Airbnb allows people to rent out their homes to people looking for short-term lodging, and the app is available in more than 220 countries worldwide.
Renting out your space on Airbnb can be a very lucrative and fulfilling ventur, and hosts get tons of support from the app, but it does come with its challenges. Although hosts are largely dependent on the whims of travelers and the market, they also have the ability to earn significant income and meet new people.
Experimenting with Airbnb is a great way to dip your toe into the real estate investing and hospitality industries. Those who end up liking it may even consider investing in additional short-term rental properties as a business model.
This article will help you navigate the pros and cons of renting out your property on Airbnb.
Related: 12 Steps To Buy A Rental Property That Cash Flows
Pros
1. Earn passive income
Many people use Airbnb as a side hustle because it’s an easy and customizable way to earn passive income. The average Airbnb host earned $924 per month before the pandemic. Now, with more and more people receiving vaccinations and planning summer vacations, it should prove to be a significant income generator in tourist markets.
Use a rental property calculator to calculate your potential earnings per month.
2. You can charge more per night
If you live in a popular destination, you can potentially earn more with an Airbnb than a long-term rental property. Do your research to see how much hotels and other Airbnb properties charge per night in your area. This will give you an idea of what you could potentially charge.
For example, in Seattle, the average apartment rent costs approximately $2,000 per month, which is $24,000 per year for a 12-month lease. On the other hand, the average daily rate for an Airbnb in Seattle is around $150, and units are rented out 270 days per year on average. That means the average Airbnb host could make $40,500 in Seattle, which is $16,500 more than the traditional rental.
3. Greater flexibility
With long-term rental properties, owners typically have to lease out their space for at least a year. Contrarily, Airbnb hosts have more control over exactly when and for how long they rent out their space. They retain complete control of their property’s schedule, and occupancy times are much shorter.
4. Bad tenants don’t stay long
Bad tenants are much easier to deal with in a short-term rental property than a long-term one. Why? Because they don’t stay as long!
With Airbnb, you will not be stuck with a problematic tenant for months on end. And if you do get stuck with a bad guest, you’ll only have to deal with them for a few days. Moreover, you’ll be able to review the guest and alert other Airbnb hosts about their behavior.
5. Wide variety of options
You do not necessarily need an entire apartment to be an Airbnb host. Airbnb has an array of options for hosts to use their platform. You can rent out a room, a mother-in-law suite, attic space, a basement, or even a houseboat. That is why if you have any type of extra room, it could make a great candidate for Airbnb.
6. Free listings
One of the benefits of Airbnb is that listings are free. Owners do not have to pay to list their properties on the platform. They can also include a host profile, description of the property, photographs and more to really bring the space to life. Moreover, by using Airbnb, owners get all of the marketing benefits and resources incorporated into the platform.
7. Hosts are protected from damages
Airbnb has a Host Guarantee program, which "provides protection for up to $1 million in damages to covered property in the rare event of guest damage, in eligible countries." This can give owners peace of mind that if something is damaged by a guest, Airbnb has them covered.
8. Meet new people
Renting out your apartment on Airbnb is a great way to meet new people. As a host, you will interact with travelers from all over the U.S. and even the world. Whether you only communicate with guests via the app or they are staying in a spare room in your house, there will definitely be chances to learn more about your patrons.
9. Guests are reviewed
As an Airbnb host, you are able to read reviews that other hosts have written about guests. This is a good way to learn more about the individuals requesting a stay before agreeing to let them rent out your space.
10. A great learning opportunity
Being an Airbnb host is like running a business. You have to market your property, find guests, ensure they are satisfied with their stay, keep up with the home’s maintenance, and more. But if you are up for the challenge, then it is actually an amazing learning opportunity. You gain exposure to property management, the hospitality industry, customer service and business operations, which are all valuable and transferable skills.
11. Perfect for house hackers
House hacking is when an investor purchases a duplex, triplex or fourplex to live in one unit and rent out the others. While many people use this model with long-term rentals, Airbnb has made it feasible to use this strategy with short-term rentals as well. You can earn more per night, per unit, resulting in substantially greater returns.
12. No evictions
One of the most difficult parts about being a landlord is needing to evict tenants who have consistently not paid their rent or broken the terms of their lease. As an Airbnb host, you will never have to evict a guest.
13. It’s scaleable
If you’ve been thinking about purchasing an investment property but are not sure if short-term or long-term rentals are right for you, using Airbnb can help you decide. By starting with just one weekend per month, one room in your house, or one property in your portfolio, you will quickly determine if you enjoy being a host. Those who do end up liking it have the flexibility to scale up as much as they’d like and can start renting out multiple rooms or even purchase a multi-family property to use exclusively for short-term rentals.
14. Vacation season is around the corner
As more people receive COVID-19 vaccinations and become comfortable with the idea of traveling, vacation season is expected to pick up. If you’ve been thinking about becoming an Airbnb host, this summer could be the perfect time to start.
Cons
1. More risk
Landlords for long-term renters typically require tenants to undergo a background check and credit check before agreeing to lease out their space to them. Although Airbnb has guest reviews and processes payment as soon as a property is booked, they do not require background checks to use the app.
2. Irregular income
Long-term rental properties offer consistent, year-round income. Short-term rentals, on the other hand, are more likely to sit empty at times, especially during travel off-season. Airbnb hosts need to be comfortable with making more money some months than others.
3. High-maintenance
Owning an Airbnb is not a walk in the park. Hosts must constantly make sure the fridge and pantry are stocked, all the home’s appliances and electronics are working, and the property is cleaned after each stay. You will be competing with other hosts and hotels, so you need to make sure your property is in quality condition to receive good reviews and attract more guests.
4. More expenses than traditional renting
Unlike long-term rentals, Airbnb owners are expected to pay for utilities, electricity, WiFi, cable and cleaning — not to mention furnishings and supplies such as linens, towels, and toiletries. To make sure your listing stands out, you will also need professional photography, a captivating description, and quality furniture. Landlords of long-term rentals do not even need to furnish the property if they do not want to, but a well-designed space with the appropriate furniture is a must for a successful Airbnb.
5. COVID considerations
Although travel is picking up a bit, it may still be down in 2021 compared to other years. If you’re new to Airbnb, you need to understand that it could be a few months or even years before you start to see the travel industry reach pre-pandemic levels.
6. Airbnb fees
While listing your property on Airbnb is free, the app does charge hosts a service fee of at least 3% for each reservation. This covers the cost of processing the transaction.
7. Taxes
Traditional rental properties come with a variety of tax benefits. Airbnb properties, on the other hand, require you to pay income tax on every single booking. Moreover, if you’re located in Europe, you may be subject to value-added taxes (VAT).
8. Not legal everywhere
Although Airbnb has gained popularity around the world, it is still not completely legal in all cities. For instance, cities such as Los Angeles, Las Vegas and New York have either banned Airbnb and/or non-owner occupied Airbnbs from operating in their jurisdictions.
9. HOA regulations
Check with your homeowners association before listing your property on Airbnb. If their bylaws have specific regulations against short-term renting, you could be fined or worse for breaking the rules.
10. Guests could damage property
Even though Airbnb protects hosts from damages of up to $1 million, it is still a huge inconvenience if a guest damages your property. Depending on how severe the needed repairs are, it could be weeks or even months before your place is ready to be listed on the app again. If you do not like the idea of other people potentially breaking your things or flooding your apartment, Airbnb may not be for you.
11. Guests can be picky
Your place needs to be stylish and have great amenities to really make significant cash flow. From the type of carpet in your apartment to the amenities in your building, guests want to feel like they’re getting the best bang for their buck. After all, many of them are on vacation and want to stay in a nice place during their time off.
12. Time-consuming
Running an Airbnb means you will be in the hospitality business, which requires a large time commitment. If your property is successful, you’ll constantly be communicating with guests, coordinating cleanings, restocking the toiletries and snacks, handling repairs, managing the schedule, and more. Even if you hire a property manager, you will still have to manage them to make sure operations are running smoothly.