The Top 10 Do’s and Don’ts for Airbnb Short-Stay Landlords

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I don’t want to be a buzz kill…

…but there’s too much mushy thinking in the Airbnb, VRBO, and short-stay space.

So much so that I see short-stay landlords acting like home-sharers — and having a lot of fun doing so.

However, if you check their bottom lines, you’ll see they aren’t doing much better than passive landlords. And doing extra work without capturing extra income is not the way to run a for-profit business.

As a foaming-at-the-mouth Airbnb-er since 2011, one who is both a provider and user with stays all over the United States, let me offer a bit of structure.

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Three Short-stay Business Models

You need to be crystal clear about which type of short-stay business you’re operating.

The table below summarizes the financial goals of the three models

Table for Airbnb Short Stay Landlord Article

Each business model has its own unique mode of operation, expected level of service, and acceptable rate of return. You’ll notice, however, that only short-stay landlords have profit as a goal.

So if you’re a home sharer or vacation rental provider, you can stop reading here. What follows is not intended for you (although you might find it interesting — so keep reading).

If you’re a landlord considering a short-stay business, you should follow these “do’s” and “don’ts” to avoid costly mistakes and become more profitable than a typical landlord.

The following is for rental owners that choose to provide short-stay housing instead of traditional long-term rentals. It is intended for those who want to maximize the yield on both their time and money.

airbnb-tax-impact

Do’s

1. Comply with local ordinances and pay your lodging taxes — if any.

Short-stay rentals are going mainstream. Just like with eBay and Amazon, you’re not going to be able to avoid taxes forever. More and more cities (sometimes states) are requiring lodging taxes for stays of 30 days or less.
Run a legitimate operation. Read your city ordinances carefully. And read the exceptions three or four times — opportunities hide in the exceptions.

2. Prioritize your start up expenditures.

Spend your first investment dollars on installing items that’ll help your guests feel secure. Start with upgrading your locks, bed bug proofing your beds, removing any and all odors, etc. Spend your last dollars on Martha Stewart-ing; decorating comes last.

Related: My Client Tripled His Income Using Airbnb: Here’s What He Should Know About Taxes

Buzz kill — right? It’s just that spending your budget in this order will reduce your chance of wipeout.

3. Compete with extended stay hotels.

Consider the world of “long-shorts,” where managers and cleaning costs don’t eat up your profit. Compete for travelers who would otherwise opt for extended stay hotels. These folks want more privacy and homey-ness than a hotel can offer. If you’re near a hospital, university, or airport, you may have a golden ticket.

4. List your offering on multiple sites.

Start on one platform and add others over time. Consider listing with the big three commission-based sites: Airbnb, HomeAway, and TripAdvisor. Then sync the calendars so you only get inquires for available dates.
It’s smart to cast a wide net to increase your exposure and minimize your vacancies. Don’t limit your platforms until you’ve had a chance to determine the pros and cons for yourself.

5. Go after employer-sponsored business travelers.

There’s a HUGE difference between travelers who pay out of pocket and those who get reimbursed by their employers. Many traveling consultants (like myself) get a stipend to cover housing expenses. Often, the allowance is based on Government Services Administration guidelines.

So be mindful not to disqualify yourself by spiking your rates. From a net income perspective, these guests just might be the most lucrative long-term and frequently repeating clients you can find.

Don’ts

1. Don’t compete with the home sharers on one and two-night stays.

Fast turns, what I call “short-shorts,” are games that home sharers can win. Cleaning and providing day-to-day management are their jobs.

To make any money with short-shorts, you would need to pass along your full cost of cleaning. And large cleaning fees are a major turn off to price savvy guests. That’s why you really need to set a minimum stay that pencils — and that might be four nights or more.

2. Don’t rely on landlord best practices — many don’t apply.

If you are a seasoned landlord, you will need to change out your mental framework to be a good short-stay provider. For example:

  • Fair housing laws aren’t valid in this peer-to-peer economy. You look at people’s peer reviews for quick go/no-go decisions.
  • Credit checks aren’t relevant since money is collected in advance.
  • So whereas having a lot of landlording experience is useful, don’t assume it’s sufficient in the short-stay world.

airbnb-tax-implications

3. Don’t try to earn more than 5 stars.

Once you get going, you can add some razzle dazzle. But if you’re a gadget person, stifle yourself.

Don’t buy whiz bang UNLESS you can estimate a reasonable break even date. Will that gadget really help you get more bookings at higher rates and with better reviews? Hmmm… buying a holographic TV is cool, but it won’t help you get a 10-star review when only 5 stars are possible.

4. Don’t lose track of the climbing baseline.

Rents are escalating. It’s possible your local market rents could be higher at the end of the year than they were at the beginning. Rents can swing the other way too, so you have to check local conditions a few times a year. If the baseline exceeds your short-stay income, then sell off your furnishings and switch back to traditional landlording.

Related: The Upsides & Downsides of Airbnb: A Landlord’s Perspective

There is no shame in pivoting. After all, you’re in the short-stay business to net more income than a traditional landlord — not less.

5. Don’t be a jerk.

Your reviews are everything in this peer-to-peer economy. Your guests will, in general, be laid back folks who want to do business directly with other nice people. So be fair, but if you need to “get someone told,” then get the resolution center involved. Airbnb has intermediaries to help you navigate crucial conversations with their referred guests. So when needed, let Airbnb facilitate.

But whatever the case, be a generous host. Your reviews equate to your wealth in the collaborative economy. The more good reviews you have, the more others are willing to do business with you. So keep your future opportunities in mind — keep your cool.

The Big Takeaway

Although there are three categories of short-stay rentals, only one of them has a profitability threshold. And following these do’s and don’ts will give you a fast track towards netting more than a traditional landlord would.

These principles are training wheels to keep you from bruising losses. Keep them on until your balance sheet shows you’re proficient. Then go on to create offerings that are nearly impossible for others to compete against. And from that position, you’ll be able to maximize your asset’s cash flow.

Do you use Airbnb? What do’s and don’ts would you add to this list?

Let me know with a comment!

About Author

Al Williamson

Al Williamson helps landlords increase their monthly income by sharing unique tips to save money. He is the author of Airbnb for Landlords, and he blogs at LeadingLandlord.com and is an active BP member.

24 Comments

  1. Curtis Marshall

    Great post Al! I’ve found almost every point to be true with my vacation rentals. You mentioned pursuing employer-sponsored business travelers. How do I go about doing that? I know about Airbnb’s business listings, but are there other places where these business travelers might be looking?

    Curtis

    • Al Williamson

      Hey Curtis Marshall,

      Yep, there’re a lot of similarities with vacation rentals. The intent of the stay is the biggest difference – and it’s huge when it comes to business travelers.

      Us travelers on GSA will be using the Business Travel Ready option with Airbnb more. In general, you can:
      1 – network to find employee-sponsored guest
      2 – tweak your ad to “dog whistle” for these folks.

      I’m coming out with a guide on how to use LinkedIn to find corporate tenants. That’s included in the course I offer.

      But, I don’t want to be mysterious about it, it’s just a bit of hustle and, as someone who was personally stuck on long-term GSA, I know it can be quite lucrative for the rental owner.

  2. J. Martin

    You hit the nail on the head with going after the “long short” rental, and stop hustling the night by nights with the rest of the home sharers!! Also marketing on multiple sites.. Cast a wide net..

    I’ve dug into a few more things since I took your course Al, and looking forward to your guide on how to utilize LinkedIn to get furnished renters. Hadn’t even thought of it!! Guess that’s why you’re writing the guidebook!!!! 🙂

    Let me know when it’s out!! Thanks for posting this Al! Leading the way for landlords everywhere. Should have listened to you a few years back and would have been retired earlier!!!! 🙂

    • Al Williamson

      Thanks for your kind words J. Martin.

      I’ll give you heads up on the LinkedIn guide but there’s still a lot of trial and error in front of me.

      BTW – you retired early enough!

      When is your book coming out? I want to follow in your foot steps.

  3. Roy Kwak

    Great post Al. I have a condo that would be perfect for this because it is walking distance to Century City (i.e. Lots of potential corporate clients). Unfortunately I think that the other owners would burn me in effigy if I started renting to short term tenants. Any tips on doing this in smaller multiunit buildings (20 units) where everyone sees each other in the elevator and parking lot? I don’t mean I would hide it, I just would want to be a good neighbor and not be disruptive in any way.

    • Al Williamson

      Hi Roy Kwak – thanks for reading.

      You definitely want to follow your HOA’s rules. What’s their policy for landlords?

      See if you can set up a formal corporate housing arrangement or a hybrid of such.

      However, short-stay housing is not a silver bullet. It’s not right for every situation.

      Best to you

        • Al Williamson

          Hey Curtis,

          I use a modified version of my residential lease agreement. I basically attached and reference an inventory of furnishings, appliances, and stuff.
          After the company’s legal and accounting department goes through your lease, you’ll end up with something different.

          That’s my experience. Hope that helps.

  4. Roy N.

    Al:

    In our AirBnB experiment this summer – we already have a furnished student house in which all rooms are booked for September – we are competing with the university residences in addition to extended stay hotels and local B&Bs.

    Our advantage over the dorm room is scale (fewer folks sharing a washroom) and you have a kitchen in which to prepare your own meals (if you so choose).

    I am still skeptical if this will be a cost effective use of our off season.

  5. Edwin Merino

    I love this!
    You’re right on the money with the business models.

    I’ve begun my own business running short term vacation homes in Da Nang, Vietnam and I find these tips really useful.

    In Vietnam, the home sharers and “short-shorts” are all competing on price which is a race to the bottom. Not the race to be in.

    Thanks for the great post!

  6. scott shatford

    Great post overall. Must disagree on the short stays. It’s hard to attract a substantial amount of business travel if you are requiring four night stays and nearly impossible to get to 90+ occupancy that way. Over 50% of business travel guest are staying under 4 nights. Also high cleaning fees should be used as a tool to dissuade shorter booking without preventing them. They can be used as a profit center.
    Probably the biggest “DO” not mentioned is dynamic pricing. Call it price gouging or what you will but supply and demand should dictate your price throughout the year.

    • Al Williamson

      Scott, thanks so much for commenting. Sounds like you’re in the trenches as well.

      I was taken back by your statement that it’s hard to attract sufficient amounts of biz travelers. Of course, you need to do what’s best for your net income and everyone faces different challenges based on their location. However if there is an extended stay hotel in the area, chances are a landlord can get a piece of that action.

      I whole-heartedly agree with your comment on cleaning fees. However, I recommend owners measure and pay themselves for management time. The additional profit doesn’t seem worth the trade off to me and my family. If I were a home sharer, I would feel differently.

      Same with dynamic pricing. It’s a wonderful money maker. But I wouldn’t recommend it to a landlord phasing into the short stay business. It’s a somewhat advance tactic that requires monitoring. I would lead them to finding the optimal sweet spot of low management and premium yet steady pricing.

      However all your points are extremely valid. The short-shorts are great if your city doesn’t charge transient tax and restrict what off site landlords can do. If you have city ordinances to follow, doing long-shorts may be the best path.

  7. Sean Walton

    Great article Al! A lot of it I picked up intuitively but nice to see it all laid out for the newbie. I agree with Scott to the extent you are in a market with small hotel room supply when a big conference or event comes into town you can charge 50 to 100% more than your base rate. Just don’t expect a super bowl to cause a 300% surge because many people put their property on the market just for those events.

    • Al Williamson

      Thanks Sean! Good insight.
      Do big conference pick small hotel towns?

      That’s the time to rent your personal residence and go stay with friends. IRS allows you to rent your dwelling unit up to 14 times per year tax free!

  8. Sean Walton

    Hi Al,
    Shoot, I could have used that tax info 2 years ago. I would stay at my girlfriend’s when big conferences came to San Francisco. There are several large conferences a year (Oracle, Salesforce) and an under supply of hotel rooms. Even the moderate sized game developers conference and google I/O cause a spike in demand. Austin has similar spikes during SXSW and Austin City Limits.

    • Al Williamson

      Gotta, but I thought those conventions went down in larger cities… But I guess demand can always out strip supply.

      After all, that is how Air Bed & Breakfast (Airbnb) found a foot hold in the industry. They chased the 2008 Democratic and Republican conventions and helped fill a need for hotel alternatives.

  9. Mark Krupa

    Short term rentals can be a lot of work.

    I outsource the cleaning and have a realtor lockbox!

    I never meet my guests.

    I’ve been buying and hosting 4 properties on the European Tourist Trail for 5 years now.

    Overall I enjoy it. But a few of them needed to be rented long-term for reasons you mentioned.

    @Airbnbcoach

  10. Brent Washam

    Thanks for that insightful article as I have been on the cusp of trying out short-term renting. One potential negative not mentioned is collecting, accounting for, and paying the occupancy tax to three or four separate entities. I’ve about decided long term is the way to go for my garage apartment in San Antonio. The labor seems onerous and profit potential small compared to a good long-term tenant.

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