In 2012, I bought an apartment specifically to rent out on airbnb. I've been managing it remotely for the past year. This post includes everything I learned as well as some revenue numbers.
Finding a Place to Buy
Each listing on airbnb has a publicly visible calendar that shows which nights are booked and which nights are available. Using this tool it's very easy to work out almost exactly each host is making. This makes it an invaluable resource when researching where to buy.
Simply find a listing that's in an area you're thinking about buying and click on the calendar tab. Then count up how many red squares there are in a given month, that by the nightly rate listed on the profile and you have the monthly revenue.
Red = Booked. Green = Available.
There's a lot of places in the US where house prices are still very cheap. It's possible to find a nice apartment in a major city for less than $US50,000.
The place I found was in Las Vegas and it cost $US40,000. It's a 750 sqft (70sqm) 1 bedroom, 1 bath. There's a shared pool with a hot tub and even a tennis court. Perfect for the weary traveller who wants to relax after a long journey.
This is what the apartment looked like soon after I bought it.
I spent roughly $US10,000 on making the apartment look nice. This includes all furniture, tv/apple tv, new hard wood floor and new paint in all the rooms.
The hardwood floor is about to go in.
Unfortunately there's no ikea in Las Vegas (the closest one is in LA) so I spent a lot of time just waiting for stuff I ordered online to be delivered. If you're planning on doing something like this remotely I'd highly recommend checking delivery time or local stores before you make the trip to furnish the place and order in advance where possible.
It took roughly 3 weeks for me to get the apartment ready for guests but this could have been optimised greatly.
This was my bed, desk, sofa and table for 3 weeks.
Getting it Going
Once your place is ready it's time to setup your listing. Guests are understandably reluctant to stay at a place that has little or no reviews so I'd recommend lowering your nightly rate for a few weeks so you can build up a few positive reviews. Once you've had a few guests stay and a few positive reviews under your belt you can start upping the price.
You should also take advantage of airbnb's free professional photography service. They'll send a professional photographer to your listing to take some really nice pictures of your place, FOR FREE!
It's amazing how big of a difference having really nice pictures of your space can make. A few months ago I ran an informal experiment (as research for another project) where I listed my apartment for rent on craigslist. They were both the same price, in the same area. One listing had really nice pictures taken with a high quality dslr and wide angel lens and the other had badly lit pictures taken with my iPhone. The listing with the nice pictures got 10x the emails.
By the Numbers
Cost of apartment: $US40,000
Cost of redecorating and furnishings: $US10,000
Revenue November 2012 -- November 2013: $US19,613 Average monthly revenue: $US1634 Rough monthly profit: $US1134 (after cleaning, bills and other expenses)
Yearly profit: $US13,608
These numbers would be a little higher but I've stayed at the apartment myself for a few weeks and also let friends stay for free.
By these rough numbers it should take a little under 4 years to completely pay off the price of the apartment.
If You're Thinking of Doing This….
Find a great property manager / cleaner: Without one of these doing this remotely would be impossible. I managed to find a great local cleaner on craigslist. She charges a flat fee of $US200 per month which covers unlimited cleanings. She also now manages the airbnb listing for me, replying to all inquiries and being the point of contact for guests.
Be smart about checkin / check out times: It's not uncommon for new guests to check in the same day guests check out. You need to make sure your cleaning person has enough time to get in there and clean everything before the next guest arrives. I have a 12 noon checkout time and a 3pm check in time.
Buy multiple sets of everything: I have about 3 or 4 sets of sheets and towels. This way the cleaner doesn't need to wash everything in the 3 hours between guest check in and check out. They can simply take all the dirty sheets and towels home, wash them, then next time they swing by the apartment have a clean set of everything ready to drop off.
Buy a nest: Nest has a great "auto away" feature that activates when nobody walks past it in a predetermined amount of time. This turns off all heating and cooling when nobody is in the unit and you and your guests don't need to think or worry about it. The cost of a nest probably pays for itself in a couple of months with this feature alone. This also lets you login to your nest account and see if a guest has arrived safely or not without having to bother them.
Buy a Lockitron: The biggest challenge with doing this remotely is handling the key transfer. Often guests flights are delayed or they just get in really late. Having someone meet them at the apartment can turn into a logistical nightmare very quickly. Lockitron allows you to invite guests to your lock for a specified amount of time. They can then arrive whenever they like and unlock the door with their phone.
Bad reviews can kill you: I live in constant fear of getting a bad review. Reviews are listed prominently on your listing page on airbnb so every potential new guest can read them before booking. It also means I don't ever leave guests bad reviews in case they retaliate and leave me a bad review in turn. I don't know how airbnb can fix this but the current review system is definitely a little broken.
This isn't "passive" income: A large per cent of guests are happy to arrive, stay in your place and leave before their check out time all without any contact at all. Often though guests will have questions or issues will arise that need your attention. Because of this you have to be always available to jump on a call and help them out.
Jon Wheatley is the co-founder need/want, a small product studio based in San Francisco, and this post first appeared on his website. If you found it interesting you should follow him on twitter here. He's happy to answer any specific questions you have about the whole process -- just tweet at him!