Airbnb can be pretty polarizing. On the one hand, people love intimate settings; on the other, they don’t offer as many amenities as hotels and are starting to cost just as much. Whether you are team Airbnb or team hotel, there is passive income to make, so let’s learn something.
Airbnb can be an excellent source of income, especially if you take the time to automate your business. If you don’t know what Airbnb is, here is the quick rundown. A host offers his or her house or room up for daily rental.
Everything is done on the website or phone app. It is very streamlined. I used Airbnb when I traveled to New York. We had many guests traveling, so we got a decent-sized brownstone in Brooklyn.
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All in all, it was a great experience, and I ended up returning to the same Airbnb a couple of years later. Now, let’s get to the good part—how can we make money?
The title says to run a passive Airbnb business. I said earlier that you could automate most of the tasks for running an Airbnb rental, but I want to remove myself entirely from the equation of making money.
How would I remove myself altogether? I would have someone (a residential manager) run an Airbnb out of my house, and I take a portion of the profits. In my opinion, this is a perfect business for a son or daughter or someone you are very close with—and trust.
How would a business like this look? I see two options for running an Airbnb like this—a full home rental or room rentals. Let’s take a look at each individually.
A complete home rental. A whole-home rental can work anywhere, but I believe it works best outside of a suburban neighborhood. Yes, I know that you can screen guests before they rent, but I do not want to deal with angry neighbors.
You also will want to be in a prime location near some kind of attraction, beach, or venue. Or you can have a secluded hideaway somewhere. Remember, the further you are away, the further your residential manager will have to drive to get there.
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Cleaning is also another point of contention. If you rent an entire home, you will have to clean (or have cleaned) the entire house. If you have a high daily turnover, it will be a full-time job to clean the entire house, the bathrooms, the kitchen, etc., in 4-5 hours before a new check-in. You may have to institute a minimum stay of 3+ days just to save on the workload.
Room rentals. Depending on the composition of your home, this can also be a viable option. If you have external doors to your master suites, that will lead to a perfect setup for an Airbnb room rental. Other great ideas are a finished basement, attic, or detached mother-in-law suite.
Another excellent idea would be to finish your basement or build an in-law suite and have the residential manager reside there. That way, they are in a prime position to control the home.
Room rentals also will leave you with more options as well. If you have space on your land, you can add a mobile home, an RV, or a tiny house that you can use for the Airbnb program as well.
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Cleaning the spaces will also be easier because the guest will be confined to a smaller, more manageable area. I would prefer the room rental idea over the whole home rental. You may feel differently.
Time for math. Sorry, but we can’t do our prep work for a business without doing some math. For this section, we will have to make some assumptions. In the Marine Corps planning phase, we make assumptions to continue the planning process; this way, we don’t stall the process.
For my Airbnb theory, I will use our home in western Florida. It is 2,500 sq ft and sits on three acres of land. It has two huge master suites, a pond, and a creek. It is not in a suburban neighborhood, so noise and vehicles won’t be an issue.
After our refinance, we now pay $1,500/month (which is a steal). Let’s add in our utilities, and the total will be $2,000 that we need to make before we profit. I will have my sons running the business for me.
My portion of the profits. The first thing I will want to decide is how much I want to take from the profits. Since they are my sons, I don’t want to be too greedy. Once they clear $2,000, I will take $500/month. And that is literally how accessible the business is from my end. I have real estate, so I am in charge. Remember, in Investing Insider vs. Outsider, I talked about how the insider can dictate terms—this is a perfect example.
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Can they profit? Now the question for them is if they can profit after they pay the $2,500/month. I believe that they could. With the two master suites renting for an average of $80/night each and assuming 25% vacancy, that would be $3,600. Remember, I am making assumptions.
Airbnb will take their cut; however, if my sons decide to clean the rooms themselves, they would receive payment for that. Also remember, that they could live in the house for free. After they pay the $2,500, they will have $1,100 a month to split. That is not bad at all.
Increase their profits. Now, let’s increase those profits. Even though I already have my cut, I will still assist them in growing profits. Why? The more they make, the more I take. What are some things that they can do to make even more money from the rental?
Add another residence. The kids can add another tiny home, mobile home, or RV to bring in more cash flow.
Offer car rentals. Wouldn’t it be nice to go somewhere, have someone pick you up, and then lend you the car for your entire stay? Yes! I wrote an article about starting a car rental business. Why not do this in conjunction with the Airbnb business? Makes business sense.
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Offer sports or water equipment rentals. Along those same lines, wouldn’t it be cool to have sports and water equipment, like kayaks and snorkels, at the ready? The boys could have a shed and store all of these things away.
Open a souvenir shop. Don’t you hate having to buy souvenirs at the airport because you forgot during your trip? The kids can open a small shop with some t-shirts and cups. Nothing too fancy, but it can turn a huge profit.
Luggage storage. People want to arrive early but can’t necessarily check-in. Offer to hold their storage for $5-10. Easy money.
Early check-in, late check-out. The boys should know their schedules to a tee. If there is room for early check-ins and late check-outs, they can turn a quick profit on an unoccupied space.
As you can see, there’s much money to be made in the Airbnb rental world. I read a book just for this reason. The book was written in the 1980s, and it’s about bed and breakfast inns, but the hospitality they offer helps me come up with some of these ideas. The name of the book is “How to Start and Run a Bed & Breakfast Inn.”
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Is Airbnb a viable passive income idea? Absolutely. Remember, you will need to understand a business before you start a business. If you just turn it over to your residential manager, it’ll be all messed up. You will need to get it off the ground, work together with the manager, and then step away.
Where do we start in our entrepreneurial pursuits? First, take your Airbnb ideas and find the proper real estate to run it. As I said, a suburban neighborhood may not be the best location. My Creative Financing in Real Estate 101 series covers how to get financing for your new home. You will want to plug in real numbers before you even attempt to buy a home. Or you can try by renting a room or finishing a basement.
Next, I recommend my business articles “Retire Rich, Retire Comfortable with a Business (book)” and “Read these 10 Books before You Start a Business (book).”
All in all, a good passive income idea. If you already have real estate, you are in a good position. If you do not, you may want to start by becoming a residential manager. If you can bring strong ideas to the table, the property owner may listen to you. Please, build up your business and entrepreneurial knowledge before you pitch an idea. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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