If you are considering an AirBnB Investment or you have a second home and you intend to make money with AirBnB you probably are asking yourself how much income your property can generate:
AirBnB has the answer for that. Here you can find an income calculator that will predict how much you can make with your property:
Base on my experience this calculator is fairly reliable for getting an idea and nothing more; if you are considering an AirBnB Investment or you want to find the proper way for starting an AirBnB Business you want to refine these numbers. Clearly the calculator has its limits as AirBnB must consider a generic property and does not have much room for readjusting the price based on the location. If all you wanted is to have an idea on how much income your property may generate I believe that this is all you need. However, if you are serious about an AirBnB investment and making money with AirBnB, I would recommend you to adjust what the calculator predicts using the following mini guide that is based on my personal experience.
Miniguide for an AirBnB Investment or Starting your AirBnB business
1 Start by answering the following questions:
- Is your property close to a train station or central bus station?
- Can your property be reached without car?
- Is your area considered a vacation place and/or a university place?
- Is your property in the city center?
2 Build a scorecard:
The more you answer “yes” the more your house will probably generate a good income for you. As a generic rule I would recommend to build a scorecard where you rate between -10 and +10 your answers, for example. If your house is in the city center of a small town that is mainly known for its industrial production of bottles for colas you may consider the following:
+3 (the train station in 15 min walking distance), +3 (yes, by train and not much more), -10 (no, the town is known for its factory and not much more), +8 (yes, it is fairly close to the city center)
The overall results of your scorecard is +4.
3 Adjust your predicted income
Now that you have result of your scorecard, goes to the AirBnB Income Calculator and input the information that best describe your property. You can then take that value and adjust it with the scorecard in percentage.
Using the example mentioned before and assuming that your basic income is 1000 USD per month your projected income will be 1000*1.04 = 1040 per month ( i.e +4%).
4 Do not forget to factor cleaning expenses
Note that AirBnB consider the cleaning fees as part of your income. This may or may not be your case. If you do not plan to clean the property by yourself you have to consider this aspect as well. In our example, assuming that we are considering a small independent apartment, you may want to factor 2-2.5h of work of a cleaner per booking and consequently reduce your projected income of that amount. Clearly this costs depends on how often your property will be booked and for how long your guests will be staying. I would encourage you to look at similar properties in your area and see what kind of booking they accepts.
- Are they allowing bookings for 1 or 2 days?
- Are they only allowing bookings for 1 week or more?
Answering these questions will give you an idea of how much you will be spending in cleaning and you can reduce your projected income accordingly.
for example if a cleaner costs 15 USD/h in our example you are going to spend approximately 50 USD per guest in cleaning. Assuming that you are going to have 1 guest per week and that you will be fully booked you will have to reduce your projected income of 50*4=200 USD per month. That will result in a total of 1040-200= 840 USD per month
5 What about utility bills?
Again, the income calculator will not consider this part of your business and you will have to reduce the projected income with your expenses. In doing so I encourage you to consider your “normal” utility expenses for the property and then double them. Guests will not put a lot of attention to the consumption and in general you will see these expenses grow. This is true for gas, electricity and heating. Not true for Internet and TV as probably they will be as a fix monthly fee.
In our example if your normal expenses for utilities be 125 USD/month and you will spend 50 USD/month for TV and Internet your projected income must be reduced of 125*2+50=300 USD/Month. That will result in a total of 840-300= 540 USD/Month
Note that this approach may overestimate the cost for utility. However, I personally prefer to consider the worst case scenario and been pleasantly surprised in the end.#airbnb #investment calculator: Miniguide for a better prediction of the #Rental of your #shortTermRental Click To Tweet
At this point I imagine that you will be considering the venture of starting an AirBnB business as a “real business” that will require dedication. Hopefully, you will also consider cleaning and welcoming your guests as an integral part of this business that you will have to factor in term of time and/or money. In short:
- Is making money with AirBnB possible? Yes, if the projected income satisfy your expectations.
- Is starting an AirBnB business a passive income? No, that will require attention unless you hire a property manager.
- In an AirBnB investment profitable? If you compare it with real estate, probably yes. However you have to factor the extra time that you are putting in.
If you are considering renting out your property using short term rent I would encourage your to use multiple websites. For example you could also consider listing your property in booking.com . In this way your AirBnB business will have multiple stream of possible income and should be more resilient to changes.