s detailed and honest, but don’t be afraid to focus on your rental’s best features. After all, the description is your chance to sell people on your property.

2. A Complete List of Amenities

While you should mention at least a few of your rental’s most impressive amenities in the description, including a comprehensive list of everything it offers elsewhere in the listing is also important. Not only will this list help set appropriate expectations for guests, it can also generate additional bookings.

Since some prospective guests will skim through the description, your amenities list is a second chance at catching readers’ attention. List your rental’s amenities to avoid missed booking opportunities.

3. A Set of High-Quality Photos

Don’t skimp on your rental property’s photographs. Listings with low-quality photos tend to perform poorly on sites like Airbnb, and it’s pretty easy to understand why. Think about it: would you seriously consider staying in a short-term rental without being able to see what it really looks like?

If you need help shooting great photos of your rental, Airbnb offers a professional photography service.

Related: The Top 10 Dos and Don’ts for Airbnb Short-Stay Landlords

A Word of Caution on Short-Term Rentals

As with any investment strategy, hosting short-term rentals carries certain risks. Property damage is one of these risks, but it really shouldn’t be your primary concern. There is one thing in particular that has the potential to cut off your short-term rental’s cash flow completely: restrictive legislation.

Airbnb and other services that advertise homes and apartments as short-term rentals are relatively new; lawmakers still aren’t entirely sure how to handle them. In some cities, new laws are making it extremely difficult for property owners to profit with sites like Airbnb.

Last year, for instance, New York banned property owners from advertising short-term rentals on Airbnb.

Fortunately for the majority of short-term-rental hosts, most cities are still taking a supportive stance on services like Airbnb. Regardless, before seriously pursuing a strategy for short-term rentals, you need to be aware that this may change in the near future.

What do you think about short-term rentals? Are they a reliable source of long-term income? Let me know your thoughts in the comment section below!

About Author

Pat Hiban

Pat Hiban sold more than 7,000 homes over the course of his 25-year career in real estate. Now, he dedicates his time to helping others succeed as agents and investors. As host of the Real Estate Rockstars Podcast, Pat interviews real estate experts to explore what works in today’s markets. He also founded Rebus University, an online training platform for real estate agents and sales professionals.

28 Comments

  1. Tyler Huntington

    Great timing with the article, Pat.

    I have two SFRs going live on Airbnb within the next two weeks near Joshua Tree. I agree with your points. I think you can totally beat this topic to death and have ? bullet points. I’ve found my To-do list is never ending. Eventually had to come to grips with the fact this is a long term project and I can make tweaks as time goes by. Just get the darn thing listed and put the unit to work.

    • Jeremy W.

      New York City? It’s a shame that so many now have to run on “stealth mode.”

      For every other city, it pays get your hands dirty with the city ordinance. In Chicago, it put a “kibosh” on most of the “unprofessional” hosts and in places where guests had too many neighbors (major condo buildings). Outside that, the market has gotten more professional because it has to be to justify the taxes.

  2. karen rittenhouse

    My son lives in a very nice condo in the center of a very small town. He travels a lot out of the country but usually for only 3-6 months. Because of that, we didn’t try to rent it out for the first few years. With all the Air B&B talk, I decide to try advertising it weekly or even monthly.

    I was amazed. In 2+ years of marketing (only Craigslist), it has never been vacant. And I have gotten as much as one month’s rent for one week stay.

    Who knew there was such a demand for furnished spaces, not hotels, even in a small town near no vacation areas! People have rented to visit relatives, while remodeling, while in town training for a new job. It’s been great.

    Thanks for your post.

      • chris Childs

        You can put in a system by advertising your listing and then screening tenants by having them apply and submit a short google survey. You can either meet them on site and have them sign a short term rental agreement stating that if they damage the property then their deposit will cover xyz, collect a photo copy of id and get the weekly deposit 1/2 upfront 1/2 at the last night of stay or you can just send them over to your airbnb page, have them create an account, and book, thus securing your listing using airbnb’s system. You do pay the 13% ish booking fee, but that’s a small price to pay for convenience and less risk. In the past several months airbnb has been less host friendly and more guest friendly, denying hosts claims in favor of the guests, so you may want to save yourself the 13% and have them book off platform, just make sure that you carry your own property insurance (and yes there is seperate property insurance you can get for STR’s) and make sure that you have the guests put down a hefty deposit either on a card or in cash, plus venmo or paypal you the first nights rent (or 1/2 upfront), that way if they cut and run you have a good chunk of money you can use towards any potential damage or their nightly bookings.

  3. Lazaro Vento

    Airbnb has changed my life I went from broke excar guy to having 20 units. Best part for me is that I don’t own any of the units. I won’t lie to anyone it’s a ton of work me and my wife do all the cleaning. There are always small issues everyday but I can tell you it’s a great way to get free. Also take control of your life you don’t need credit and once’s you get rolling loans for growing are easy to get.

    • Joseph Nichol

      Lazaro congrats on the 20 units and getting free! Are the issues everyday explaining certain amenities for each unit to each tenant? Also, on average how long does it take for you and your wife to get the place back into tip top shape after a tenant who is there all weekend?

      I am looking to start Airbandbing my property in Tucson AZ.

    • Deep Sharma

      Awesome Lazaro!! I hope you’re bigger than 20 units by now 🙂

      Questions for all:
      – As a owner how much involvement needed on daily basis?
      – How you manage cleaning/supplies etc on daily basis; yourself or manager? Once day is okay?

  4. Gary F.

    Airbnb in my area (South San Jose) is quite competitive and not very consistent. I have 4 bedrooms for Airbnb and I’ve been averaging 10 days/month over the past two months. Not enough to make up the difference for longterm rental. And my house is all brand new remodeled and the rooms are super nice, but still very low traffic.

    I like the idea of renting apartments and Airbnb those but I imagine not many landlords are ok with subletting, especially to Airbnb.

    I’m open to doing this model out of state. Any suggestions to where?

    • Vaughn K.

      Did you ever try lowering your price just a little bit?

      In my experience looking on Airbnb, a unit that is almost identical to another, but is literally just 5-10 bucks cheaper a night will often end up being almost 100% booked, whereas the other is maybe half booked. A very minor tweak like that after looking over your competitors might yield some good results.

  5. Victoria Seale

    I have a STR property in Santa Fe NM. It has been a year since it went live, and a great couple manages it for me as I don’t live in town, and couldn’t be of immediate help if a tenant needed it. They do everything and are well worth the 25% they charge to take care of all the details, booking, cleaning, questions, check in, issues. That said, I pay all the utilities, taxes, insurance, and all the little stuff that makes this place get 5 star ratings like having some coffee on hand, fire wood, internet, paper towels, toilet paper, dish washing detergent, clothes detergent, makeup wipes (to keep makeup off towels), soap, shampoo, conditioner. I”m sure i’m not thinking of some other things that all add up. You have to supply what someone would get in a hotel and more. Hair dryers, irons, ironing board. There are lots of airbnb units in Santa Fe for the size of the town so lots of competition. It was also not easy or cheap getting insurance that covers STR. Maybe most people aren’t telling their insurance companies that they’re doing STR; i don’t know. Maybe some people have guest quarters that are next to or attached to their home, and they are just using their regular insurance to cover the STR unit. If you are renting a room in your house, then my response doesn’t apply to you. Also there is the upfront cost of furnishing a place if it isn’t already furnished. This is a big upfront cost if you want your place to look at all nice. I’ve stayed in airbnbs that look like everything was bought at a garage sale or thrift store. A card table with a table cloth on it. Mismatched sheets that were old. No sense of style or design. Yes it was cheaper than a hotel, and I had a kitchen, but it wasn’t as nice as the Hampton Inn I just stayed in in Salt Lake City. Though I had a discounted rate at the Hampton, so the Hampton was nicer and cheaper than some of the airbnbs i’ve stayed in. Also there is a big seasonal time in Santa Fe. Christmas and Spring Break are popular, but the really big time is the summer, and namely August for Indian Market. Rentals really fall off from November thru April. There are tons of the STR units that go on the market looking for 1-6 month rental periods to see them thru the slow time. I will be switching to LTR starting March 1 and see if that is better. I think it will be from the rents the property manager is shooting for for a furnished LTR. The city also has a yearly STR fee, and initially a lot of hoops to go thru. There can only be so many in proximity to each other. The city doesn’t want whole areas just airbnb units, which makes sense. The LTR tenants will be responsible for the utilities, internet, wood, etc., and that will be great!

  6. Kristen Doppelt

    I have a SFH in Kansas City close to The Plaza and I have been leasing it through Airbnb for several months now. I am averaging 92% occupancy and the home rents for anywhere from $65-$125/night. I absolutely love the Airbnb platform and would recommend it to any investor looking to optimize their rental in a good location. I definitely recommend having a good property manager that can make sure the property is in perfect condition for every check in. Cleanliness and details are key. My home has a theme so it all ties together and the guests absolutely love it. Coming from a 18+ year career in long term property management I must say the change of pace and attitude with short term renters has been a breath of fresh air. There are no move outs, applications, security deposits etc. I have found that the positives outweigh the negatives and the cash flow is well worth it!

  7. Malina Lieven

    Great article on vacation rentals. The emphasis on photos is a MUST! Just throw down the $100-$200 to get professional pictures. However, there are some points that should be mentioned.

    – Decor matters! You’ll get more views since your place will look top notch of the sweet decor and the pro pictures you had taken. Higher occupancy and higher nightly rates will happen with updated decor. People want to vacation somewhere as nice or nicer than their home.

    – List on multiple sites. Make sure you have a listing for both AirBnb & VRBO. Find out which one is more popular in your area and make that one the “book now” option. Don’t set both listing sites as “book now” as you have a chance of a double booking.

    -Pricing. Do your homework and know when the highest/lowest occupancies are for your area. If there is a big music festival that sells out all VR and hotels, don’t be afraid to double or triple you nightly rates. Same goes for the slow times. Don’t just have $250/night for the whole season.

    -Leave it to the professional. Interview professional vacation rental managers in your area. The fees are higher than what you would find with long term rentals, but they will be able to maximize your properties rates and occupancy. Plus, you just need to sit back and collect your monthly check.

    Here are some other great resources for your vacation rental:
    Netflix’s Stay Here
    Podcast: Sarah and T – The Professional Vacation Rental Manager’s Podcast

  8. Jared Whidden

    We recently listed one one of our condos in Phoeniz, AZ through AirBnB and have seen some great success. Cash flow has been consistently 150% of what long term tenants would provide and the platforms works great for communication and addressing common questions. A couple of tips that have helped make this successful for us are:

    1. Provide lots of details re: amenities, items, sleeping arrangement etc. The questions inevitably come up and small things like the listing mentioning that restaurants are near by, can mean more bookings.
    2. List on multiple platforms. We list on AirBnb with the ability to book the condo without our approval after they answer a number of questions and meet some pre-defined criteria. We then also then cross list through Home Away and VRBO but the booking needs to be confirmed by us to avoid double bookings.
    3. Be pleasant. Ratings and reviews are the key to long term success.

  9. Jason Allen

    Great post. I like to do a lot of market research to find which property types, amenity types, etc. the top properties have and then just emulate their success. Then once you do that you can load up on every amenity possible which will then allow you to not get filtered out of search results.

  10. Diana Foo

    I’ve had a few places I’ve rented with Airbnb, and I have done a few LTRs over the years. The STRs with ABnB ALWAYS provided a greater ROI. There was a little more work, (cleaning, wi-fi problems, etc.) but it has still been worth it. One of our places is in a less-than-great-part of town. It didn’t matter. We would be booked solid during high season, and that covered our out-of-season expenses.

    We have a cottage on our primary residence property. Right now a son is living in it, but he just bought a place and will be moving out soon. I am setting the cottage up to be a pricey honeymoon destination cottage. We own the property (no mortgage) so it will be nearly 100% profit, discounting utilities and other minor expenses.

    Having said all that— it is vital that STR owners collect and submit sales, hotel, and tourist taxes. This is why municipalities are cracking down, because too many people are not submitting the taxes. The last thing most of want is to lose any hard earned profits in tax penalties and legal fees. Just do it the right way so we can all continue to enjoy the profits.

  11. Will F.

    I’m intersted in trying the AirBNB or short erm rental on a few of my units in Los Angeles County and near the beach in Long Beach. If anyone does this or does Airbnb/short term rentals as property managers let me know I’m looking to hire someone

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