20 Apr Airbnb Income
People all around the world are creating Airbnb income by offering their properties as short-term rentals on Airbnb. (When you sign up with this link, you get some free Airbnb credit and I get some free Airbnb credit. Go do that now. It’s FREE to sign up and this post will make more sense after you’ve had a chance to explore the site a bit.)
Airbnb was created as a way for people to make a some extra money by their renting rooms and couches to visitors. Today, the company is worth many billions of dollars and is competing with the large, established hotel brands all over the world by renting entire houses and apartments in addition to rooms and couches.
I’ve stayed in Airbnbs all over the world and it has been wonderful (almost) every time. There was one weird experience in Brussels, but that’s a story for another time. I prefer to stay in Airbnbs instead of hotels because I prefer to live like a local instead of living like a tourist. I travel quite a bit and I’m comfortable getting outside of the typical tourist zones, but that’s a personal preference.
Airbnb is great as a traveler and it is also great for property owners. Long-term rental income is usually much less than what an owner can earn in Airbnb income by offering short-term rentals.
How much more can an owner make in Airbnb income? That’s a great question! Let’s take a look.
Example 1: Airbnb income from a condo in Denver
A friend of mine owns a condo in a popular neighborhood in Denver. He has owned it for twelve years and it is his primary residence.
Note: The primary residence part is important because of the short-term rental laws in Denver. Like many large US cities, there is an extreme shortage of affordable housing. Regulation has been implemented in Denver to keep property owners from making the affordable housing problem worse by limiting the ability to offer short-term rentals. The only way to (legally) make Airbnb income in Denver is if the property you put on Airbnb is your primary residence.
He sent me this screenshot to show me exactly how much Airbnb income he is able to make by renting his entire condo. Those numbers are sexy!
He doesn’t get to keep all of that money, of course. There are taxes to consider (city, state and federal), cleaning costs and the revenue share arrangement he has with his girlfriend so he can stay with her whenever someone is renting his condo. 🙂
Here’s the simple breakdown:
Denver short-term rental tax: 10.75%
Colorado state income tax: 4.63%
Federal income tax: 35%
Cleaning fees: $75-$150 per rental
Girlfriend revenue share: 20%
For the total income he’ll receive from the rentals illustrated on the screenshot, his net income will be $1641.86 ($4136.08 minus taxes, cleaning fees and the girlfriend expense).
There are things he can do to offset some of these taxes and fees, but we’re not going to get into the nitty gritty details of deductions and such. Assume he has no deductions and he’s not charging his guests for cleaning for this illustration. In real life, he’s able to keep more than $1641.
Example 2: Airbnb income from a beach house in California
The math here is much simpler. My friend’s family has a vacation home on the Northern California coast and they have been KILLING IT with their Airbnb income.
For a few years, they had the house and used it about two weeks a year. This is more common than you may think. Many vacation houses and resort houses are used in a similar way.
After a few years of the mostly-vacant house sitting there, my friend went to his parents and proposed a solution: Let him rent it and generate some Airbnb income when they’re not using it. He would manage the entire process and be paid for his work (20% of the gross rental income).
At first, his parents were skeptical. They eventually agreed. They kept the rental rates low for the first few months so they could rack up some good reviews on Airbnb (very important!). They raised the rates to regular market rates after they had a good base of guests who had reported great experiences. Now, they have repeat guests year after year. The guests return for their annual vacations and everyone is happy.
The first year of Airbnb rentals generated just over $30,000 in Airbnb income. His cut was about $6000 and he was thrilled. His parents were thrilled with the $24,000 they made from an asset that was costing them money before they put it on Airbnb. His parents pay the county short-term rental taxes and all the other regular maintenance expenses.
The best part? None of them have visited the house in over a year because it’s always booked! It’s fine, though. They have a trusted cleaner who watches the property for them and can do quick turnovers (like when one guest checks out at 11am and the next one will be there at 3pm).
The property is technically “his,” but not really. He’s essentially operating as the family’s property manager. Many people around the world take this approach when they don’t have the means to buy their own Airbnb rentals. You can make some serious money by managing other people’s vacation rentals if you’re willing to hustle to find the right ones.
Regardless of your opinion on the politics of short-term rentals, they are here to stay. They represent one more way you can get on the path to financial independence with nothing other than your wits and your time. It’s pure HUSTLE. Go get some.