Last Updated on Dec 24, 2019 by James W
If you’re someone who loves travelling or travels a lot for work then you’ve most likely heard of or used Airbnb. Airbnb, for the uninitiated, is the popular online rental marketplace that allows people to rent out unused private properties for a short-term period. These private properties could range from single rooms to entire houses. If you have available property you would like to get extra income by renting it out, here’s how you can start a profitable Airbnb business through Airbnb financing.
But first, let’s take a look at what Airbnb is all about
Airbnb Financing: Explaining How Airbnb Works
Airbnb is an online rental marketplace founded in 2008. It provided a safe platform for people to rent out their extra or unused properties as lodgings for travellers. People generally use the website to seek out homes or accommodations that feels like home—something that hotels cannot provide. Most people who host accommodations in Airbnb are people looking to rent out their home or extra space to supplement their income. This is the reason why there is demand for airbnb financing nowadays.
Airbnbs act as a conduit between travellers and hosts. It provides a platform where travellers and hosts can interact with each other and exchange goods and services safely.
A comprehensive review system adds value to potential hosts and guests searching for accommodations in a peer-to-peer model like Airbnb, People generally trust reviews in online marketplaces. Most people base their decision to purchase products or avail of a service from the reviews they read online. Reviews allow them to safely choose quality products and services and protect them from scams.
Ready to start your Airbnb business thru Airbnb financing? Let’s learn how this system works first.
How Airbnb Makes Money
Over the years, Airbnb’s reputation and revenues have increased significantly. In fact, there are thousands of listings in over 65,000 cities in 191 countries around the world. Airbnb’s main source of income is from service fees collected from bookings. Guests pay at least 6-12% non-refundable service fee depending on the size of the room or house they want to reserve. More expensive reservations means guests pay lower service fees. Why? According to Airbnb, families or groups with larger reservations can save money for other more important travel expenses.
Hosts are charged a 3% fee that will cover guest payment processing. Once a reservation is booked, the guests pays the service fee unless the host decides to retract the listing or cancel the booking. Airbnb adjusts service fees in case there is any change in a reservation.
Another factor you need to take in if you decide to get airbnb financing for your airbnb business is that users are subject to value-added tax (VAT), although this depends on local and international laws.
Those who plan to reserve an airbnb in South Africa, Iceland, Norway, Switzerland, and the European Union, will be charged a VAT in addition to the service fees. Because tax laws are not the same around the world, Airbnb does not charge VAT to every guests across the board. However guests with airbnb reservations in the EU are expected to pay taxes based on the rate found in their home country. In addition, guests paying their bookings in a different currency than that of the host are subject to different exchange rates fixed by Airbnb. Hosts are also subject to VAT which is deducted from the income they earn from booking reservations.
Airbnb Financing: Getting Started With Airbnb
Once you get airbnb financing, you can get started with your own Airbnb rental business.
The first step to becoming a host is to register your home or available property thru photo submissions and by providing descriptions of the property for rent. Once it is listed with Airbnb, people from all over the world, especially travellers looking for affordable accommodations, can view it on their website or mobile app. Guests can check the Airbnb listings using different criteria such as:
- Location/destination
- Dates of availability
- Price
- Rooms available (bedrooms, bathrooms, washrooms)
- Amenities
- Host language
- Parking space
- Air conditioning
- Etc.
Guests can also contact the host directly through Airbnb’s direct messaging feature.
Are You Allowed To Rent Your Space?
Before you start your Airbnb business thru Airbnb financing, make sure you are allowed to legally become an Airbnb host within your jurisdiction, and that you are willing to abide by local laws and regulations.
Prior to getting Airbnb financing, find out what laws on hosting of paying guests within your jurisdiction are there. Such laws can vary depending on the city, state, or country you are in. There are places where hosting is not allowed, while some places charge additional occupancy tax.
If your property is an apartment or condominium, find out whether you’re allowed to sublet it. Landlords and Condominium homeowner’s associations often impose rules to prevent owners from renting out their properties as Airbnb spaces. You can get evicted from your apartment if you rent it out without your landowner’s knowledge and permission.
Another important thing you need to consider is your relationship with your neighbors. If you have noisy or unruly guests, you will automatically turn into a pariah within your neighborhood. But, despite such minor issues, becoming an Airbnb host can be a great home-based business opportunity for you. If you need help starting up this venture, check out Airbnb financing companies online.
Are You Committed to Becoming An Airbnb Host?
Before you go ahead and decide to host an Airbnb, you need to consider the following things first:
- Do You Really Want to Start A Business? Starting any business requires commitment. You need to want it. You also need an entrepreneurial mindset and the will to put in the work. Start by doing background research on this industry and creating a business plan that you can easily follow.
- Do You Have Time? Let’s face it. Being a landlord can eat up a huge chunk of your time, especially with regards to short-term rentals. Some of the things you need to do include:
- Managing bookings and responding to messages from potential renters
- Arranging to meet guests to hand over or claim keys.
- Make sure the property you’re renting out is clean and ready for your guests’ arrival.
- Take care of property maintenance issues (pest control, plumbing, electrical and other necessary repairs).
- Be available to your guests anytime in case any issues arise.
- What Are Your Financial Goals? Are you renting out your property to make a little money on the side, or as a steady source of income? Income from Airbnb rentals is highly dependent on the following factors:
- Demand –Tourist demand is one of the biggest factors that influence the pricing and popularity of your property.
- Seasonality –If your property is located in a northern climate, you can be sure that demand for it will decrease dramatically during the winter season (unless you have a ski cottage). Likewise, demand for properties in warmer locations will dramatically decrease during the summer seasons.
Before you even consider the idea of quitting your job, getting Airbnb financing, and making a living out of your Airbnb property, make sure you have carefully researched your property’s income potential. Start by checking rental rates and booking frequency of other Airbnb listings that are within your area.
- Consider the Extra Costs –Besides the booking fees charged by Airbnb, there are also other costs that come with being an Airbnb host. They are:
- Insurance –regular homeowner’s insurance policies do not include the use of properties for business purposes; this includes renting your space on Airbnb. Several countries such as the USA, Canada, the UK and the like provide Host Protection Insurance program for free. This provides $1 million insurance coverage against property damage and bodily injuries. If your area is not covered by AIrbnb insurance, go see an insurance agent and try to see about getting proper coverage.
- Business License –There’s a growing number of cities that require Airbnb hosts to own or hold business license.
- Cleaning and Maintenance –In order to maintain a high level rating on the AIrbnb site, you need to keep your property in good shape all the time. This means you need to conduct thorough cleaning between guest visits and perform regular checkups and maintenance. If you hire people to clean and maintain your property, this will add to your expenses.
Small Business Loan For Airbnb Financing
While it’s not easy to obtain Airbnb financing, it is not entirely impossible. There are plenty of small business loans available that have appeared in response to the increasing demand for Airbnb financing. These include companies that offer Airbnb hosts advances on Airbnb reservation receivables and loans.
If improving your income with an Airbnb rental business sounds like a good idea to you, do your research on companies that provide loans for financing. They can help you get your foot in the door, or even build your business the minute you’re already established. Have fun and good luck!
