Airbnb has become one of the most popular forms of accommodation for people going on vacation or taking a business trip. Many people have started running their own Airbnb businesses either as a supplementary income or even as their main job. If you get it right, there is a lot of money to be made from renting out Airbnb properties. However, with so much competition, it is vital that you understand every element of the business in order to be successful.
To help everyone who is considering moving into the Airbnb industry, here are the important things to consider before you start an Airbnb business.
1. A Detailed Business Plan
Starting an Airbnb business is no different from any other kind of venture and it is really important that you prepare a detailed business plan. There are various factors which you need to consider, but luckily there’s a ZenBusiness guide on starting an Airbnb side hustle that can help you to create a strategy to reach your business goals. Your business plan will help you to pitch your ideas to potential investors or to secure a business loan or other kind of funding which will be explained in further detail in this article.
2. The Best Business Structure
When starting any kind of business, you will need to decide what is the best business structure for your new company. As the owner and operator of an Airbnb business, you will need to register your company in whatever country or state you are operating in so that you have all the necessary licenses. Choosing the right business structure will enable you to get your business up and running smoothly and will offer you the right personal and financial protection.
Here are some business structures available to you as a new Airbnb business:
An ‘S’ Corporation
This is a formal business structure with unlimited, multiple shareholders in ownership. All business profits and losses are declared on the personal tax returns of individual shareholders personal tax returns so there is no corporate tax payable by the company.
A Limited Liability Company (LLC)
A very popular business structure, particularly for small businesses and startups. An LLC will provide many benefits which are very useful for an Airbnb business such as operational flexibility and no personal liability for business debts or losses.
A ‘C’ Corporation
C Corporations are very similar to S Corporations except that the more shareholders you have, the more tax your business itself will pay.
A Sole Proprietorship
This business structure provides the most freedom and flexibility in terms of operation for you as an owner but does have added personal liability risk. If you don’t register your Airbnb as a different business structure it will by default be a sole proprietorship.
3. Property Types
Airbnb started out as a way for people to rent out spare rooms in their homes both for people on a trip and longer term rentals and then expanded into the tourism industry. These days, there are long-term Airbnb’s, luxury Airbnb’s and many other kinds of property. You will need to look at the properties available and do some research into where the demand is. Vacation rentals can be extremely profitable but also tend to be one of the most highly saturated markets. Some people rent out properties which they own while others rent them long-term themselves and then sub-lease them. Make sure that you check with the owner of the property if this is the way you want to run your business.
4. Finances
When you have combined personal and business finances, you put yourself and your assets at personal risk if the business fails or there is some kind of legal issue. One way to mitigate this risk, as detailed above, is to register your Airbnb business as an LLC. However, this is not the only really why separating your business and personal finances is always advisable. The distinction between the two will help you to make clearer, more considered decisions as you will be more easily able to see exactly where your business finances are. Open up a business account and get a business credit card for purchases related to your Airbnb business and you will be able to get some tax breaks on those purchases.
5. Landlord Responsibilities
Running an Airbnb company is about far more than just getting some properties and listing them on the website. Airbnb is all about customer service, and as the landlord, it is your responsibility to make sure you deliver in every way. You have to look after your guests at every stage of the booking, their arrival, their stay, and their departure. If you don’t, they will give you bad reviews and it will put your business in jeopardy straight away.
Running a successful Airbnb business can be a great way to make money but it takes a lot of hard work and effort. Keep things in mind when starting your business and you will be on the way to success.
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