Dreaming of turning your property into a profitable venture? Launching an Airbnb business might be your golden ticket. With initial investments ranging from as little as $500 for sprucing up a spare room to hundreds of thousands for purchasing prime real estate, this venture offers flexibility. Essential skills for success include property management, a knack for customer service, and a grasp of local tourism.

On the financial side, earnings can range from around $10,000 to $100,000+ annually, depending on your property and its occupancy rates. However, patience is a virtue in this business. Expect a break-even period of anywhere from six months to several years. Discover the nuances of the Airbnb world and how to build a thriving business in it.

Considerations Before Starting an Airbnb Business

Initial InvestmentRanges from the cost of a spare room setup ($500) to purchasing a property ($100,000+).
Skills RequiredProperty management, customer service, basic maintenance, marketing, and local tourism knowledge.
DemandDepends on location and season. Urban and tourist areas see higher demand.
LocationProperties in tourist spots, city centers, or near major attractions and events are preferred.
HoursVaries. Can be 24/7 if managing and responding to guest needs frequently.
Permits and LicensesDepending on location: business license, special permits, and adherence to local rental laws.
Annual ProfitsCan range widely from $10,000 to $100,000+ annually, depending on property and occupancy rates.
ChallengesManaging guest expectations, property maintenance, dealing with potential damages, adapting to changing local regulations, and ensuring constant occupancy.

Why start an Airbnb business?

Starting an Airbnb business allows you to set the price you want for your property for nightly rates and extended stays. It can be a great source of extra income if you already have a full-time career. 

The website allows you to list for free, although there are some fees when it actually comes time to rent. Remember, though, that the potential for securing many clients throughout the year can make these fees worth it. And with positive reviews, you’ll become a trusted Airbnb owner, growing your business further. 

Another reason to start an Airbnb business is that guests are always on the lookout for a more relaxing and comfortable home-like location. And perhaps best of all, the website offers protection that can cover up to $1 million in damages to your property.

How to Start an Airbnb Business Checklist

If you’ve decided to take that leap and open an Airbnb business, here are 10 helpful steps. 

Step 1: Plan your Airbnb business

You’ll have to create a business plan first. No matter if your business will be a solo venture or you’ll run it with others, you’ll have to decide on the business structure. An LLC is a good choice for an Airbnb business because it provides personal asset protection and limits owners’ liability.

Beyond that, you should also consider the following questions:

  • Who will be the host? 
  • Who is in charge of the overall business?
  • Who will handle complaints? 

These will all be handled by you if you plan to run things alone. If you have a team, you’ll need to sit down and discuss the merits of each role and how much work each position will require.

Additional Questions to Consider Before Opening an Airbnb

A few other questions to think about include:

  • What should your nightly price be?
  • What house rules should you enforce?
  • Should you offer a single room, a loft, an apartment, or larger property? 
  • What luxuries should you offer to make renters’ experiences better?
  • How can you structure your listing to attract potential guests? 
  • What will your recurring costs be for cleaning, furniture, etc.? 

Step 2: Decide your budget

If you decide to purchase a property for your Airbnb business, then consider the costs, insurance, taxes, utilities, and mortgage (if applicable). In addition to calculating rental costs, you’ll want to consider other expenses that come with renting, such as linen and towel costs and outfitting the property. If you decide to offer meals, then a grocery budget will also need to be considered. 

Step 3: Choose your rental market

Before you start an Airbnb business, one of the most important things to consider is who your rental market will be. It’s best to make this decision based on your location. If your property is near popular attractions, then people looking for a vacation rental will probably be your primary client base. If the property is near a corporate hub, then business travelers will be popular clients.

Step 4: Name your Airbnb business

All business owners should create a catchy and memorable name for their company. There’s no harm in doing some research to see what other similar businesses are calling themselves to get some ideas. It’s a good idea to name yours based on your location or the type of renters you’re looking for.

Adding your own name to the title gives it a personal touch as well. Something like “Samantha’s Hosting Company” or “David’s Beach Getaway” can work. That said, if you’re solely hosting on Airbnb and not seeking bookings elsewhere, your business name won’t matter as much because the Airbnb platform and brand is so well-known and powerful.

Businesses come in different forms and structures, and deciding what yours will be will take time and consideration. Many Airbnb hosts choose the limited liability company (LLC) structure since it offers various protections for personal property. If you’re a real estate investor that happens to own many Airbnb rentals, then you can put all of your properties under a single LLC entity. Our LLC service, which starts at $0, plus your state’s required fee.

Step 6: Register your Airbnb business for taxes

Like with any business, you’ll have to pay taxes for your Airbnb business. Property taxes are a given, as is the case for everyone that owns real estate properties. You’ll also be subject to sales taxes and even a local occupancy tax. The latter is often known as a hotel tax. Get in touch with an accountant for help with this. 

Step 7: Get all necessary permits and licenses for your Airbnb business

You’ll need to make sure that your business has all the necessary permits and licenses. Since you’re running a rental business, you’ll need a specific business license. This might be called a Lodgers Tax License or a Transient Occupancy Tax (TOT) certificate.

You’ll have to register your Airbnb business with your local county agency that collects hotel taxes. One thing to know is that Airbnb businesses cannot operate in areas where local zoning laws prohibit them from using properties for short-term rentals. 

Step 8: Open a business bank account

Having a business bank account is important since it makes tracking your business expenses easier and streamlines your tax work. It also helps you maintain your LLC’s limited-liability protections and safeguard your personal property. If your Airbnb rental generates over $20,000 a year or if you conduct over 200 transactions through the business, then Airbnb will send you a 1099-K form. 

When the time comes to do your taxes, you can deduct certain expenses like fees charged by Airbnb. These include reservation fees, which can be up to 20%, depending on your property’s nightly rental cost. The bottom line is that having a business bank account instead of a personal one makes your business taxes easier to complete and helps you comply with business laws.

Step 9: Buy a property if needed

An Airbnb business doesn’t always require you to purchase a property. You can use your own home, but if you decide to avoid this, then you’ll have to do some homework and research. You can start off by checking out some Airbnbs in your area.

This will give you an idea of the size and amenities they offer. You can also see what feedback customers are leaving. Are they saying it was spacious, cramped, old, needed remodeling, etc.? Take all of these into account when choosing a property for your Airbnb business. You’ll definitely want to make sure that it’s near local attractions and hotspots, too. 

Step 10: Set your Airbnb house rules

As the host and property owner, you can set any rules you’d like. Just be sure that they’re fair and agreeable. You can also decide if pets will be allowed, how many guests can stay per unit, and list check-in and check-out times. It’s also a good idea to set a rule for quiet periods so guests don’t disturb others during the evening and early morning. 

How Airbnb Hosting Works

Airbnb is a customer-service-centric business model. In order to stay in business and attract future guests, you’ll have to run your operations like a hospitality business. Guests will check in, allowing you to meet or message with them and get a feel for how to keep them happy with their stay. Payments for your rentals will be made through Airbnb.  

Positive feedback is an important incentive to keep guests happy, so be quick to respond to their needs and questions. Keeping your property spotless is also important, as is following COVID-19 protocols. These are musts to do business with Airbnb. 

Ready to Build Your Airbnb Business?

Once you learn how to start an Airbnb rental business, you can add a steady stream of income every month. You just need to learn how Airbnb hosting works and plan ahead. Just like starting other business types, if you want to get an Airbnb started, you begin with a detailed business plan. Then follow the rest of our steps to dive into the world of short-term rentals.

Now you know the steps to start your Airbnb. We can help with our fast, easy formation services. We will handle formation for you for free (just pay your state’s fee), so you can get prepared to run your business. Then, once your business is up and running, we offer worry-free compliance and other services to help your business grow. 

Starting an Airbnb Business FAQs

  • Yes. You can use a rented property as an Airbnb, as long as you have permission from the homeowner. You can even rent out a spare room in your own home, whether you own or rent.

  • The Airbnb website has a list of requirements for being a great host. These include being responsive, accepting trip requests, avoiding canceling guest reservations unless absolutely necessary, and doing everything you can to ensure a high-level rating.

    • Be honest and detailed in your listing.
    • Be fair with your pricing.
    • Always put the customer first, even when they’re difficult.
    • Have a quick response rate.
    • Have a plan B for the unexpected, like cancellations. Be open with the customer and try to make things right.
    • Always leave reviews for guests, even if they’re negative.
    • Keep track of all your expenses.
  • Airbnb hosting works and can be a profitable hospitality business since there will always be a market for people searching for comfortable lodging.

  • This depends on different variables, like whether you plan to purchase a property to rent out. If you plan to use your own property, then you may need to do some renovating or remodeling to give the rented room(s) more privacy or to add a new bathroom, for example.

    You’ll also need to consider amenities and cleaning costs. But if you already own the property, you may be able to start an Airbnb business with little additional money.

  • Overall, the final amount you make will depend on your profits from bookings minus the costs to run the business, like maintenance and cleaning. Airbnb also charges a percentage to use their service. This is where a business plan and accounting software will come in to let you know what your profit margin is.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.