If You Have a Home to Rent Out, Here’s How Much You Can Earn as an Airbnb Host

Q: My family has a second home in a desirable location, and we have been discussing whether or not to become Airbnb hosts to rent the home when we are not using it. But start-up costs seem like they could be high, and we’re not sure whether it’s worth the trouble. How much can an Airbnb host actually make? 

A: This is a common question for people to have about the best vacation rental sites such as Airbnb and Vrbo, largely because the internet is full of wild success stories. However, there are also plenty of woeful tales of short-term rental hosts who couldn’t find bookings or whose guests trashed their homes. It’s hard to gauge exactly how much profit an individual Airbnb host will make, because Airbnb profitability depends on many factors: location, market rates, the current state of the property, the maintenance and upkeep costs, and a number of other considerations. That said, a solid assessment of how each of these factors relates to the potential property listing can make it easier to estimate how much an aspiring host could earn when starting an Airbnb business. There are also some steps they can take to maximize their earnings.

• Ready to become an Airbnb host? See what Airbnb can offer you.

Greg Davis is the senior vice president of owner growth at Evolve, a vacation rental management company with headquarters in Denver, Colorado. When it comes to maximizing earning potential, Davis advises against cutting corners to save money in the beginning. “When you’re just getting started with vacation rental, it can be tempting to skimp on some items to spare up-front costs,” he says. “But it’s more than possible to create an attractive rental property that taps into your highest income potential while avoiding overspending.”

Airbnb hosts make an average income of $924 per month by renting out their property.

While there’s an enormous variation, the Airbnb average income is approximately $924 per month. This includes all manner of Airbnb hosts—those who rent out their whole property and those who rent out a room or shared home; those in high-demand areas and those in towns without huge attractions nearby; and those who rent all year as opposed to those who rent for specified times. Considering how high and low Airbnb revenues can go, the average of $924 per month suggests that there is certainly money to be made: Almost half of all hosts make more than $500 per month. In some of the highest-earning cities, the average annual Airbnb earnings can be as much as $20,619.

This is part of the draw that many people with extra space feel when considering becoming an Airbnb host. And one of the advantages is certainly the passive aspect of Airbnb income that comes from hosting. While Airbnb start-up costs can be significant and regular maintenance work can eat into profits, most of the earning happens without the host working regular hours. However, maximizing that passive income requires hosts to make some careful choices at the outset, as well as making good decisions as the rental bookings begin.

Earnings can vary dramatically depending on the type of property and its geographic location.

Geographically, warm-weather states tend to boast the highest average Airbnb income. While snow-capped mountains are a huge draw in northern climates in the winter, their season is limited—many ski areas transition to water parks and offer gondola rides in the summer months to try to keep the tourists coming, but they just don’t have the year-round draw of sunny coastlines where people can escape from home any time of year. Southern and warm coastal areas can offer more nights for bookings in great weather, and consistent bookings equal higher profits from the best rental listing sites. Areas with commercial, natural, or tourist attractions can also pull in more nights booked. Lowest on the earnings scale are locations without obvious attractions or very limited seasons. Hosts can still make a fine profit in those areas, especially if there’s a specific seasonal attraction or the property is located near a city that hosts frequent conventions, but they won’t have the same level of profit that is generated by year-round tourism.

Even within an in-demand area, location makes a difference when it comes to making money with Airbnb. Airbnb clients are internet-savvy: they know how to check the crime rate in the neighborhood where a listing is located, and to see what types of amenities, such as restaurants, shopping, and public transit, are located nearby. Awareness of the setting of the Airbnb for owners of existing properties enables the host to find ways to offset any negative elements, such as adding security features to the home or adjusting lighting and landscaping to make the home more inviting and secure. Guests may also compare listings on Airbnb vs. Vrbo, and with this additional competition, hosts will want to make sure their property listing stands out.

Airbnb listings in areas with high short-term rental demand and relatively low housing costs tend to have the highest profits.

In general, the highest-earning vacation rentals are located in areas that attract tourists year-round and have moderately or affordably priced housing. Private room rentals tend to do best in smaller cities where rents are lower. The balance of the cost to purchase and maintain the property against the potential rental charges increases the profits when the area is attractive enough to draw a higher rental fee (especially when traditional hotels in the area are costly) but the mortgages and taxes on the property are lower.

• Ready to become an Airbnb host? See what Airbnb can offer you.

Airbnb hosts can expect higher profits during peak seasons and over holiday weekends.

Strategic pricing is a huge component of profiting from an Airbnb listing. Rather than charging the same amount for every night of the year, a smart host uses online tools or simply surfs listings themselves to examine seasonal trends. If the Airbnb is close to a major college or university, the owner can increase the rate for move-in weekend, family weekend, and graduation, along with when any big football games are scheduled. If the property is close to a large concert venue, hosts will want to keep an eye on ticket sales for the concerts that fans will travel to see; those are weekends when people will pay more for a nearby location.

Property owners can charge higher nightly rates when local tourist attractions are busiest, and reduce rates during slow periods and midweek, when the lower rate will make the property more attractive to the smaller number of guests looking for a place to stay. Achieving this balance can be tricky: Hosts don’t want to price themselves so high that they’re skipped over by guests who can find similar lodgings for less, but they also don’t want to miss out on higher Airbnb profit periods.

Listings with high occupancy rates and positive guest reviews are more likely to make a profit.

High-quality pictures of the property are important because guests will be able to see themselves sunning on the balcony or curled on the comfy couch in front of a fire. But what they really want to see is how often other guests choose a particular listing and how they feel about their stay. These two items—the percentage of time the listing is booked and the reviews previous guests leave—are two of the most influential aspects of the listing.

According to Davis, “Data shows having at least 6 months of available booking dates per year is key to a rental’s success—and blocking just 3 months of your calendar could result in 28 percent less annual revenue, with that loss growing as your blocks increase.”

Guests can be pretty ruthless when they’re writing from the safety of their own home with no real obligation to the host. If they’ve liked their stay, they’re more likely to post positive reviews in hopes that they will be welcomed back. But guests who haven’t had a great experience will be honest, and guests with an axe to grind can be downright unfair, and those negative reviews can have a strong effect on potential guests.

There’s not a lot that hosts can do to prevent poor reviews other than to work hard at consistently providing what the listing offers. Responsive hosts who are available to address problems immediately (or who hire one of the best Airbnb management companies to handle such problems on their behalf) are more likely to keep their reviews positive. Airbnb does allow hosts to post public responses to reviews, so hosts can offset the potential damage of a negative review by posting a helpful reply explaining their side of the story. Taking any and all steps to make sure the property is what the guests are expecting and that their needs are met promptly will help protect ratings. So much of a rating comes from whether or not the guests’ expectations have been met, so investing in a few extra amenities can go a long way toward helping guests feel cared for, even if something goes wrong.

“Treating your guests to five-star hospitality is one of the best things you can do to make your investment worth it,” advises Davis. “Feeling cared for in your rental can encourage positive reviews, which can boost your property’s visibility and potential for more bookings, as research shows 81 percent of guests consider reviews before booking. The more positive reviews you collect, the stronger your online reputation becomes, allowing for improved profitability over time.”

Hosts will need to determine their operating costs to get a clearer picture of their estimated income.

Once a listing is up and running, the host will need to determine their operating costs to see how much of their earnings they’ll need to spend on maintaining the property. Many municipalities require short-term rental owners to obtain a business license, and many have a separate tax structure for short-term rentals on top of regular property taxes. Hosts will also want to budget for coverage from one of the best insurance companies for Airbnb hosts (such as Steadily); short-term rental properties are excluded from most homeowners and landlord insurance policies, so hosts will want to protect their property with vacation rental insurance in addition to the damage protection that Airbnb provides. Basic utilities such as Wi-Fi, electricity, gas, and water and sewer service must be covered each month as well.

One of the most significant costs of maintaining an Airbnb is the cleaning cost. It only takes one bad review that mentions dirty bedrooms, bathrooms, or kitchens to drive other potential guests away, so cleaning has to be done regularly and rigorously. The host can handle this job themselves, but many contract with a cleaning service to take care of this task, which adds to the operating costs. Airbnb hosts can add a cleaning fee to their listing, which can offset the cleaning costs. However, hosts will want to review other listings in the area to see how much hosts are charging for cleaning. Although a lower rent is attractive, being the only property in the area to tack on the cleaning fee can deter renters.

Other operating expenses include updating furniture and decor, adding extra amenities, and including technology to make the Airbnb more competitive with other properties in the area. Hosts will want to regularly stock the home with paper products, cleaning products, toiletries, and kitchen basics. Guests comparing Airbnb vs. hotel stays understand that Airbnbs are not hotel rooms, so they aren’t expecting daily maid services, but they’re more likely to leave favorable reviews when there are extra toiletries and toothbrushes in the cabinet and tea bags and coffee pods in the kitchen.

Finally, extra amenities can help make an Airbnb listing stand out. Stocking equipment for anticipated activities, such as sleds, kayaks, bikes and other sporting equipment, beach chairs, coolers, and umbrellas, can enhance a guest’s experience during their stay. A closet full of board games or a video game system can turn a disappointing rainy day into a fun family afternoon.

Davis advises hosts to study the amenities that travelers to the area seek out to help determine which amenities to supply. While catering to local interest is key, Davis also explains that there are some features that will always attract guests, regardless of the locale. “Our data shows properties with hot tubs, for instance, tend to see 29 percent more bookings throughout the year than those without,” he says. Identifying these types of amenities can help hosts choose where to spend their money to increase profitability.

• Ready to become an Airbnb host? See what Airbnb can offer you.

Property owners will also want to familiarize themselves with Airbnb host fees.

Airbnb works by charging Airbnb fees such as a service fee, which offsets the company’s costs for management and customer service. This fee can be paid by the host, in which case it’s deducted from the guest’s payment before the host receives their payout, or split between the host and the guest. If the host covers the whole fee, it’s not actually an expenditure or amount the host has to budget to pay up front, but it does subtract from the bottom line in the payout.

When comparing Airbnb vs. Vrbo for hosts, property owners will want to note that Airbnb offers two different pricing structures (split-fee and host-only), whereas Vrbo only offers a pay-per-booking plan, which can make service fees harder to estimate.

Hosts can estimate their Airbnb earnings using an online calculator.

There are several online calculators available to help hosts estimate their potential earnings. Property owners will need to enter basic information about the property, including the location, type of listing, and number of guests who can be accommodated. The calculator will then gather local booking data from Airbnb and several of the best Airbnb alternatives. Factors that the calculator may consider include nearby occupancy rates and average nightly rates to estimate how a potential listing would fare. A calculator can’t take everything into account because it can’t see the property’s specific features that could impact its appeal to potential guests; however, it can provide a solid estimate for hosts to work from.

Sources: Earnest, SmartAsset