Airbnb has made a name for itself by connecting travelers to homeowners in a mutually beneficial system that helps users find inexpensive accommodations, while making some extra income for homeowners. In theory, it’s a great idea—your home is one of the biggest investments you’ll make in life, so who wouldn’t be interested in making a few hundred to a few thousand extra dollars every month?
However, renting your home (or a room of your home) on Airbnb may not be as straightforward as you think.
What to Know Before Renting
Renting your home on Airbnb is neither inherently good nor inherently bad. Instead of trying to figure out whether it’s right or wrong, focus on arming yourself with the most accurate information possible before making a decision.
Here’s what you need to know:
1. There’s a reason Airbnb is so popular.
If Airbnb didn’t work, it wouldn’t be as successful as it is. This is a company with a $25 billion valuation (as of 2016), and it’s built its reputation by encouraging both travelers and hosts to engage in its social media community. This social media campaign has made it a breakout marketing success, according to digital marketing company Single Grain, and has also given the brand greater transparency, so prospective hosts can see what they’re getting into before pulling the trigger. Take a look at the types of posts both hosts and travelers leave—you’ll see lots of good reviews, which are a big part of why the app continues to be a success.
2. Local laws vary.
The laws in your state and city will vary. While some hosts can get set up on Airbnb without any necessary changes, there are restrictions on how accommodations can be provided in different areas of the country. For example, in some areas, depending on the circumstances, it’s illegal to rent your apartment to travelers. In others, it may be necessary to obtain licensure as a bed and breakfast if you want to use the platform.
3. Not all tenants will offer positive experiences.
Airbnb offers a mutual review system that keeps both hosts and travelers in check, but unfortunately, past reviews are no guarantee of behavior. In some areas, if a tenant rents a property for more than 30 days, they have the same rights as month-to-month tenants, and if they refuse to leave, you’ll need to go through a formal eviction process to force them. If tenants damage your property, Airbnb may be able to reimburse you, but they may still cause a disruption, or demand a refund if your experience doesn’t meet their expectations.
4. Your income is taxable.
It may seem like Airbnb is an easy way to create a new stream of revenue, but the reality is you won’t be seeing 100 percent of that revenue—anything you make by renting your property is categorized as taxable income. Nobody will be withholding those taxes, so it’s your responsibility to set enough money aside to pay estimated taxes throughout the year. The amount of taxes you owe will vary greatly depending on a number of variables, so do your research before listing your property.
5. Remember the ongoing expenses.
It may seem like renting a room won’t cost you anything—especially if you already own the house—but there are some ongoing expenses you’ll need to keep in mind. Airbnb will take 3 percent of whatever you charge, and you’ll need to pay for things like cleaning supplies, toilet paper, any amenities you want to offer your guests, and of course, higher utility bills once you actually have people staying over.
6. Rental is always a time investment.
Even if you don’t consider yourself a landlord while renting out part of your home on Airbnb, you’ll have many of the same responsibilities as one. Renting property will always be an investment of time, from screening potential candidates to maintaining the property you’re attempting to rent. You’ll need to be prepared to invest some serious time in managing your rental, and if you already have a full-time job, that may not be possible.
The Bottom Line
Renting your home on Airbnb is, as you would expect, a mixed bag, but as long as you’re prepared for the experience, it can be a profitable endeavor. Be sure to do your research thoroughly before listing your property, and remember that your experience probably won’t be perfect. With these things in mind, you’ll be equipped to make the best decision possible for you and your property.