Airbnb seems to be the buzzword these days in the property industry. But the question remains, can you make good money from Airbnb? In this article I will answer that question for you, plus let you in on secrets to succeed in this cutthroat world.
So, can you make good money from Airbnb? The answer is a decisive YES! In fact, there are over 650,000 hosts worldwide making a killing with over 6 million Airbnb listings. How much you can earn as an Airbnb host depends entirely on your property.
For example, a standard 2-bedroom apartment or house in a major city can earn you an average $20,619 a year. A study has shown that 50% of all Airbnb hosts make more than $500 a month, with some earning as much as $10,000 per month.
It should come as no surprise that you can make good money from Airbnb. I know first hand the amount you can make, but it’s not all bells and whistles. There is plenty you need to think about prior to becoming an Airbnb host.
In this article I am going to pose some questions that you will need to think about should you wish to setup your own Airbnb business. Remember, it’s a lot of work and there are plenty of expenses.
Is being an Airbnb host worth it?
The answer is yes. Financially, you can make good money from Airbnb, a lot more than if you rented out your property. But there are two schools of thought to consider before coming a host.
“To make good money you need time and capital”
First, you must consider your time. Running an Airbnb can be exhaustive work. You must deal with guests on a constant basis, even answering questions in the evenings. Another thing to consider is that you’ll need to clean your property after a guest checks out. Will you do it, or will you hire a cleaner? Managing staff takes up time too.
Second, you must consider your finances. Sure, Airbnb hosts can make a ton of money, but setting up one is quite expensive. You need to furnish a property and continue to provide amenities for each new guest.
Is being an Airbnb host worth? It’s a matter of finding a sweet spot between the two. If you have the available time and surplus funds, then being an Airbnb host is 100% worth it. I’ll discuss the costs involved in setting up your business next.
You may also like to read an article on how to buy an Airbnb house.
Is Airbnb profitable for hosts?
A frequently asked question is, is Airbnb profitable for hosts? So to answer that question for you, let’s take a quick look at a case study shall we?
The level of profitability for Airbnb hosts depends entirely on the type of your listing. For example, a three bedroom house in Boston earns an average of $4,447 per month, or $53,364 a year. Whereas a private room in the same city will earn just $1,009 per month, or $12,108 a year.
Of the 15 major cities across the United States in our study, Airbnb hosts with a house were more profitable. To illustrate, a two or three bedroom house averaged between $1,810 and $2,599 per month. Studio apartments averaged $1,284, while private rooms averaged $553. Hosts with a shared room can make good money from Airbnb with an average of $142.
So in other words, the average Airbnb house makes between $21,720 and $31,188 per year. An apartment makes $15,408, private room $6,636 and shared room $1,704. So yes, you can make good money from Airbnb!
Check out my article on house vs private room for info about the different Airbnb property types.
It’s a similar story across major cities across the world. The type of property you own will determine how much you can make.
So can you make good money from Airbnb? A recent study done by Earnest shows that Airbnb hosts make an average of $924 per month across all property types.
But of course running an Airbnb incur expenses, which is going effect the profitability of hosts. We’ll cover some of those expenses now.
How much does it cost to list on Airbnb?
You may be asking yourself how much does it cost to list on Airbnb? It’s a great question and one you need to take seriously.
The simple answer is that there is no cost to list you property. However, Airbnb charge hosts a flat 3% service fee for every booking they receive. This fee can slide up to 5% depending on how strict your cancellation policy is. So for example, a booking of $500 will incur a cost of roughly $15 in fees.
These aren’t the only costs you will incur though. It costs money to setup an Airbnb and there are various things you need to consider:
- Supplies
- Amenities
- Cleaning
- Insurance
- Furniture
- Taxes
- Accounting
Of course, furnishing is the big expense. It will serve you well to read my article on how to setup an Airbnb on a budget for help in this area. Another popular option to consider are companies that offer furniture packages.
Furthermore, you will need to provide your guests with amenities, some of which are essential. I recommend you read my guide on Airbnb amenities explained.
As you can see, the costs start to mount up when setting up an Airbnb. But the good news is that actually listing on Airbnb doesn’t costs a cent, which means you can make good money.
Airbnb Setup Costs Estimations
Above is a real life case study. Those are my six Airbnb’s and exactly how much it cost me to furnish and stock each one.
The two houses are both 3-bedrooms and cost between $2,500 and $2,700 on Airbnb. Apartment 1 had two bedrooms and was a little more costly at $2,780. While the remaining apartments were all identical with one bedroom and cost between $2,300 and $2,450 to setup.
So you can see, setting up Airbnb’s are not too costly. It all depends on how smart you are and where you source your items.
How do Airbnb payments work?
In the next few sections I want to discuss everything to do with Airbnb payments, and how you get paid. A common question I hear is how do Airbnb payments work?
First, log in to your hosting account and click on Account Settings. You’ll find this by clicking your little profile picture up the top right of your web browser.
Second, click on Payout Preferences on the left menu and this will display the payment method screen. This is where you can select the payment method you want. Click the green button.
Lastly, select your billing country from the drop down menu. Each country has different payout methods, as well as currency options.
How to select Airbnb payout method:
- Click on Account Settings
- Select Payout Preferences
- Choose your billing country and currency option
How do you get paid from Airbnb?
Airbnb pay hosts 24-hours after a guest has checked in. The time it takes for the payment to hit your account depends upon your payout method.
As a guide, PayPal usually takes 3-4 hours and is the quickest option, but will incur fees. Payoneer Prepaid Debit MasterCard will take 4-5 hours and may also include fees. If you have opted for a Bank Transfer, you will get paid in 5-7 business days and pay no fees.
I like to recommend people use bank account transfer. That is my preferred option and I have been hosting on Airbnb for over three years now. Airbnb has never missed a payment and it usually arrives in my bank account after 3 days.
For further information you should read my guide on when Airbnb payments are made.
What percentage does Airbnb take?
Airbnb charges hosts a flat 3 percent fee that covers the costs of processing payments. That figure can jump to 5 percent depending on the hosts cancellation policy. This fee includes local taxes such as VAT, GST, etc.
In addition, Airbnb charge guests a fee between 5 percent and 15 percent. This figure depends on the size of the booking subtotal and covers the cost of running the company. In other words, the higher the booking subtotal, the lower the total percentage will be.
So as you can see, it’s the guests who cop the biggest whack in terms of the percentage Airbnb takes. Hosts can make good money from Airbnb with the lower fees.
It would serve you well to check out my article on how the Airbnb price breakdown works which covers this topic.
Are there hidden fees on Airbnb?
There are fees to be aware of with Airbnb, but ‘hidden fees’ is not the term I would use. All the fees on Airbnb are very transparent.
Hosts have very little to worry about as the fees are minimal. Just be aware that your fee will rise depending on how strict your cancellation policy is. This is in addition to the 3 percent fee.
Guests, on the other hand, are hit with numerous fees. When making a booking on Airbnb, make sure you read the price breakdown before confirming.
Fees to watch include a cleaning fee, service fee and extra guest fee. Sometimes hosts will add extra costs to cover linen or laundry expenses, so be wary.
Hidden fees on Airbnb
- Cleaning fee
- Extra guest fee
- Service fee
- Linen/laundry fee
Does Airbnb take money right away?
A common question I hear asked is does Airbnb take money right away? The answer is yes, they do. Airbnb collects your payment as soon as your booking is confirmed.
They then hold that amount until 24 hours after check in, when it is then sent to the host. So hosts, while you can make good money from Airbnb, you must wait until a day after check in to see the cash.
Some reservations allow you to split the cost across multiple payments. This is only on selected listings and you will see the text pay less upfront. When you see this, it means you can make a partial payment now, and pay the rest later.
For a full explanation check out Airbnb’s split payment help page.
What if you don’t own property?
I am often asked if you can make money on Airbnb without owning property. It may surprise you that you actually can!
In fact, I have written a guide showing you 9 ways you can make money on Airbnb without owning property. You should check it out.
In fact, I have written a detailed step by step guide explain Airbnb Experiences here. I encourage you to check that out as I have some great ideas to get you started.
But, to summarise quickly, there are many different ways to make money on Airbnb. You don’t actually have to own property. Maybe you can manage properties for other people? Perhaps you can rent out a room from the house you’re renting yourself? There are tons of different ideas out there!
One of the best ways is to signup to Airbnb experiences. People will pay you to provide them with experiences around you town. This includes things like bike tours, city tours, you name it.
There are many ways to make good money from Airbnb without owning property. Do you have something to offer?
So, can YOU make good money on Airbnb?
By now you should be well aware that you can make good money on Airbnb. In fact, you don’t even need to own an Airbnb to be making good money! So you need to ask yourself the question can you yourself make money from your situation?
So let’s summarise the key takeaways from this article and and what you will need to consider.
First, is being an Airbnb host worth it? That depends on your property type. Do you have a three bedroom house? An apartment? Maybe a private room? This will effect your potential earnings. An average 2-3 bedroom house in the United States earns $21,600 to $31,200. An apartment roughly $15,400 and a private room $6,600.
Second, you’ll need to work out your setup costs. Consider things like supplies, amenities, cleaning, insurance, furniture, taxes and accounting. I have shown you above you can furnish your apartment for less than $3,000 on a budget.
Third, do you have the time? Running an Airbnb takes a lot of time. You’ll have to deal with guests, clean your property and deal with accounts. Will you do all the cleaning, or will you hire someone?
Lastly, after you have done all this, you will have a very good idea if you can make good money on Airbnb. The answer is surely yes. If it costs less than $5,000 to setup, realistically you can make this back quite quickly.