How to start an Airbnb business in 2023? We’ve put together this 10-step guide on how to buy an Airbnb property and rent it for maximum ROI.
With the removal of the last COVID-19 travel restrictions across the US, more and more people are going on vacation and traveling to popular tourist destinations. With tourists trying to make up for lost travel opportunities over the last few years, short term rentals are becoming more popular than ever.
From a traveler’s point of view, an Airbnb rental property provides a place to stay, while offering more comfort and better pricing than standard hotels. Meanwhile, from an investor’s point of view, an Airbnb business supplies a steady stream of income. It also gives an opportunity to expand and diversify their real estate investment portfolio and boost their profit.
In this article, we will provide you with 10 steps to buying a profitable vacation home rental property and becoming an Airbnb host. In other words, we will show you how to start an Airbnb business as a first-time investor. We will also share the 10 best Airbnb markets for rental revenue in the US in 2023.
Additionally, we will demonstrate to you how Mashvisor can help you along the journey to maximize your return on investment.
For a quick intro to short term rental investments, watch our video to learn more on the subject of how to become an Airbnb host:
Pros and Cons of an Airbnb Business
like any business venture, setting up an Airbnb rental business comes with its advantages and disadvantages.
Pros of Starting an Airbnb Business
Following is a list of the most important benefits of running an Airbnb business as a first-time investor:
First, in most cases, short term rental properties provide a significantly higher income and return on investment than long term ones, especially when you plan carefully. It is a major reason to spark your interest in an Airbnb investment.
When first getting started, you can simply rent out a room in your primary home to test the Airbnb strategy. You can even sublet a room in the home house you’re renting without owning the property yourself. It is known as Airbnb arbitrage, which we will discuss in a bit.
If you like it, you can purchase an investment property for the sole purpose of renting it out on a short term basis. Many savvy investors prefer to buy a rental property first and a home second to benefit from the advantages of real estate investing.
In other words, the answer to the question “How do I start an Airbnb business with little money?” is through short term rental arbitrage or renting a room in your own home.
The sky’s the limit with Airbnb investments. When buying a property, you can choose from thousands of markets and millions of listings. You can go for a beach house in Florida, a cabin in Colorado, or a condo in New York. You can rent out a room, a housing unit, or an entire multifamily real estate property.
When you purchase an Airbnb property, you also buy a second home that you can use with friends and family. You can choose which days to rent out and which days to reserve for yourself. You can’t do it with a long term rental which is permanently occupied by the same tenants.
If you invest out of state or work full-time, you can hire an Airbnb property management company. It will turn your investment into a passive strategy and a source of passive income. Moreover, working with a professional should boost your revenue and ROI.
Easy Investment Portfolio Growth
Because of the high revenue and return, you can easily save up for a second, a third, etc., investment property. After buying your first short term rental, you can add more houses to your portfolio every couple of years.
Cons of Starting an Airbnb Business
While an Airbnb property comes with a lot of pluses, you should know the minuses, too to make an informed decision.
Endless Host Responsibilities
If you decide to be an Airbnb host yourself and not hire a manager, you will have a never-ending list of things to do. Check in and check out guests, clean and restock between stays, repair furniture, communicate with renters, ask for reviews, write guest reviews, etc. The higher your Airbnb occupancy rate, the more work you’ll have.
Higher Startup Expenses
Running a vacation rental business means that you must fully furnish the property. So, you need to be prepared to put in a larger initial investment than with a long term rental.
High Operating Costs
Airbnb startup cost are more costly than renting out on a long term basis. You need to cover the utilities, provide coffee and tea at a minimum, replace towels and sheets, clean the property, etc. Make sure to factor in the said expenses in your rental property analysis before you buy a property.
A Lot of Maintenance Work
Since guests only stay for a few nights, they are less attached to your property than tenants and thus, are more likely to cause wear and tear. As a result, you will need to spend time and money fixing the property and the furniture to continue generating demand and 5-star reviews.
Strict Legal Regulations
Many previous top locations for Airbnb investment are no longer an option due to newly imposed short term rental laws. Many more are likely to introduce further regulations to protect affordable housing and local citizens. Thus, it’s best to choose a location where long term rentals are also profitable if you need to switch strategies and get into long term rental investing.
How to Start an Airbnb Business
No matter the size of the property or the room that you rent out, the Airbnb business model can be profitable for anyone looking to make extra money. You can pick the guests and set the price for your rental property. If you already own the property and some basic furniture, you won’t need a large amount of money to get your Airbnb hosting business plan running.
There are many resources online that will teach you how to start an Airbnb business with no money. Still, you must consider a few things before taking the plunge, especially if you’re planning to buy a rental property to get into Airbnb hosting.
So, how do you start an Airbnb business in 2023?
Follow the 10 steps below to learn how to start an Airbnb business in the most optimal way, with or without money:
1. Decide on a Budget
Whether you plan to invest in a long term rental property or an Airbnb investment, the first step is to calculate how much money you can afford to spend on an investment property. To do so, you must look at your savings, as well as how much money you expect to make in the coming years.
If you plan to use a conventional mortgage, keep in mind that the minimum down payment required is 20% of the purchase price, but you can also consider alternative loans for investment property. In addition, you need to factor in closing costs (2%-6% of the loan amount), first-year property tax and insurance, and repairs.
Because you will rent out to short term guests, you also need to buy furniture, which averages $2,000-$20,000 in the US market. Considering a median property value of $357,319, you can expect your initial investment to add up to around $100,000. It is a substantial amount for someone just getting started.
Moreover, as a beginner real estate investor, it is important not to leave yourself with zero cash reserves, as anything can happen in real estate investing.
For instance, you can face an unexpected repair issue with your Airbnb income property. You might also experience a below-average Airbnb occupancy rate for a few months, similar to the situation caused by the pandemic.
That’s why when you buy a property to start an Airbnb business, you should plan ahead. You need to make sure not only that you can purchase an investment property now but also take proper care of it and continue covering the monthly mortgage payments in the future.
2. Choose the Best Real Estate Market for Starting an Airbnb Business
The next step in how to start an Airbnb business is to select a location. As a real estate investor, location is one of the most important factors for the success—or failure—of your rental business endeavor.
When deciding on the best places to invest in real estate properties to rent out on a short term basis, you should look for the following indicators:
The top Airbnb locations are home to numerous tourist attractions and activities. It means that there will be a large number of visitors year-round. The constant tourist arrivals will ensure high Airbnb daily rates and excellent Airbnb occupancy rates. They are the two most important factors for determining the rate of return on short term rental properties.
Economy and Business
The best US housing market for buying an Airbnb investment property is characterized by a strong economy and by constituting a business hub. It means that the location will attract numerous domestic and foreign business travelers, many of whom prefer the comfort of vacation rentals over hotels.
Airbnb Laws and Regulations
Profitable Airbnb cities face only minimal regulations and no major restrictions on vacation rentals. After all, you can’t optimize your return on investment if you can’t rent out a non-owner-occupied property or can only list it for a certain number of days per year.
Don’t limit your real estate market analysis in search of the top location to start an Airbnb business to large cities only. Check out small towns, too, since, frequently, they emerge as the best short term rental markets for real estate investors.
Later in this article, we will provide you with a list of the 10 cities with the highest Airbnb income in 2023.
3. Study Local Laws and Regulations Before Starting an Airbnb Business
After conducting a rental market analysis and choosing a few top locations for vacation home rentals, you should familiarize yourself with the local short term rental rules.
In response to the rapid growth of the home-sharing industry in the past decade, many US cities and towns have adopted restrictive legislation to limit the further spread of short term rentals. They also aim to protect the local population. As a result, vacation home rentals have become illegal in many locations, while they are strictly regulated in others.
That’s why the next step in the process of how to start an Airbnb business is to check out the rules and regulations governing the local short term rental industry.
You need to choose a place where renting out an entire property in the absence of the owner is allowed for the entire year. They are known as non-owner occupied short term rentals, meaning that you can buy an investment property for the sole purpose of renting it out on Airbnb.
If you’re not certain where to start, you’ll be happy to hear that Florida has relatively less severe Airbnb laws and regulations than other top tourist destinations like California.
4. Search for Appropriate Investment Properties for Sale
As soon as you’ve chosen the best location for investing in an Airbnb rental property in the US market, you should get into an investment property search.
Savvy real estate investors use multiple sources of listings when searching for the best properties to buy. They should include MLS listings (which you can traditionally access only through a real estate agent or broker), real estate investor websites, and online marketplaces. You can also check out “For Sale” signs in the neighborhood and reach out to your own network.
If you want to streamline your rental property search process, you can check out Mashvisor. Our real estate app gives you access to hundreds of thousands of potential Airbnb properties for sale in the entire US real estate market. It makes searching through them based on specific criteria extremely easy. The listed properties include:
- MLS listings
- Short sales
- Bank-owned homes
- Off market properties
Importantly, each property listing is accompanied by readily available Airbnb investment property analysis showing you how good of an opportunity a certain property is. Our real estate investment tools make out-of-state real estate investing easy and feasible even for beginners.
5. Analyze the Return on Investment for you Airbnb Business
The next step in how to start an Airbnb business is to analyze the rate of return on the rental property that you’re planning to buy. You should conduct rental property analysis on a few of the most promising listings that you found during your investment property search.
Typically, using an Airbnb spreadsheet for analysis requires months of collecting, entering, and analyzing Airbnb data. By the time you’re done with the investment property analysis and ready to move forward with the purchase, all profitable opportunities will be gone.
Since the emergence of the Mashvisor real estate investment software platform, things have changed significantly. Now, you can quickly and efficiently analyze any residential property in the US market with our Airbnb calculator. You can now see what Airbnb occupancy rate, income, cash on cash return, and cap rate you can expect.
The properties listed on the Mashvisor real estate investor website come with readily available analysis. For off market properties that are not listed on our platform, you can simply enter the street address, and you will get access to the rental property analysis.
For experienced and beginner real estate investors, it is essential to know that all numbers and figures are based on rental market analysis and Airbnb rental comps. They are active Airbnb listings that are very similar to the property under investigation and are located in the same area.
6. Start an Airbnb Business by Buying an Investment Property
By now, you’ve done everything to be ready to buy a rental property with confidence that it will bring you a positive cash flow and a high return on investment. If you’re an experienced real estate investor who is now switching to starting an Airbnb business, you can purchase the property on your own.
However, if you’re just getting into real estate investing, you might want to consider hiring an agent to help you. Buying an investment property is complicated for someone with zero experience. An agent will be able to negotiate the best possible price for you and close the deal quickly.
Meanwhile, you don’t need to worry about an increase in the closing fees as agent fees in the US real estate market are paid for by the property seller, not the property buyer. However, if you decide to buy an Airbnb property with an agent, choose a professional who specializes in rental properties. It will make the process smoother and more profitable.
7. Fix Up the Airbnb Property
After learning the process of buying a property, the next step in the process of how to start an Airbnb business is to ensure that your short term rental property is in an excellent rentable state. You cannot list your house before getting it in top-notch condition and furnishing it well for a comfortable stay.
During the home inspection before the purchase, you should’ve gained a clear understanding of the current state of the property and the required repairs before you can rent it out on Airbnb.
Now is the time to implement those fixes. Don’t overdo them, though or it will increase your Airbnb startup costs. Remember that it is not your home but an investment property. At the same time, you should ensure that it is in as good shape as other Airbnb rental listings in the neighborhood. It will allow you to ask for a decent Airbnb daily rate and achieve a high Airbnb occupancy rate.
Remember that you’ll need to upload photos of your property when creating a listing on the Airbnb platform. The state of your property will clearly show on the pictures and will become the element pulling in or pushing away guests. Make sure that your final listing looks homey, comfortable, and clean.
8. Choose the Best Vacation Rental Platform for your Airbnb Business
Although short term rentals are commonly referred to as Airbnb rental properties, Airbnb is not the only website where you can list and market your vacation home rental. There are dozens of other home-sharing platforms, such as Vrbo, Booking.com, Vacasa, and many others.
As a first-time Airbnb host, you should explore a few different websites and choose the best one for your particular case. Check out whether they charge a listing fee or you only pay a percentage of your bookings. Make sure you know exactly how much you‘ll be expected to pay and what you’ll get in return for the listing fee. Your property must be advertised in the best possible way to optimize your ROI.
9. Creating & Optimizing Airbnb Listing
Creating and optimizing an Airbnb listing is essential in drawing potential guests to your property. It is important to provide high-quality photos and complete and accurate descriptions of the property for prospective guests. Also, setting a competitive price point and utilizing the tools provided by Airbnb will help boost visibility for your listings, as well as increase credibility with users.
By presenting great visuals along with pertinent details about the space available, you can create a memorable impression on those who view it – leading them one step closer to booking their stay. Using features like discounts or creating special offers are additional ways where both hosts and guests benefit from engaging through this platform.
High-Quality Photos and Descriptions
Presenting your property to the public requires a good first impression. You can easily make this happen by investing in quality photos that flaunt all of its best features and captivate potential guests. When taking pictures, be sure to use natural light, different viewpoints, and even a tripod for stability so they look more attractive and compelling.
To attract visitors, you should also craft an engaging description highlighting every detail about the premises, along with all available amenities it offers. They will help answer any questions or doubts people may have before booking their stay here.
Keep in mind, though, that when describing your accommodation space, it is important to select meaningful words. They should be designed specially around painting a vivid experience of what’s offered at this particular spot – a great way to lure them into making reservations!
Competitive Pricing Strategy
To draw in potential visitors and preserve your gains, having an effective pricing plan is essential. Begin by checking out the nightly costs of similar listings at multiple properties around you to gain an understanding of the market rate for your property.
When deciding on a price, take into account the amenities, location, and what customers desire so that rates can be adjusted according to seasonal trends or local events.
Use specialized tools, such as those provided by Mashvisor, in order to perfect your pricing strategy while still keeping competitive among others. Mashvisor’s Dynamic Pricing tool allows Airbnb hosts to automate setting the nightly rates for their Airbnb rental. Using AI-powered algorithms, the tool can calculate the best nightly rate for any short-term rental and help maximize the monthly rental income.
Also, make sure to stay up-to-date with industry trends in order to accordingly adjust prices that will bring extra benefits for both sides: those looking for lodging and yourself!
Utilizing Airbnb’s Tools and Features
Take full advantage of Airbnb’s resources and functionalities to maximize the profitability of your listing. Utilizing features such as Instant Booking or earning Superhost status can make sure that people find, recognize and book with you more easily.
Consider using vacation rental management software, which manages listings on multiple online travel sites while also automating pricing, messaging, and booking. Giving owners/operators time back in their day while maximizing income at the same time.
Keeping a watchful eye on business performance is just as important. Use reporting tools from within Airbnb so decisions are made based on facts, not instinct! With data-driven insight into operations, there really shouldn’t be any limit to how much success one could achieve when running an Airbnb or short-term rental business.
10. Managing Your Airbnb Business
Having a successful Airbnb venture requires good management, and this section outlines the best practices to that end. From building your support team and fostering great customer relationships to regularly monitoring progress for optimization, it is essential in order to reap rewards from your Airbnb business plan.
With the following tips, you’ll be ready to tackle any potential issues or successes related to an Airbnb business.
Building a Support Team
Having an organized team of professionals is critical to the success of your Airbnb business. Hiring local specialists for housekeeping, maintenance, and other related chores, such as washing, gardening, or pool upkeep, will help provide guests with a remarkable experience during their stay.
Keeping up with all the relevant details can require full-time dedication. By having dependable support services like cleaning companies, you’ll be able to guarantee this efficiency.
When employing assistance, consider factors such as property size, expected occupancy levels, and amenities available so you obtain quality service providers who fit what’s necessary.
Make sure to establish clear performance expectations, along with consistent feedback. Quickly addressing any questions/concerns are surefire ways to make sure you exceed the targets set when organizing Airbnb business’ ancillary staff requirements.
Guest Communication and Customer Service
Ensuring a positive experience for guests and boosting repeat bookings is achievable with great customer service. Taking care of the check-in process, outlining house rules clearly, as well as being quick to answer questions during their stay can make all the difference in creating happy customers. Such customers are likely to return again and write favorable reviews.
Meeting guest preferences or expectations shows that you really value them, helping you set your Airbnb business apart from competitors, too. Customer service should always be your top priority if you want to generate more successful bookings.
Performance Monitoring and Improvement
It is important to remain up-to-date with your Airbnb business performance by routinely tracking metrics such as Airbnb occupancy rate, ADR, ALOS, RevPAR, and net operating income for continued growth. Monitoring the said metrics while making consistent decisions based on observations is key when aiming for success.
Leverage customer feedback along with market trends in order to identify possible improvement areas and adapt services accordingly. Staying informed on relevant data can ensure the success of any operation against competitors in this ever-changing landscape.
In this article, we’ve provided you with a list of 10 steps on how to start an Airbnb business in 2023. We’ve covered everything you need to know, from how to budget, through how to buy Airbnb property fitting your requirements and expectations, and all the way to how to optimize your listing and bookings.
As shown above, according to Mashvisor’s nationwide real estate data analysis, Airbnb rental properties offer a significantly higher return on investment than long term rentals across the US. Thus, buying an Airbnb property and running an Airbnb business is totally worth it. That is, as long as you follow our guide.
Meanwhile, Mashvisor can help you identify the top areas to buy a short term rental in any US city and provide you with a list of the best opportunities available for sale in each market. We can also help you conduct a comprehensive investment property analysis with a few clicks of a button. All in all, Mashvisor will turn three months of Airbnb research and analysis into just 15 minutes.
To learn more about how Mashvisor can support your Airbnb investing journey, sign up for a 7-day free trial now, followed by 15% off for life.