This Airbnb host makes $51,000 a year from short-term rentals — could your home also be a self-sustaining property?

·7 min read
This Airbnb host makes $51,000 a year from short-term rentals — could your home also be a self-sustaining property?
This Airbnb host makes $51,000 a year from short-term rentals — could your home also be a self-sustaining property?

With the cost of living soaring this year, some Americans have been looking around their homes to find a way to boost their income and foot the bills. And many have landed on a simple and clever way to cover their mortgage payments: renting their homes out.

“That was absolutely the reason to do it,” says author and Airbnb superhost Hilary Hattenbach, adding that her previous careers as a digital marketing VP and then as a consultant meant the work was pretty inconsistent.

Hattenbach and her husband Jared bought a 1920s-era duplex in Silver Lake, California in 2011 and have been renting out one of the units since. But when their original tenants left in 2014, the couple made some upgrades to the space and listed it on Airbnb.

“We had a mortgage to pay. And with Airbnb, the amount of money we were making — it was almost exactly the amount of our mortgage. Some months, it would be a little bit more. Some months, it would be a little bit less,” she says.

An August report from Airbnb says countries with an increase in inflation saw an increase in hosts in the second quarter of 2022.

According to Airbnb, the typical American Airbnb host’s income rose to over $13,800 in 2021 — an 85% jump over 2019.

The Hattenbachs ended up making on average about $51,000 a year between 2014 to 2019.

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The cost-of-living in the U.S. is high

Although mortgage rates recently dipped below 5% for the first time since April, they’re still significantly higher than they were at this time last year.

On top of that, everything from fuel to fruit is more expensive than it used to be, and the Federal Reserve hiking up interest rates means it’s becoming costlier to borrow as well.

A May survey from Airbnb showed that nearly 45% of hosts globally said their hosting income has helped them stay in their home in 2021, while 46% said their hosting income covered food and other necessities that have become more expensive.

Hattenbach notes that Los Angeles is a pricey place to live, so the couple knew they’d have to supplement their existing income somehow to pay off their mortgage. The pair looked at properties that were either duplexes or had guest houses that they could rent out.

The duplex they ultimately settled on is near the iconic Los Angeles Hollywood sign and the Griffith Observatory, and Hattenbach says she gets a lot of tourists.

With a 30-year mortgage on the property, their monthly payments come to around $4,000. Hattenbach estimates they’ve been able to cover the full cost of the mortgage 85% of the time since they started hosting with the rental income alone.

When the COVID-19 pandemic hit in 2020, Hattenbach and her husband gave a short-term lease to some former Airbnb guests, but she says they plan on putting the property back on the rental platform once their current tenants leave.

Costs to consider before becoming an Airbnb host

The first step in becoming an Airbnb host is getting to know the numbers, says veteran host Danny Rusteen, a former Airbnb employee and the owner of OptimizeMyBnb.com — a blog site and business designed to help hosts make the most out of being an Airbnb host.

If you do the math and find that your estimated rental income might not be enough to cover the costs of hosting plus your mortgage, you may want to think again. Your location also matters.

There are some markets that can be a potential headache for an Airbnb host, Rusteen warns. This could be due to lack of rental demand in those areas, or issues with guests.

“I would suggest looking into the market to ensure it’s a good market,” Rusteen advises. “Measure your mortgage costs and your other fixed costs and variable costs.”

You’ll need to estimate how much you can reasonably earn in rental income and whether this can cover all the costs of owning and hosting your property.

This could include the cost of upgrades and renovations, home decor, cleaning and maintenance (you’ll charge your guests a cleaning fee), a smart lock, keypad or lockbox and extra insurance. Airbnb offers its own free insurance, but you may still want to purchase your own.

Hattenbach says she learned some important lessons from when she first began hosting. “We kind of underestimated the cost of running it,” she admits, explaining that she and her husband initially charged a low cleaning fee and cleaned the apartment themselves, but later hired a professional cleaner and then raised the fee.

And don’t forget to consider the tax implications. You’ll have to report your rental income when tax season comes along, although you may be able to deduct expenses like cleaning, advertising and repairs.

Reasons short-term rentals might not be your best option

You may want to consider renting out your property long-term instead if you’re looking for a more consistent income.

That would make you less vulnerable to the ups and downs of the travel industry, like seasonal vacancies or pandemic lockdowns — the short-term rental business suffered during the first year of the COVID-19 pandemic.

And while you can benefit from flexible pricing and greater income potential with short-term rentals, you’ll also need to deal with the upfront costs of cleaning and regularly stocking up on essentials like towels and toilet paper as well as keeping up with the wear and tear that comes from having so many people in the home.

For those who own second homes, it’s more common to rent that out rather than their primary residence. Vacation home sales skyrocketed in the second half of 2020 and through April 2021, however demand has now fizzled out thanks to higher mortgage rates and home prices.

Renting out your primary residence can get tricky. “If we're speaking to the family who just goes on one vacation a year — for two weeks, maybe a month — that's not ideal,” Rusteen says. The more time you can rent out your home (or part of it, as Hattenbach does), the better.

Rusteen also advises against renting out a home that has sentimental value to you, since there’s always the risk of damage. You can be at risk of theft or receiving complaints from neighbors as well.

How to maximize your income as an Airbnb host

The Airbnb website notes that holiday weekends, such as Thanksgiving and Labor Day, and the summer and fall travel season are popular times.

“It's really important for a host to start off strong — to start off with momentum,” Rusteen explains. “If a host starts in slow season, then their pool of — I call them FPGs — future potential guests is just tiny, because you're going up against existing hosts with reviews.”

He recommends charging less for weekdays and more for weekend stays, although beginner hosts will need to start their pricing low overall.

It’s also crucial to make your rental look as desirable as possible. Your online listing should be updated and appealing to potential guests, with great photos and a thoughtful description.

If you meet certain requirements, like high ratings and reviews and enough completed bookings, you could receive superhost status — which can attract more guests.

Rusteen advises creating a digital guidebook on Airbnb that answers some basic questions, like how to operate the washer or what the Wi-Fi password is, and lays out the house rules. You can even include recommendations for what to see or where to eat in the area.

Hattenbach also listened to her guests — switching out the regular shades to blackout shades when they told her the light filtering in through the windows was too bright in the mornings.

It’s all about creating a space that you’d want to stay in, she emphasizes.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.