Since the pandemic, demand for Airbnbs has surged. According to AirDNA, the average occupancy rate for short-term rentals in the U.S. has increased by 10% since 2019 and short-term rentals have earned an average of 39% more annually as compared to before the pandemic. With such encouraging numbers, you may be considering converting your own vacation home into an Airbnb.
Analyze the Local Market
Although Airbnbs can produce substantial passive income, not all markets are ideal. If your vacation home is in an area that has strict short-term rental regulations, it might not be worth the effort of converting it into an Airbnb, said Avery Carl, a real estate agent, owner of nine short-term rentals and founder of the Short Term Shop.
Instead, she recommends Airbnb-friendly markets that are more resistant to recessions.
“It should be in a regional drivable vacation market, not an expensive flying vacation market like Aspen,” she said. “If you’re in the south, consider the Smokies in Tennessee, or if you’re in California, maybe it’s Big Bear.”
According to AirDNA’s 2021 market report, small cities or rural locations provide the highest average annual revenue for short-term rental owners, followed by mountainous or lake-side destinations.
Set Up Your Financial Systems
Carl recommends setting up separate bank accounts before launching your vacation home on Airbnb. This will make paying and filing taxes easier in the long run.
“You don’t want your short-term rental income going into the same bank account as your W-2 income,” she said. “Have separate bank accounts and separate debit cards so you can keep track of your expenses.”
Don’t forget lodging taxes and renter’s insurance, said Chris Cook, senior director of property acquisition at Evolve: “Once you confirm that you have the required permits to operate a short-term rental in that area, you want to make sure you’re charging the appropriate amount of tax and have a plan to accurately remit those taxes.”
Provide a Great Experience To Get 5-Star Reviews
As demand grows, Airbnb owners can charge higher rates. But with higher rates come higher expectations, which means owners must work even harder to achieve those crucial five-star reviews.
Contact Square House Property Management
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