Wondering how to start an Airbnb? Curious about what it takes to become an Airbnb host? This article goes over each step of starting an Airbnb business. From the research and planning stages to furnishing, decorating, and listing a property, those who wish to become Airbnb hosts will find all the information they need to succeed below.
What Is Airbnb, and Why Is It So Popular?
Airbnb is a short-term rental listing platform that was founded in 2008. It connects property owners with guests who need a place to stay during their travels. Airbnb offers an alternative to staying at hotels and features millions of unique places for travelers to stay. Many people prefer staying at a vacation rental rather than a hotel because it feels more homey and personal, and they can enjoy an entire home with plenty of privacy.
Airbnb Hosting: How Does It Work?
Airbnb hosting is relatively simple when thinking about how to start an Airbnb rental. People who have a property they want to rent out, whether it’s a room, apartment, or house, list it on the Airbnb website. A listing consists of photos and written information about the property. Hosts also need to set a nightly rate. Once a property is listed, potential guests can view it and book a stay. Generally, they must agree to the host’s house rules, and then their stay is confirmed.
How to Start an Airbnb Business: 10 Steps for Success
Those interested in starting their own Airbnb rental business are sure to find success by following the step-by-step process laid out below.
Step 1: Research and Plan the Business
The very first step in starting an Airbnb business should always be to do some research and planning before taking action.
Write a mission statement.
Writing a mission statement puts potential Airbnb hosts in the right mindset to start their vacation rental business. A mission statement can be thought of as a brief blurb that explains exactly what a company is about.
Hosts should think about their values, what motivates them to start the business, and how they want to operate their vacation rental. Other factors to consider are their goals and overall vision for their business. Identifying the what, how, and why of their vacation rental business is a good place to start.
For example, Airbnb’s mission statement is the following: “Airbnb’s mission is to create a world where anyone can belong anywhere and we are focused on creating an end-to-end travel platform that will handle every part of your trip.”
Vrbo, another popular vacation rental listing site, has this mission statement: “Our mission is to find every family the space they need to relax, reconnect, and enjoy precious time away together.”
Set a budget.
Staying on budget is crucial for success in the short-term rental industry! Purchasing and fixing up a property to serve as an Airbnb is quite an investment. It’s wise to take the time to calculate (and save up for) a realistic budget with plenty of cushion, so hosts don’t put themselves in a compromised financial situation.
The amount of money necessary to invest when starting an Airbnb business can vary greatly depending on the type of property purchased and its location. However, hosts will need at least 10% to 30% of the purchase price for the down payment and closing costs. (This can also vary based on financing method; we’ll give a brief overview of several financing options later in the article.)
After the initial investment, it’s crucial to keep in mind that there will be ongoing costs to keep up with. These include mortgage payments, repairs, renovations, insurance, property taxes, and cleaning fees.
Choose a target market.
Once the mission statement and budget have been established, it’s time to think about what kinds of guests the vacation rental will appeal to. This is a crucial part of how to start an Air bnb. There are tons of different target markets to consider: families, pet owners, luxury travelers, snowbirds, workationers, and many others.
It’s common for new vacation rental hosts to try to appeal to as wide an audience as possible. Unfortunately, this is often counterproductive. It’s better to evaluate the property, the market it’s in, and what types of tourist attractions it’s close to in order to zero in on a particular type of traveler. Once a host has decided on a certain segment of the market, the types of furniture, decorations, and amenities necessary to fill the vacation rental become much clearer.
Select a profitable real estate market.
A good market analysis will reveal which cities are best suited for starting an Airbnb business. Of course, it’s always wise to choose a market with low supply (not a lot of other vacation rentals to compete with) and high demand (plenty of travelers looking for a place to stay). However, there’s a lot more to it.
Hosts’ first step when doing market analysis should be looking into potential markets’ rules and regulations or overall market strictness. There are generally three levels of strictness: stringent, moderate, and relaxed. As a general rule, new hosts who are just starting an Airbnb business may want to avoid stringent markets, as their regulations are complex and constantly changing. It’s possible to open a vacation rental one day and have it shut down the next due to a shift in legislation.
Market maturity is also key. In markets that haven’t had time to mature, there are often conflicts between vacation rentals and hotels, as well as between Airbnb hosts and locals. Meanwhile, mature markets have had time to reach equilibrium and tend to be more stable and profitable.
In general, there are three types of markets: metro markets like NYC and Nashville, regional vacation markets like Gatlinburg and Panama City Beach, and national vacation markets like Honolulu and Aspen. For new hosts, it’s usually best to opt for regional and national vacation markets, as they typically don’t have stringent regulations. And for optimal recession resistance, national vacation markets are the way to go. Learn more about each market type here.
Factors like the stability of the local economy, population demographics, and seasonality play a role as well.
To complete a thorough market analysis, there are plenty of resources available. The local Department of Tourism will always have pertinent information and helpful year-over-year figures. Hosts can also find information through conference centers, tourist attractions, hotels, universities, and the National Park Service (if the chosen market is near a national park). Major national property managers, Mashvisor, KeyData, and AirDNA are excellent sources of valuable data as well.
Look for appropriate investment properties.
Next, it’s time to scour the chosen market for properties that have great potential as vacation rentals. Fixer-uppers will require more time and effort before they turn a profit and begin earning money, while some properties are nearly ready to be listed as they are.
When questioning how to start an Air bnb and how to find the best property possible, it’s always smart to work with a skilled real estate agent. Ideally, hosts should seek out a professional with vacation rental agent certifications and specialized knowledge of the industry, as well as plenty of experience with investors. A few places to connect with vacation rental agents include online forums, local business agencies, booking platforms, vacation rental owner webinars, and vacation rental owner Facebook groups.
Analyze the return on investment.
It’s smart to consider the ROI of a new vacation rental business. Generally, the simplest formula for calculating the return on investment is the net return on the investment divided by the cost of the investment. This number is then multiplied by 100%.
Often, an ROI of 10% to 15% per year running a vacation rental property is viewed as a success. This generally means a host should make around 10% to 15% of the amount they invested into the property each year through bookings. When calculating a property’s potential ROI, think about the occupancy rates that will be necessary to achieve it.
Step 2: Invest In a Property
Once the business groundwork is laid, investing in a property is the next step in how to start an Airbnb.
After a host has found a suitable property in the market of their choice, the biggest question is typically how to finance it–and there are plenty of options available.
First up is paying in cash, which requires quite a bit of disposable income and typically results in a lower ROI. However, there are plenty of benefits to purchasing a property in cash as well. It means hosts can jump into opportunities quickly, avoid the pre-approval process, and enjoy zero interest added to their investment. Plus, sellers will often offer steep discounts to buyers willing to pay in cash.
There are also several types of traditional loans to consider, such as conventional, commercial, private lender, and hard money loans. Each of these comes with its own benefits and drawbacks.
When starting an Airbnb business, there are a couple of unique financing options. The 10% down vacation home loan is an especially appealing one. Although it comes with the undeniable advantage of only having to put 10% down, this loan also comes with many stipulations. A few are that the property being purchased must be located at least 65 miles from the host’s home, that it must be a one-unit dwelling, and that hosts must occupy the property for a certain amount of time each year. Learn more about this loan and other financing options in our detailed article on the topic.
Another vacation rental-specific financing option is the jumbo loan, typically used to invest in large luxury properties.
Alternative ways to finance a vacation rental include partnerships and the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method.
Step 3: Start the Business
Now that the planning’s done, it’s time to get started!
Choose a business name.
A business can’t exist without a name, and a name is also the beginning of the branding for the company. When starting an Airbnb business, hosts must keep in mind that their business name functions as the core of their brand. It should be recognizable, memorable, and unique. The best business names are challenging for others to copy and stand out from competitors rather than getting confused with them. A good business name for an Airbnb business also embodies the particular guest experience provided at the property.
Form a legal entity.
Many vacation rental businesses establish themselves as LLCs, or limited liability companies. There are other types of legal entities to consider as well, such as C-Corporations and S-Corporations.
One of the main benefits of forming an LLC is that it generally eliminates hosts’ personal liability, meaning that their personal assets won’t be on the line in the case that their vacation rental business goes bankrupt. Hosts won’t pay corporate taxes on their business income; instead, they’ll be required to pay self-employment tax contributions.
Meanwhile, C-Corporations or C-Corps offer even more protection against personal liability but tend to incur higher costs and require more advanced reporting and operational processes. Sometimes, C-Corp profits are taxed twice.
S-Corporations or S-Corps are designed to avoid the potential double taxation that C-Corps often encounter. To file as an S-Corp, it’s necessary to do so with the IRS, rather than registering with the state.
Hosts who aren’t sure which type of legal entity would be best when starting an Airbnb business should consult with an accountant and lawyer for professional guidance.
Register for taxes.
Registering for taxes is necessary for a vacation rental business to operate legally. How to start an Airbnb in this way involves registering the business with the IRS and receiving an Employer Identification Number (EIN). An EIN functions as the business’s Social Security number.
Open a business bank account and credit card.
Setting up a bank account and credit card specifically for the short-term rental business makes it simple to keep track of its finances, rather than using a personal bank account to cover business expenses. It can be possible to find particular business credit cards offering cash back rewards and other incentives.
Set up business accounting.
Business accounting can be set up through free or paid bookkeeping and accounting software, or vacation rental business owners can consider hiring a professional accountant to keep track of their finances. Quickbooks, Freshbooks, Wave, AppFolio, and Stessa are a few options for low-cost business accounting software that are sure to be helpful for hosts asking how to start an Air bnb. View our full guide to vacation rental accounting software here.
Obtain permits and licenses.
Depending on the vacation rental location and the renovations needed to prepare the property for guests, hosts will need various permits and licenses. For instance, it’ll likely be necessary to file for a general business license and a short-term rental license. Hosts must be sure to familiarize themselves with the rules and regulations of their market to know which permits and licenses will be necessary for starting an Airbnb business. Visiting City Hall or checking out the city’s official website can be helpful.
Some short-term rental listing sites, such as Airbnb, offer limited protection for hosts. However, it’s highly recommended to invest in a third-party insurance policy with additional coverage for more protection. When thinking about how to start an Air bnb, the safest way to do so is with insurance.
As hosts compare various policies, it’s best to look for loss of income coverage, property and contents insurance, liability coverage, location-specific coverage (particularly if the area is prone to floods or earthquakes), and no forced entry requirement for theft or damage.
Hosts should check out Proper Insurance, Allstate, CBIZ, American Modern, and Safely Insurance for plans created specifically for vacation rental owners. Learn more about the best insurance for Airbnb hosts in this article.
Define the brand.
Branding generally consists of the business’s name, logo, and tagline. In the first step of starting an Airbnb business, we discussed choosing a business name, which sets hosts up perfectly for continuing the branding process. From the business name, it’s possible to move on to creating a short, catchy tagline. One example is Airbnb’s tagline, “Belong anywhere.” Other famous taglines include Disneyland’s “The happiest place on earth” and Nike’s “Just do it.”
Next, hosts should choose a color palette for their logo and content. It can be beneficial to do some research on color psychology and choose colors accordingly, or to select shades that embody the local area and guest experience. For instance, a vacation rental on the beach might have a color palette containing shades of blue, yellow, and orange to evoke the ocean, sand, and sunset.
A simple yet recognizable logo is key to branding because it will act as the face of the business on all social media channels and everywhere the business is online. It’s possible to choose a text-only lettermark, a symbol or brand mark, an emblem, or a combination mark for the business’s logo.
Of course, hosts starting an Airbnb business must be sure to keep their branding consistent across all channels, social media platforms, and other locations on the web.
Create a business website.
A business website is a great way to spread awareness of a vacation rental while also offering an easy way for guests to book their stay. Hosts wondering how to start an Air bnb business website should begin by purchasing the domain and using their existing branding.
Ensure all pertinent information about the vacation rental property is easily accessible, include a page for direct bookings, and consider starting a simple blog. Vacation rental websites should be mobile-friendly, since many potential guests will be accessing the site from their phones. Hots can even go above and beyond by making their website multilingual, thus helping travelers from other countries feel more comfortable booking a stay. Learn more about creating a business website for a vacation rental here.
Step 4: Survey the Competition
Vacation rental owners need to look at what the competition is offering and identify ways to stand out. They can do this by assessing the amenities of similar properties and figuring out what they can offer that their competition doesn’t. For example, maybe other properties in the area have a large, fenced-in yard, but they don’t have a barbecue grill or outdoor seating area. Or perhaps they have a DVD player but don’t offer free access to streaming services. These seemingly small amenities can make a huge difference when potential guests are choosing between two similar properties in the same local area.
Another way hosts can stand out from competitors is to increase their capacity. This can be especially valuable if the property is catered to families or large groups. Adding bunk beds, pull-out couches, and blow-up mattresses is an easy and effective way to do this. Offering a pet-friendly rental can also be a way to distinguish the property from others nearby.
Aside from looking at competitors’ listings, hosts should also dive into their reviews to learn about what they’re doing well and where they can improve. They can then implement that feedback into their own properties.
This is also the point in how to start an Airbnb when short-term rental owners can create their competitive pricing strategy. Generally, it’s wise to use a dynamic pricing strategy rather than a static one because dynamic pricing takes various factors into account in order to adjust the pricing on a regular basis. It’s essential to think about upfront, ongoing, maintenance, and management costs when calculating the nightly rate for an Airbnb. Applications like AirDNA and PriceLabs simplify dynamic pricing by automating the process completely, so hosts don’t have to calculate constantly-changing prices on their own.
Step 5: Renovate, Furnish, and Decorate the Property
After the sale’s gone through, the business is up and running, and vacation rental owners have identified ways to stand out from the competition, the fun part begins! Renovating, furnishing, and decorating allows hosts to fix up their vacation rentals so that they’re perfect for their ideal guests.
When considering how to start an Air bnb that guests will love, hosts should opt for furniture that offers a good mixture of durability and comfort while considering what the property’s ideal guests would like best. The most important furniture items are typically a sofa, coffee table, bed(s), dining table, storage, and lamps. Decor is also crucial for pulling the space together and giving it a finished, homey feel. Meanwhile, appliances and various electronics are also essentials for vacation rentals.
Vacation rental owners can find high-quality furniture at IKEA, CasaOne (a furniture renting service), local furniture stores, Craigslist, and other online marketplaces.
A few trends for vacation rental interior design include ceramic backsplashes, wall murals, indoor greenery, touchless items, and multipurpose spaces.
Step 6: Give the Property a Test Run
At this point, the vacation rental property is nearly ready to welcome guests. The process of how to start an Airbnb is almost complete. But first, hosts should either stay there themselves for a week or two or invite trusted friends and family members to stay there. This “test run” allows hosts to figure out any final missing pieces or little things that need to be tweaked before a real guest stays at the property. Often, staying at a property will reveal things about it that can go unnoticed if hosts only stop by the property for a few hours here and there to renovate and decorate. Leaky faucets and flickering lights may seem like minor issues, but they can make a difference in guests’ reviews!
Step 7: Create Listings on Multiple Sites
Now, the vacation rental property is fully prepared and streamlined it’s time to stand out your rental property with proper listings! While many new vacation rental hosts turn to Airbnb first, it’s best to list a property on multiple different sites to increase bookings and revenue. Not only are large online travel agencies like Vrbo and Booking.com important, but smaller niche sites are also fantastic places for those starting an Airbnb business.
A particularly cost-effective listing site is Rental Trader. This site is a great choice for new hosts because it’s simple and free to sign up and list a property. Plus, host fees are extremely low at just 4.5% per booking.
Aside from listing sites, hosts should be sure to update their business websites to allow for direct bookings.
When thinking about how to start an Air bnb, remember that optimized listings maximize bookings. This means that hosts should concentrate on getting high-quality photos that showcase all that their vacation rental has to offer. The quality of the writing in the headline and description is just as important. Videos can also make a difference in convincing potential guests to book a stay. Some hosts choose to hire professional copywriters and photographers to help them create the best listing possible.
Step 8: Earn Positive Reviews
One easy way to get more reviews is simply to reach out to guests after their stay has ended and ask them for feedback. Even if guests don’t leave five-star reviews, this still gives hosts a chance to see where they can improve for the next guest stay. Hosting a short-term rental property is a learning experience, and it takes time to grow and become successful.
Offering guests a unique experience by personalizing their stay can be one way to increase hosts’ chances of earning five-star reviews. Welcome gifts, prompt responses to any questions, customized recommendations, and a guest binder containing all the information they’ll need can go a long way.
Amenities also make a huge difference to guests. A fully stocked kitchen, high-speed WiFi, bathroom toiletries, entertainment, parking, cleaning supplies, a washer and dryer, high-quality bedding, and safety features are all commonly sought out by guests. If the property has an outdoor area for guests to enjoy, adding outdoor amenities like a pool, hot tub, grill, fire pit, hammocks, and outdoor seating can make the experience even better. A fenced-in space for kids and pets, as well as an outdoor dining area/workspace, are also great add-ons.
Easy check-in and check-out, particularly self-check-in, adds a level of convenience for guests that can help hosts earn five-star reviews. Cleanliness is another aspect of starting an Airbnb business that can make or break a vacation rental property’s ratings.
Step 9: Automate and Delegate
The vacation rental business is up and running, and now it’s time to simplify things! It’s nearly impossible for hosts to do everything themselves, especially once the bookings start to become more consistent. Although hosts may be able to complete the steps of how to start an Airbnb on their own, continuing the business solo can be quite a challenge. This is where hiring others to help and using a good property management system comes into play.
A property management system, or PMS, allows hosts to automate some of the more repetitive tasks, like guest communications and combining calendars from multiple listing sites. Streamline, Guesty, Lodgify, and Rentals United are a few PMS options hosts may want to check out. View our comparison of ten of the top property management systems here.
Meanwhile, hiring a property manager, an Airbnb cleaning service, and maintenance personnel can further simplify hosts’ responsibilities.
There are other ways to automate as well. For example, smart locks enable self-check-in for guests. Smart lights and sensors can easily be set to turn on and off to conserve energy (and lower utility bills) or to deter thieves when the property is empty. Finally, a smart thermostat makes it simple to manage the temperature (and further lower utility bills) as well as prevent potential issues like freezing pipes.
Step 10: Continue to Grow and Scale the Business
Some hosts are happy to work with a single vacation rental property, but others are interested in scaling their business to become much larger. Once the first vacation rental property is established, it becomes much easier to continue building the brand and expanding. Check out this article on scaling short-term rental businesses for more insights on growing successfully.
Some hosts are happy to work with a single vacation rental property, but others are interested in scaling their business to become much larger. Once the first vacation rental property is established, it becomes much easier to continue building the brand and expanding. Also, check out these Airbnb host hacks for insights to scale your short-term vacation rental business.
One of the most important things to remember when scaling an Airbnb business is to set goals and create detailed plans to achieve them. Effectively managing finances is also crucial, and it’s best to have several different bank accounts to properly manage the business and allocate various funds. An emergency fund is always vital!
As hosts’ vacation rental portfolios continue to grow, they shouldn’t forget to prioritize the guest experience that’s at the heart of their business. Sticking with consistent branding for all properties can also promote success.
Here’s a brief overview of how to start an Airbnb.
- Research and plan the business by writing a mission statement, setting a budget, choosing a target market, selecting a profitable real estate market, looking for appropriate investment properties, and analyzing the ROI.
- Invest in a property, choosing a financing option that makes sense after weighing all the pros and cons.
- Start the business by choosing a name, forming a legal entity, registering for taxes, opening a business bank account and credit card, setting up business accounting, obtaining permits and licenses, getting insurance, defining the brand, and creating a business website.
- Survey the competition to see where other vacation rentals are doing well and where they could do better, as well as to get a good idea of competitive pricing.
- Renovate, furnish, and decorate the property in a way that appeals to its target audience.
- Give the property a test run to discover any final issues that need to be addressed before welcoming guests.
- Create listings on multiple sites, being sure to optimize the headings, descriptions, and photos to maximize listings.
- Earn positive reviews by providing an excellent guest experience.
- Automate and delegate by using a property management system and hiring a cleaning crew and maintenance personnel.
- Continue to grow and scale the business, setting goals and achieving them one by one.
Before you click away, don’t forget to list your property on Rental Trader! The process is quick, easy, and free. Plus, our goal is to make travel cost-effective for hosts and guests, so we only charge a single 4.5% host fee per booking. Join the Rental Trader revolution today!
In this video, our correspondent Margeaux has explained the process of starting an airbnb step by step (with illustrations):