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Logo courtesy of CNBC
By Thomas Muellner
If you’ve ever traveled to a new city, you know that finding a decent hotel can be a costly venture. Too often, you end paying a small fortune to stay in a cookie cutter-room with floral print curtains just because there are few other options. Sound familiar?
To try and solve this pesky traveler’s dilemma, a handful of new lodging services have burst onto the scene in recent years. Platforms like Airbnb, Homeaway and VRBO offer would-be hotel guests an alternative to traditional accommodations by connecting them directly with local homeowners who are interested in renting out their extra space.
Beyond providing an authentic respite for hearty travelers, these platforms offer a unique opportunity for entrepreneurial homeowners and renters to earn some extra cash. If you’ve ever thought about putting your pad on the short-term market, consider these points to help you get started.
First things first. Before you start banking on supplemental income from Airbnb, understand that the laws and regulations around short-term rentals vary widely by city and state. Some communities have tough restrictions that make it costly — or even illegal — to host visitors through services like Airbnb and VRBO while others maintain open policies with few limitations. In either case, it’s important to do your homework early and often to make sure you’re always in compliance with local laws.
What’s more, if you rent your home or live in a multi-unit condominium, you might face even more restrictions. It’s increasingly common for modern lease and homeowner agreements (HOA) to include specific language that prohibits short-term sublets, like the ones through Airbnb. This can be for a variety of reasons, though it usually gets back to safety concerns and the comfort of other residents. So before you take your first reservation, read through your lease or HOA rules to make sure you don’t get dinged with fines or other penalties.
On the other hand, if you own your home outright or have an open-minded landlord (or management company) you may be sitting on a gold mind of a side hustle. Reports suggest that hosts who regularly rent out an extra room of a two-bedroom apartment can cover as much as 81 percent of their monthly housing costs; individuals living within major markets who rent out their entire two-bedroom home or apartment earn an average of more than $20,000 a year in extra income. That’s nothing to sneeze at.
However, to make hosting on Airbnb worth the investment, homeowners and apartment dwellers need to wear lots of different hats – concierge, building manager, handyman – maintain a positive attitude and think strategically about how they set up their home.
The first thing you’ll want to do when preparing your home for the short-term rental market is to decide which spaces are going to be available to guests.
Will you just be renting out your extra room or will your entire three-bedroom home be available? Will somebody be living in the space when it’s not being rented?
Next, create a renovation budget to help you keep track of your expenses and get your place camera ready. You may find that you need to purchase additional furniture (e.g., bed frames, mattresses, chairs, etc.), as well as everyday home staples (e.g., toilet paper, kitchen utensils, etc.) to maximize your space.
While you’re at it, look for opportunities to boost energy efficiency by using smart home technology. By installing features like timer controls on your heating and air conditioning units, occupancy sensors in limited-use spaces, and high-efficiency light bulbs, you can cut utility costs and set boundaries for future guests.
Beyond home decor and utilities, you’ll also want to set up services like internet and cable for your guests if they’re not already set up. And be sure to organize important details – such as the Wi-Fi password, house rules and local activity and restaurant recommendations – in a welcome document or binder for easy reference. Don’t be afraid to show your personal style, and know that the investments you make here will pay dividends down the road.
After you’ve done the heavy lifting of setting your place up for visitors, consider any areas where you might be exposed to risk. Though the chance of having an issue with a guest is very low and backed by Airbnb’s host guarantee, you can never be too careful when it comes to protecting yourself.
Think about the access guests will have when staying in your space.
Are sensitive documents, such as passports or birth certificates, stored in public areas? Are valuables and heirlooms protected under lock and key? Do passwords follow security best practices and have they been updated recently? Are utility bills and bank statements being sent to this address while guests are present?
By working through these types of questions, you can be sure you’ve got an extra buffer with guests and focus on the fun side of being a host.
Once your place is secured and ready to roll, take quality photos of each room, any special features and the outside of your home, and follow the simple steps to list your unit online.
Just like the income you earn from your day job, the money you earn by renting your home on sites like Airbnb is subject to federal and state taxes. And depending where your home is located, you may also be on the hook for what’s known an occupancy tax. This is a special local or state tax on the room or spaces you’re renting to guests.
While it’s no fun to pay extra taxes, it’s tough to get around them. That said, you may be able to lessen the blow by writing off related expenses, such as cleaning fees and home upgrades, when filing. As always, it’s best to consult with your tax professional to see what is and isn’t in bounds given your specific situation.
Lastly, as you jump into the world of hospitality, remember that the guests you’re renting to are just like you. By being clear and prompt with communication, as well as friendly, dependable and accurate in the information you provide, you can be sure you’ll lock in loads of five-star reviews. Happy renters will help you attract new guests and grow your business.
Above all, enjoy the entrepreneurial experience and know that even if your second bedroom doesn’t seem like the Ritz, it may be the perfect spot to call home for a weary traveler.
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