The Pros and Cons of Renting Your Place on Airbnb

by | BiggerPockets.com

When Erin and I first short-term rented our place on Airbnb years ago, we didn’t know what to expect. Airbnb’s biggest proponents spun tales of easy money falling like leaves from an autumn tree, while its biggest opponents wove dire stories of raging parties that ruined their homes and left them questioning humanity.

More than 150 guests later, I can say we’ve experienced more of the former than the latter. Still, one of the most common questions buyers ask me is, “What are the pros and cons of renting your place on Airbnb?”

I’ll lay out the biggest ups and downs below. (Hint: Neither the disciples nor the detractors got it completely right.)

Pros

Money

In our experience, a short-term rental in a good location, well furnished, well photographed, and attended to with great care and customer service can pull in two-to-three times the revenue of an unfurnished, long-term rental. So yes, the money is very good.

Look at the hotels in your area. How much are they charging per night? Do the math, and you’ll quickly see that financially, a well-run Airbnb can far exceed a traditional rental model.

It sure did for us. With Airbnb revenue, we paid down debt, bought a car, and put a down payment on our first primary residence. (And we’ve subsequently used equity from that house to buy two more properties.)

Cultural Experiences

For those of you who are interested in more than just the money, the cultural exchanges brought about by using Airbnb can be rewarding. Millions of travelers fom all walks of life and from every corner of the the earth now use the short-term rental platform. (And many others use its competitor VRBO as well.)

Related: How to Use Airbnb to Travel & Live for Free in Retirement

If you’re open to it, you can find yourself learning about vodka from a Russian, or hearing stories of the road from a seasoned traveler. I once had a few too many Colorado IPAs with the nicest South Korean couple. Their English was only slightly better than my Korean, which is to say we couldn’t verbally communicate with each other at all. But I’ll never forget speaking the common language of ping pong over a few pints.

Better Upkeep

This might sound counter-intuitive, but running an Airbnb can result in a cleaner house. If you’re renting on Airbnb often, then you’re also cleaning often. And leave it to guests to find the weak links in your home’s armor. A faulty light switch? You’ll be fixing that soon. Peeling paint in the bathroom? One less-than-stellar review, and you’ll smooth that over real quick.

In our experience, a well-run Airbnb requires a clean and in-tune home. So whether you host in your own home or in an investment property, you’ll be required to maintain your residence.

Cons

Time and Work

While running a profitable Airbnb is not rocket science, it’s also not a walk in the park. You will work, and work hard. I’ve never scrubbed so many toilets as I did that first year. Laundry, cleaning, stocking, key handoffs, pre-stay communication, in-stay responses, calendar management, and the occasional repairs are all part and parcel of this venture.

Can you outsource these duties? You sure can, but there’s a good chance you’ll need to learn firsthand how to operate a successful Airbnb before you can coach someone else to do it for you.

Related: 3 Easy Steps to Discovering Your Airbnb Income Potential

Risk

There is no way around it. Inviting numerous guests into your place day after day, week after week, does open you up to some risk. There are the thoughtless guests who party hard and leave you the mess, and there are the well-intentioned guests who simply have accidents that result in a broken chair or table.

But here’s something to know: Those incidents are so far and few between that I would not let them deter you from pursuing this model. Those horror stories you hear on the local news? They happen, but Airbnb hosts 500,000 stays every night of the year, and one or two of those stays are bound to turn sour.

Take steps to prevent such incidents and to protect yourself from the inevitable accidents. First off, you should actively screen potential guests. Ask them questions about their trip and their intentions. Secondly, be sure to purchase insurance tailored to short-term rentals. (No, neither your homeowner’s policy nor a traditional landlord policy will cover you in this case.)

Don’t get me wrong, Airbnb is not for everyone. Inviting guests into your home requires a certain level of comfort with the unknown. I’d encourage skeptics to give it a try, but if the idea makes you squirm, then traditional rentals are probably a better path for you.

For us, the pros far outweighed the cons. Airbnb spring boarded us into the world of real-estate investing. It helped us hone our skills at operating a business, and it changed the course of our financial future.

Have you tried renting your property with Airbnb?

Share your experience in the comments section below!

About Author

James Carlson

James Carlson loves the city of Denver, a good IPA, real estate, and Airbnb. He is co-owner of James Carlson Real Estate and works with buyers, sellers and investors. He is also Denver's Airbnb expert. He has hosted more than 150 guests and teaches classes on short-term rentals and hosts seminars on the current state of Airbnb laws in Colorado.

45 Comments

  1. Jerry W.

    James,
    Thank you for taking the time to write about vacation rentals. I have been hearing a lot about them, and have decided to try one. I have spent several months fixing up half of a duplex, and just listed it and got my first guests tomorrow. I have had a pretty hard time finding anyone to give out much information on what the reality is for them. this article helped me a lot.

    • James Carlson

      Hey Jerry,

      Congratulations on taking the big step to get that up and running. I think if you’re in any kind of a good location, you furnish it well, take good photos, and have a good customer service, then Airbnb can be a huge money-maker. Good luck with yours.

    • James Carlson

      Hey Emily. Thanks for the kind words. I don’t know anyone doing that up in Seattle. (It’s crazy to me that big cities, like Seattle or Denver where we’re at, don’t have a dedicated and well-publicized page for this Airbnb laws information, because it is such a big topic.) I think my wife, Erin Spradlin, has a blog post coming out soon about how to track down the info from your city. It’s not difficult but does require asking the right questions. PM me, and I’ll be sure to send it to you when it publishes.

  2. Logan Welsh

    Nice article and would whole heartedly agree. My wife and I run an Airbnb and have traditional rentals. Both have pros and cons across the board, from your time, to ROI, tax advantages and more. Nice job BiggerPockets on covering the spectrum when it comes to real estate investing and pointing out the pros and cons here in this article.

    • James Carlson

      Absolutely, Logan. As with everything in real estate, it depends on your goals and lifestyle preferences. I know Craig Curelop, Denver guy and Bigger Pocket employee, bought an up-down duplex, lives in the basement on the couch and short-term rents the bedroom on Airbnb. He’s a hustler, for sure, and someone to respect, but that’s not for everyone.

      Short-term rentals aren’t for everyone and they definitely require more work, but in the right situation, they can be a big win in your investment portfolio.

  3. Adar Fejes

    Thank you for your article, It has come so serendipitous, I have been reaching out to fellow Airbnb host’s in my area and ready to buy my first property to Airbnb. My only question is the people I have talked to have been renting out rooms in there homes. Any advice on how to gage an entire house? I am in New Hampshire ski country and in the mountains for hiking so we are busy almost year round… how do you price your property if there is not many to compare yourself off? Also how do you determine what is a good buy for a short term rental, is there a formula you use? Lots of questions I know but I am eager to learn and jump in!!!!
    Thank You for your time,
    Adar

    • Shelby Pracht

      If you are in a position to, it’s a great idea to start by renting out a room in your home so you can get to know your clientele and what they are looking for. If that’s not feasible for your situation, do plenty of research on other sites like VRBO, Booking.com, etc; to get an idea of what a whole unit should go for your area. Airdna.co can be a good tool as well. Start off on the low end and you can increase prices as you gain more insight and good reviews. Good luck!!

    • James Carlson

      Adar, Thanks for reading and reaching out. The first thing you need to do before buying any property for short-term renting is to check your city’s Airbnb laws. And even if your city is open to Airbnb right now, I’d be cognizant of — and maybe have an exit strategy for — the idea that your city may change those laws. Run the numbers based as if it was a long-term rental so you know you’ve got a back-up plan.

      As to the question you actually asked: There’s no perfect science to pricing a property. As Shelby Pracht said, you could check out AirDNA.co. (Yes, there is no ‘m’ at the end.) If you buy a report, it will give you a general idea of what you can get, but it’s not perfect. In the end, you guestimate the best you can, start low to undercut others who have reviews, get yourself a handful of reviews (which increases your search rankings on Airbnb), and then increase by 10% or so every few weeks until you see a drop in price and then back up a bit to that sweet spot.

      • Helene Key

        I’ve also hear that Airbnb increases your ranking if you update your listing regularly. In the case of most online venues, there has to be a formula for ranking the listings. I try to use my phone app daily to adjust my prices on a few days, sometime by just a few dollars. It couldn’t hurt. And NEVER use the pricing tool without a minimum nightly rate. Airbnb has actually suggested I list my 3br house for $43 which is absurd! When I first started, Airbnb lowered my place to $81 for the weekend of the eclipse. Being a dutiful host, I honored the price and hosted my guest at %25 of what others were charging for those nights.

        • James Carlson

          Helene,
          That’s a great point. I think updating your photos and your listing description does help keep you fresh on the search rankings. (Airbnb has never said so, but it would stand to reason, as Airbnb likes hosts that are responsive to guests, and updating your listing would indicate to Airbnb that you’re going to be active and responsive.

        • Helene Key

          I received and email article from Airbnb recently that addresses this very thing. I don’t know how to paste the link the I can copy and paste the contents:

          What factors affect my listing placement in search results?
          That’s a great question. We have an algorithm that looks at over 100 signals to decide how to order listings in search results. Most of those signals have to do with things that guests care about, like positive reviews and great photos. If you think guests might care about it, it probably factors into your ranking! The reason is this: you’re most likely to get a booking request (or be instantly booked) if a traveler finds the type of place they’re looking for right away. We get a lot of information from the traveler about what they want for then show them listings that match their needs most closely.

          Not every signal is weighed equally, and you don’t need to have a perfect listing or an unbeatable location for your listing to rank well. But there are some really influential signals that make a difference. Some of those include: how often guests click on your listing in search results, how often guests attempt to contact you from your listing page, how many booking requests you accept, if you use Instant Book, and how competitive your listing price is. ***

          I still tweak my listing regularly to keep my prices competitive and updated. Once a guest canceled because they didn’t like the neighborhood. I looked at what the going rate was before re-pricing and tripled my original price. It booked within a few hours. It pays to update.

  4. Shelby Pracht

    For everyone else considering jumping into STRs or Airbnb, can I just reiterate Jame’s point about automation? It’s totally possible to scale and automate, but you should definitely start by running everything yourself! It’s a pain, but the lessons you’ll learn this way are so worth it! Thanks for the great article!

    • James Carlson

      Hey Zachariah,

      Some people rely on Airbnb’s coverage, but I don’t totally trust it because it seems like they have split loyalties — their hosts AND their guests who caused the problem for which you’re making an insurance claim.

      I’d recommend spending a little extra and getting insurance coverage that is only for you. Check out a few options. Proper Insurance is great. It acts as both your traditional homeowner’s policy and a short-term rental policy. Their coverage areas are broader than Airbnb’s coverage, as well.

      You could also try Slice.co (yes, no ‘m’). They’re on-demand insurance that covers you for only when you’re hosting a guest.

      Whoever you go with matters less than buying coverage that is specific to short-term rentals. Good luck.

    • James Carlson

      Gary, you might check out my response Zachariah above. As to what your liability is, I’d ask your insurance guy or gal. Liability is obviously going to change depending on your property, and because I’m not an insurance agent, I’d hate to answer.

      I do feel comfortable saying that you should definitely get real insurance like Proper Insurance or Slice or CBIZ.

      Good luck.

  5. You didn’t mention utilities. The occasional guest will run up a huge water, electric or gas bill. And just month in and month out, if you have central air, they are going to use it constantly even when it’s not really needed, like when it’s 75 degrees and the ceiling fans that you should have in every room would be plenty comfortable. Count on that.

    Also in a lot of locations it’s seasonal. So you might get “2-3 times the revenue” during the high season, you will probably get considerably less than a conventional rental during a few of your worst months.

    On the plus side, you can stay in your own house when there is a gap. It’s nice to stay connected to your property and that isn’t possible with a long term tenant there.

    • Richard Stenberg on

      @Kurt, there is an upside, at least where I live, to paying for utilities. City inspections for certificates of occupancy get triggered when someone new puts utilities in their name. At that point, by the way, the property is already in violation, because you’re supposed to get the inspection before the tenant moves in. But with Airbnb we’ve never had to get an inspection, because there are no long-term tenants. It’s actually more lightly-regulated by my city than a normal landlord-tenant situation would be. Also, I don’t know if you’re speaking from experience on utility costs, because my experience is different. I live in half a duplex and Airbnb the other half, for the last two years-plus, so I have a very apples-to-apples comparison between my monthly utility usage and that of my guests. I can remember one instance where the heat bill was consistently 50 percent higher in the rental because we had long-term Airbnb guests who were students from China, and they were used to free, city-supplied heat in the part of that county they hailed from. Every other month the utilities have come in a little lower in the rental than in the half I use as my home–probably because I can set things unusually high or low during the brief periods it’s unoccupied.

      • Yes I am speaking from years of experience and I own multiple properties.

        Do you have Central Air Conditioning? If so I predict they will use/abuse it. And as I said it will be occasional. We had an electric bill for $600 in the winter when it is normally $100 because the tenants, left the top off the outdoor hot tub for a full month. We had a $600 water bill when it should be around $100 and we never figured out why.

        And yes we had a gas bill that was out of bounds as did you. As I said it’s the occasional guest that does something completely weird. And you are at their mercy pretty much.

        • Richard Stenberg on

          Yes we have central AC. On the summer it consistently goes above 100 here in Saint Louis, so this is a must. Clearly results may vary, but I can only say based on personal experience that our average guests’ preferences for heating and cooling aren’t out of line with my own. We were booked all but a couple days for our July into August utility bill, and the electric was something like 170 for us, and 160 for the Airbnb. It’s a service-oriented business, but I sit pretty easy with the idea that what makes me comfortable might not be what every guest needs to be comfortable. Results may vary. That’s the real overall pro/con to being an Airbnb host versus a landlord, I think. A successful landlord isn’t generally going to comp someone a month of rent or give someone a ride to the airport, but high-grossing Airbnb hosts often get there by putting their guests’ interests first, and letting good will and good reviews be a business generator.

        • Yes, but in order to generate that “good will”, you have to supply:

          Internet/Cable: $200/mo
          Electricity: $1-300/mo (sometimes more)
          Water: $150/mo (sometimes more)
          Gas: $50-200/mo and this is in Socal, could be more

          So you are incurring conservatively $500/mo for a decent size house, none of which you incur renting to a long term tenant. And you neglect to mention that in the list of cons?

          Get real

    • James Carlson

      Kurt, thanks for your impassioned input here. It’s nice to have another perspective, albeit one I don’t totally agree with.

      You are right about the seasonality of Airbnb. At least in some areas. In the mountains, the high season is obviously the winter. In other areas, it’s the summer. I think if you’re in a big city with a high tourist demand, that seasonality is a bit flattened as the demand might dip a bit in certain seasons but never really plunges off the clif like in resort towns.

      In those seasonal areas, I’d try to plan a few months out from the drop-off. Post your ad everywhere you can and try to get a traveling nurse or some other 3-to-6-month renter to cover your nut during the down season.

      • Absolutely, there are no months I am empty in my Southern California beach city. I didn’t mean to imply that. But it’s really day and night comparing summer to any other season. I am hoping for an Autumn bump from the new Stadium and the return of the Rams.

        • James Carlson

          You make a good point. I can imagine SoCal has big fluctuations.

          And I hope the Rams can help you out, but damn … judging by the attendance in the Coliseum so far, they’ve got a ways to go.

    • James Carlson

      Hi Kurt. Thanks again for the input. I can see that some might consider the 3% Airbnb takes from the host proceeds as a con, but I see it as a relatively small cost of doing business. As with everything in real estate, you’ve got to run the numbers yourself, figure out what works for you and what you feel comfortable with. Maybe 3% is a deal-killer for some. For us, it was far outweighed by the revenues coming in.

      • Maria Feurer

        Really enjoyed the article as in our circle we are more of the few using the Airbnb model. It’s great to see feedback that we ar not alone in this investing model that is working great for us. And agee where We have looked at the fees taken from Airbnb and Vrbo as part of doing business. We like leveraging the marketing power of Airbnb to get guests in our rentals right away but as we grow have been working on also becoming listing independent with our own site. But it’s great to know that after all the hard work to get the rental ready we can use Airbnb to get our dates filled right away! Thanks for the article and sharing your expertise.

        Ps A big challenge we have right into is automation to handle our listings and guest communications. Trying to find something g that keeps the service level we provide, updates listings and calendars and automates some communications to guest and staff within a reasonable budget. Have not found that answer yet but only half solving solutions. Would love yours or anyone’s with experience with this input. Thanks!

  6. Vanesa Gonzalez

    Thank you James for taking the time to write about Airbnb. I am in the process of purchasing my first short term rental here in Miami but I’ve been using Airbnb for many years on our trips to Europe and Asia. I always thought running a profitable Airbnb would be a lot of work but I am ready to give it a try now that I have more time. Thank you for pointing out about the city regulations and having an exit in case the city changes the law. It did happen last year in Miami Beach. This article helped me a lot!

    • James Carlson

      I’m right there with you. My wife and I have been on both sides and love both of them. We’ve stayed all around the U.S and in Croatia, Bosnia and Istanbul. We’re total disciples of Airbnb. Yes, definitely check out Miami’s laws. I knew Miami Beach had recently enacted some restrictions. (And I hope all is well for you down there after Irma.)

      Good luck!

  7. Helene Key

    Thanks James, I appreciate your post. I have been a landlord for over 10 years and finally took the Airbnb plunge in June. In three months, I have earned 3 times the rent for similar properties. The added pro in that it dubs as my home and I can block days whenever I want to relax in my very own cozy nook. Indeed there is more time an energy put into maintaining the home, but I am pruning a current long term tenant for the position, to help offset her monthly rent, so it’s a win-win for everyone.

    The house next door is for sale for $65K, which is $15K more that what it’s worth considering the condition and what it would take to make it Airbnb worthy (plus the added furniture). I know the earning potential of the property but I also know that you make money when you buy. I submitted an offer with a $50K cashiers check and negotiated to $55K for my final offer. However, it’s killing me to let it sit on the market, wondering if I’ll get rowdy neighbors. I’ve considered paying the higher price to protect my own investment. I’d love to hear any feedback on this.

    • James Carlson

      Helene, Thanks for commenting. May I ask: where are you located?

      Just to be clear … so you didn’t get it at $55k? I know the adage of making money when you buy is true, but like any rule, you’ve got to know when to break it. I don’t know if this is that time or not. How much more are you making with Airbnb than you would with a traditional rental? Whatever that spread is, how long would it take for that spread amount to cover that extra $10k you’d have to throw in? Is that worth it to you? And what are the laws in your area? If there are none, how confident are you that there will continue to be no laws? If you can do Airbnb in that place for long enough (because the laws are going to continue to be favorable), is it worth it to have that cash cow?

      You also need to consider burnout. Right now, you’re making cash hand over fist and the work isn’t phasing you. I remember that period as well. But at some point, you’re going to tire of scrubbing toilets and changing sheets every three days and you’ll want to hire that work out. Be sure to calculate that in and make sure it’s still worth it.

      I can’t answer all these questions for you, but think about them. And let me know what you end up doing. Good luck.

      • Helene Key

        I am in Charleston, SC and no, I didn’t get it at $55. The agent said the owner needed at least $65 to sell, so every day it sits and I pray it doesn’t sell. I’ve often thought to sabotage the showings that I’ve witnessed, just to run them off, haha. A house in that neighborhood might rent for $850 and I’ve averaged $2300/mo. Reduce that by the utilities (cable $50, water & sewer $60, electric $125, landscape $80). If I were to pay $25 for each cleaning, I’d spend about $300/mo but then I would factor that into my fees which are currently only $15. It would take a year for me to recoup the extra money put into the house next door and then I would be on top. I am uncertain about the laws in this area, but planning to attend a meeting on 9/26 at town hall about that very thing. I’m excited to see what will become of it. I think the most valuable feedback you’ve given me is the burnout that I didn’t factor in. Being an entrepreneur at the core, I’ve been down this road many times. I know that the start-up is always the most invigorating part. I have to keep in mind that my back is not as fresh as my thoughts! Lastly, for now, I reviewed my account, only to realize that I’m in the middle of a BRRR and actually don’t have the potential to pay the $65 right now, until I refinance the duplex I just purchased last month. I’ve been so preoccupied, I forgot to apply for the refi. Let’s hope the house sits a while longer and I get refinanced in time to figure out exactly what I want to do. Thanks for the response, I’ll keep you up to date.

        • Vahid Mirjamali

          Thats a golden opportunity. I’d be purchasing places hand over fist until I couldn’t no longer. Don’t let this opportunity pass by as it did over here in socal over the last few years.

  8. Otai Samuel

    Hullo Mr James Carlson, Greetings from Uganda.
    I have been a good silent reader of your blog articles, not until I came across the AirBNB business discussions with business owners.
    I am very interested in doing Real Estates Business especially on the AirBNB model.
    —- I wanted to be enlightened on how one should do it?
    —What Capital is involved?
    —If someone can do it using other people’s Property, without necessarily injecting my own cash?
    — Is it online / MOM Network business?
    Thanks SAMUEL OTAI

  9. Michael Baum

    Thanks for the article! We just bought our vacation home in May and have been working pretty steadily to get it ready to rent.

    It has taken all summer to get it almost ready. Just a bit more and we will be good to go for the 2018 season. It is a lakefront home on Lake Coeur d’ Alene in north Idaho.

    Very excited to see how things turn out. We did have a couple of folks rent it for a weekend and they gave it stellar review overall so we are hoping to dish out some great experiences!

  10. Gulliver R.

    James,

    Great article! If you don’t mind me asking: what is your cash on cash return for one of your AirBNB units (assuming 20% down payment on a bank loan)? I’m just trying to wrap my head around the monthly net income. Thank you and keep killing it!

    Best,
    Gulliver

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