Things to Know Before Renting Your Home on Airbnb
Housing prices are increasing quickly in many areas of the country, and interest rates are on the rise. That might challenge your ability to afford a mortgage. You might consider extra sources of income. A roommate is one possibility, but another route is turning part of your house or apartment into a short-term rental through Airbnb.
Airbnb has 660,000 listings in the United States, and more than four million around the globe. People rent out rooms or private entrances in a home or apartment through Airbnb’s website. It functions much like an inn or bed and breakfast. The company takes a commission, but you keep a majority of the money. It’s a great way for people to generate income from a property.
Here are some things to think about when renting out a room in your home.
Understand the Laws
If you are going to host guests for money at your house, you need to understand the applicable laws. Some communities have created specific laws that govern Airbnb rentals, and other communities have outlawed the practice. A couple in Las Vegas was fined $72,900 recently for operating an Airbnb without a license. Besides the legality of operating the business, specific taxes often apply when renting the room. Just like a hotel or bed and breakfast, you might be required to pay a lodging tax.
Know Your Available Times
When deciding to rent a room, you will need to think about how much time you have available to manage the property. If you work 50 hours a week at an office on the other side of town, it’s going to be difficult to greet guests. You need to make sure you can dedicate the necessary time to the rental. You want to be able to give your guests a positive experience during their stay.
What Type of Person Are You?
Your personality can play a role in your decision to rent out a room. If you are a hermit and do not like to socialize, a short-term rental business might not be the right choice. On the other hand, if you relish talking with people and enjoy having guests in your home, an Airbnb rental could be a perfect choice for some extra income.
Honestly List the Property
When putting together the listing for the rental, you need to be honest. You want photos that fairly represent the property. You can be positive when describing the accommodations, but you don’t want to give someone unreasonable expectations. If it’s a small, loud room in a house, then say that. You shouldn’t describe the space as spacious and private. The practice will establish happy customers, and get you more positive reviews from guests on the Airbnb site.
Understand the Market When You Set a Price
You need to research other Airbnb rentals in your community and hotel rates when you set your rental rate. You want to set a rate that is competitive. If you set the rate too high, people will be less likely to rent the space. At the same time, you want to earn a reasonable amount of money for your time and the space. You don’t want to lowball the price. You can always adjust the rate after you set the price.
Calculate Ongoing Expenses
You will have expenses when you rent the room, and you need to take that into account. Laundry, coffee, and other amenities cost money. You want to make sure that those costs are taken into consideration when you set your rental rate. You also want to think about your time. You will want to estimate how much your time is worth when you are looking at a daily rate. You will most likely spend more time than anticipated on the rental. You are running a small business.
Think Like a Businessperson
You are offering a service. You need to think about ways to provide value to your customers. You are no different than an innkeeper or the owner of a bed and breakfast. You should respond quickly to inquiries and provide guests with amenities that enhance the experience. You could think about providing maps of the area and brochures from interesting points of interest. A booklet with a list of top restaurants in the area might also be a good idea.
Pay Your Taxes
Like any business, the government is going to want a piece of the action. Airbnb reports your earning to the government, so you will need to find out what tax laws are applicable. In most cases, you will file a federal Schedule C where you list the income and expenses for the business. You might also be required to pay income taxes quarterly rather than at the end of the tax year. State and local income taxes may apply. You will need to keep accurate records and document the expenses associated with the business. It’s best to speak with a tax accountant.
Keep All Payments Through Airbnb
You might be tempted to go around Airbnb. The website takes a cut of the rental rate. Perhaps, a guest wants to stay a couple extra days after arriving. You are insured for up to $1 million when the renter goes through the website. It’s not worth the little bit of extra money by taking the payment directly.
Prepare the Room for Rental
The guest room should be a cozy and inviting space. You might opt for a certain theme in the room. Whatever route you choose, you should put time and effort into preparing the room. You wouldn’t want to stay in an unkempt space. You shouldn’t have your guests stay in space that is not well maintained. You need to put the proper time and effort into the rental listing.