Some people use Airbnb for some extra side cash. After all, that’s how the founders started the company: they noticed hotels were overbooked and they had some extra air mattresses to host people.
They grew their air-mattress-in-the-living-room business to one that is now reportedly valued at $31 billion (some say it’s worth $38 billion). That’s an accomplishment that makes our dreams look like child’s play. Let's talk about scaling your Airbnb business to levels you also never thought possible.
If you’re on this page, it’s because you’re a short-term rental host who sees the potential in Airbnb and short-term rental arbitrage. It’s because you see that it’s more than just a way to use your room for extra cash.
If you’re on this page, it’s because you may already be convinced by the goldmine that is Airbnb and you want to learn how to become an Airbnb entrepreneur and grow your business. But the problem is you don’t own property. Today, you’re going to learn how to run a thriving short-term rental business without owning a single piece of property.
There are two ways to do this:
If you’re ready to take on more listings and treat your short-term rentals like a real business, you’re in the right place.
Below is my ultimate guide to scaling your Airbnb business like a pro without owning any property.
The first step to scaling your Airbnb business without owning any property is to understand what Airbnb arbitrage is. Rental arbitrage is the process of renting out property long-term and then re-renting it on short-term or vacation rental platforms like Airbnb, VRBO, or HomeAway. This is also called a leasing model and is a more expensive option for building an Airbnb business.
The revenue you make on this is wholly dependent on the difference between the long-term rental and short-term rental prices in your market.
Of course, when you set up your Airbnb arbitrage business, you need to get buy-in from your landlord. Some Airbnb entrepreneurs do this by paying a surcharge on their monthly rent or by giving the landlord a cut of the profits from the short-term rental business (which is called co-hosting or property management, as you’ll learn below).
Fewer and fewer people are able to buy homes in today’s economy. Across the US, not only are the prices for purchasing a home increasing, but the median wages are not meeting the level necessary to be able to purchase homes.
This excludes a lot of people from the short-term rental business if you take the traditional vacation rental route. Rental arbitrage opens a door to these potential entrepreneurs that otherwise would have been closed.
However, this model can be a bigger initial investment and harder to scale than the property management model, which you'll read more about below.
Read more about the pros and cons of rental arbitrage and how to best benefit.
Before scaling your Airbnb business, you need to start one!
To start, you can read my ultimate Airbnb host starter guide.
Know that this is a business just like any other, and you need to come at it with an entrepreneurial spirit and cover all your bases: pay close attention to customer service, finances, demand, marketing, cleanliness and your guests’ overall experience.
The first thing you need to do is figure out where the best places for rental arbitrage are. You need to make sure you’re investing in the right place. Some cities/areas perform better than others.
It’s pretty straightforward. If you come out with a negative number (where the long-term lease is higher than what you’d make with your short-term rental), then you’ll lose money. If it’s higher, you’ll make money. But make sure it’s enough considering the other expenses you’ll have as a host.
Let’s go back back to the co-hosting business model we talked about earlier. It’s not just about ‘hacking’ the strict regulations.
Between managing different listings, prospecting properties, maintaining the property, keeping your listing updated and responding to guests, scaling your Airbnb business can quickly become overwhelming.
Airbnb gives you the option to add a co-host to your listing. This means that:
As you can see, on top of making it easier to handle the regulations, it makes it easier to handle overall.
Some co-hosts do a 50-50 split, others do 30-70, it’s up to you to decide. But both of your accounts are connected to Airbnb and whenever the payment is made, it sends you each your share.
It’s completely up to both of you how you divide responsibilities and profit share. You’re allowed up to 3 co-hosts per listing, so you can really get a good team going.
When you’re added as a co-host on Airbnb, not only will you be directly paid your share, but you’ll be able to fully manage the listing (photos, descriptions, etc.) and chat with the guests directly.
Becoming a co-host or an Airbnb property manager can be a very rewarding and lucrative business. There are several things you can do as a co-host:
If you want to run this as a business, you probably want to take a course on how to become the best possible co-host. You can learn about the business, hospitality and mindset of running a six-figure Airbnb business in the STR Profit Academy.
One good step before you get going is to start a plan. How are you going to run and scale this business?
Figure out how you're going to choose the properties, which property management model you plan to use, and how you're going to fund this business.
This is also a good moment to choose your niche and develop your customer avatar. Just like any business, a short-term rental business will do better if you have a plan to follow.
Read my guide on how to create the best Airbnb business plan here.
Now that you’ve set up your property, it’s time to register your listing. You may or may not already be familiar with this, but there are a few things to pay attention to when you prepare your Airbnb listing:
Your ranking is influenced by over 100 factors. You won’t be able to cover them all.
You’ll do best if all your choices are guided by guest satisfaction. This will help increase your revenue and bookings.
Never forget that you work in hospitality and you should do everything to make your guests have the best possible experience at your listing.
In practical terms, you can improve your guests’ satisfaction by improving your response time, having a floor-lickingly-clean property, and providing them with comprehensive and local guides, among other things.
Continue providing excellent customer service and get positive Airbnb guest reviews, and your business will grow.
Scaling your Airbnb business means you need to focus on increasing revenue rather than just volume. I’d rather have 80% occupancy at $200/night than 100% occupancy at $100/night. You can use automated pricing tools to help you set the right prices.
After you start scaling your Airbnb business, your next question may be whether you should incorporate your rental property.
Please note, I’m not a lawyer and more importantly, I’m not your lawyer. But here’s my take on whether you should incorporate your Airbnb arbitrage business.
The benefits of incorporating your short-term rental business are:
This is only something to consider if you really plan to build a long-term business (which, if you're on this page, I think you are). If you're just playing around with one unit and doing it only for side income, it might not be necessary.
If you only run a sole proprietorship (what you're doing if you aren't incorporated) you have less paperwork and everything is a bit more direct. However, you are personally liable if anybody sues you for what happened in the Airbnb.
Note that getting an LLC or incorporating your Airbnb isn’t the same as getting a business license. LLCs and incorporates operate nation-wide, while a business license is for a specific region or state.
And if you’re wondering if you need to apply for an Airbnb license, the answer is maybe.
Some cities or counties require you to get a business license if you run any kind of business, including short-term rental properties. And some places will require you to get a short-term rental license.
It all depends on the regulations in your area — some places are much stricter than others.
Again, this is a point you should consult with your lawyer.
Read more in detail about whether you should incorporate your rental property.
Before anything, you need to find a profitable unit. Airbnb charges hosts a 3% fee. And remember that Airbnb’s concern is to maximize your bookings, not your profit. You can't scale your Airbnb business without some financial analyses.
Despite all of the regulations involved in short-term rentals and vacation rentals, the short answer is “yes”.
According to a Statista report, vacation rental revenue in the US is expected to grow by 6.4%, resulting in a market volume of over $19 billion by 2023. The main trick to finding a profitable unit when scaling your Airbnb business is choosing the right location.
Places like New York, San Fransisco, Santa Monica and Barcelona have very strict regulations and it may be harder to make a profit there. But other places like Key West, Virginia Beach, or Portsmouth have a lot of potential for profit.
Make sure that when you find a property, you are transparent and up-front to the landlord that your plan with this property is rental arbitrage. Do not try to hide this from your landlord.
If you’re deadset on getting an Airbnb in places with strict regulations, there may be some ways to get around them (without running an illegal operation). Rules and regulations differ on a city-by-city basis, and you need to be clear and aware of these to run your Airbnb business properly.
One way to get around the often strict regulations is to adopt the property management business model. This business model is a fantastic way to scale your Airbnb business more quickly. It entails finding individual property owners and offer to split the revenue with them. Homeowners can sometimes legally get short-term rental licenses, and all you have to do is jump in and manage the property.
This is usually a 70-30 gross revenue split. With this business model, you can usually hedge against regulations and scale your Airbnb business much easier.
We’ll talk more about this model below.
Scaling your Airbnb business sometimes sounds scary. People hear a lot of horror storiees: they’ve read news stories of squatters refusing to leave the Airbnb rental, or they fear their guests will throw a party of a size Keith Richards could only dream of, or that people will steal their belongings. The list goes on.
I’d like to give your doubts the heave-ho by telling you that, although they are completely understandable, they are also highly unlikely. Nothing in life is 100% safe. But there are actions you can take to reduce that risk as far as possible.
Let’s talk keeping your short-term rental property safe and screening guests.
The first step is to make sure you’re vetting your guests. You can check whether this person has positive reviews on their page, if their profile has been verified, or whether they’ve described themselves a little in their About Me section.
If you are on the fence about your potential guest, you can always ask a few questions before accepting the booking.
Things that I like to ask are:
– What is the purpose of the visit?
– Who else will be staying at my place? (I usually host groups of four or five)
– Is the visit part of a larger trip?
Another thing you can do is add a smart lock to the door and give them temporary access to it during their stay. That way, after their stay, they won’t be able to get back inside of the property.
You can also use tools like NoiseAware to monitor noise levels in your apartment. That way you’ll know whether they’re having a party or if the noise levels get too loud, and you can try to stop it in advance before a neighbor complains.
The next thing you’re likely asking yourself is whether you need extra insurance for Airbnb. The property owner’s landlord or homeowner’s insurance policy does not cover the property for business use. Scaling your Airbnb business means more risk and you may want to consider protecting yourself.
Airbnb does have Host Protection Insurance, which is different from the Host Guarantee. The Host Guarantee policy protects hosts against damage done to their property by guests, but not against liability claims.
Taken straight from the Airbnb website:
“The Host Protection Insurance (HPI) program now provides primary coverage for Airbnb hosts and landlords, as additional insureds, in over 15 countries. Our program protects against liability claims up to $1 million USD that occur in a listing, or on an Airbnb property, during a stay.”
You're not covered if:
Not to mention the Host Protection Insurance only covers you in up to $1 million in damages. That may seem like a lot, but damages can quickly add up. It’s up to you whether to get extra liability insurance, but it may be a good idea for hosts who want all their bases covered.
Read a detailed explanation about choosing Airbnb liability insurance.
The downside to the short-term and vacation rental business is that vacations are seasonal. But if you’re the business person I think you are, you’ll set up strategies to help boost off-season bookings and off-season occupancy rates.
You may be wondering what to do with your vacation rental in the offseason. Well, the answer is simple: keep renting it! There are still plenty of opportunities for business.
Hopefully, you’ll be using a pricing tool like Beyond Pricing or Wheelhouse by now (read my guide to Airbnb pricing tools) to make sure you’re getting exactly the right price for the seasons and demand.
Some strategies you can implement to survive the Airbnb slow season are the following:
You can continue scaling your Airbnb business even in the slow season. You can also make up for it by taking all the opportunities to grow your Airbnb revenue.
Airbnb can scale, and it can scale well if you do it right.
If you have money to invest at the beginning, you can make a lot of profit with the leasing model or rental arbitrage.
If you want to start already and don't have a penny to invest, you can try to the Airbnb property management or co-hosting model, which can scale very quickly. Basically, taking this business idea on like a real entrepreneurial venture, you have to keep in mind the 6 following things:
Read more about how to build a six-figure Airbnb business the right way.
Now your business is moving forward confidently, you can think about ways to maximize your short-term rental profit. Scaling your Airbnb business doesn't only mean getting more properties and more occupancy. It also means adding more services.
One awesome way to do that is to sell the local experience rather than just a place to sleep. After all, that’s what Airbnb is all about: their brand is built around people being able to “Belong Anywhere”.
You can create a personalized, in-depth guidebook with tools like Hostfully and show them that you’re a local, knowledgeable host that cares about their experience.
Publish your listing on multiple channels like VRBO, Tripadvisor, HomeAway and more to promote your listing. You can keep these all under one synched calendar using automated property management software like Smartbnb, iGMS, Your Porter, Hostfully or Lodgify.
Furthermore, you can also make your own website to promote your listing. Airbnb is a fantastic channel to use to acquire bookings, though it doesn’t have to be the be-all and end-all of your business.
You can use tools like Lodgify to create your own vacation rental website and use SEO and other marketing techniques to get bookings directly through there.
Automating your Airbnb business is a great way not only to increase revenue but also to give you tons of time back. And with all that time, you can start working more on your business instead of in your business
You can automate things like cleaning services, guest communication, check-in, property management and more. And most of it through non-expensive software!
This should be enough to get you started on scaling your Airbnb business without owning any property. If you want an extra boost sign up for Eric’s free webinar on co-hosting mastery by clicking the button below.