How To Make A Profit From Your Airbnb Listing
Guest post by Leigh Stewart, Editor of Tranio.com
The San Francisco property start-up, Airbnb, dropped a major bomb on the holiday rentals market when it launched in 2008 and continues to rock the boat 8 years on. By allowing individuals to rent out their extra space, it created a novel and accessible way for the average homeowner to turn their property into a source of income rather than expenditure. Despite emerging new rules to tackle landlords who abuse the legal grey zone around Airbnb, the average homeowner can still legally use this service to increase household revenue, cover mortgage repayments and council tax.
Here are the four essential tips to maximise your revenue via Airbnb by Leigh Stewart, editor for overseas property broker Tranio.com.
How to make your listing unique
Uniqueness is the backlash of bland socialism and a relic of the last century. Globalisation and the Internet have synonymously struck two resounding chords. On the one hand, all this information has broadened our horizons, our aesthetics and our sense of self; but on the other hand, the consistent onslaught of selfies, friends’ travel blogs and useless news has compounded the understanding that we are just a drop in a massive flood of very identical human beings.
This is why UNIQUE is one of the key branding points for any Airbnb listing. While it doesn’t mean designer, it definitely means contemporary. Attractive listings are minimalist yet thoughtful with a touch of artistry. White walls, a simple bedframe, a fresh sheet set of one block colour, a clothes rack and some simple prints or pictures will do the trick. If you are completely lost by the last sentence, just pick up an Ikea catalogue (the best Airbnb listings all look like an Ikea showroom).
We have suffered too long under the insipid hegemony of mediocre hotel accommodation and this is precisely why Airbnb is making a killing. Location is important, but a nice interior, coupled with some complimentary shampoo and a spotless home will do wonders for future and returning clientele.
Laws, government tax schemes and expenses
London is the first British city to officially jump into bed with Airbnb, though it makes sense considering the current house price crisis. But still, it is greatly appreciated that the local authorities and Chancellor of the Exchequer have embraced the new collaborative economy as a means for the majority of us to cover all those expenses that salary growth fails to.
In real terms, this means that you need to register your Airbnb listing with the “rent a room” scheme by the HMRC as soon as you exceed £7,500 in gross earnings. By doing so, you achieve two things. First, you become an “official” service provider in the eyes of the law and tax authorities. Secondly, it allows you to earn up to £7,500 tax-free whilst deducting expenditures like mortgage repayments, council tax, utility bills and other fees that you may have, such as cleaning.
You are legally authorised to host guests for 90 days out of each year, but if you exceed this threshold, you are bound by law to apply for planning permission from local authorities. Now consider this: in London the average nightly Airbnb rate is £96, meaning that if you rent your space for 90 days, you will earn £8,640 in gross revenue (before expenses), or an extra £720 per month.
Choosing the right rental rate
Choosing the right rate is essential if you want to capture the maximum clientele and keep your occupancy levels up. Set the nightly rate too high for the wrong location or property and you will only attract last minute guests who had no other choice. Set the rates too low and you will be full, but you will earn less money. Deciding the correct rate is intimidating but luckily there are plenty of tools to help you make the right choice – and if all else fails, you can always review and readjust later on.
Start off by building a profile of your property with the following elements: location, size, type (shared, room or entire home/apt), amenities (Wi-Fi, TV, kitchen, heating, etc.) and distance to public transport; then log on to Airbnb as a user and search for similar property in your location. This will show you what’s on offer, how much people charge and how busy the listing is (in the calendar section, just remember that owners can block off dates so it’s just a reference, not a reliable indicator). Other things to look out for are the ratings, reviews and pictures, which are excellent benchmarks for what people want and expect.
This DIY evaluation is the most effective for cities other than London. If you live in the capital, you can actually consult data by borough on the average revenue per month, average annual occupancy, listings by type (entire home vs. rooms) as well as reviews and top hosts on Inside Airbnb.
A photo worth a thousand pounds
Humanity has become obsessed with visual stimulation and in this sense, Airbnb is no different to Tinder: ugly photos don’t get a second glance – unless you’re desperate. For this reason alone, it is imperative to have respect for the art of photography and a healthy level of self-awareness when it comes to your skills behind the lens.
It starts with two things: a proper camera that takes hi-res photos and good natural light. An IPhone just won’t cut it here, nor will a flash. Taking a good photo is a combination of honesty (it must faithfully represent your listing) and enhancement. The latter does not mean Photoshop, it means shifting curtains that inhibit natural light and moving the awkward piece of furniture that’s blocking your angle – because getting a good photo of a small room is difficult.
In order to attract potential clients, the listing must come with a complete collection of photos for each room as well as the external façade of the building. Don’t forget to organise things correctly: put photos together room-by-room so they tell a coherent story. The value of this work is quantifiable: academic research studying online real estate sales shows that listings with less than 10 photos took longer to find a buyer and sold at a discount on the asking price.
Getting great reviews and returning customers is both art and science. Success is in the simple things like treating guests properly, understanding you are taking people’s money in exchange for a service and appreciating their custom. Airbnb is not rocket science but the reality is that many hosts will never be excellent. It takes little more than common sense, people skills and a coat of paint to make money off your listing but the extra effort will exponentially increase your revenue and keep you on the right side of tax authorities.
Leigh Stewart – Tranio.com
The Property Voice Insight from Richard Brown
What a good, feature-rich guest post from Leigh Stewart of Tranio here, I particularly like the reference to the planning law issue, which I suspect most people would be unaware of.
The top tips appear to be: differentiation, presentation, social proof (recommendations), correct pricing & customer service. This is also interesting as many of these considerations are closely aligned with running any business operation and that's often where some Airbnb hosts can fall down as well.
Many Airbnb hosts are homeowners, renting a space in their home, or their entire home for brief spells only and this article addresses this sector of the short-term lettings 'sharing economy' very well. However, there is a growing presence of professional operators that are now using Airbnb as a channel to market for a more dedicated short-stay service offering.
These more professional operators will often not live at the properties they are promoting and will use hired hands to help them with their cleaning and laundry and may have designer furniture packs to dress the property to suit their target market. They may promote their listing across different platforms, such as Booking.com or TripAdviser, along with Airbnb, perhaps using a channel manager software solution like Kigo or Tokeet.
This opens the market of short-term accommodation to specialised property investors, who will then compete with (often budget) homeowners at one end of the scale and larger B&Bs, guest houses and hotels at the other end. In this regard, more needs to be done to make the offering as slick and professional as possible. There will be less forgiveness for leaving a dirty plate lying around, slow communication, bad service or poor value for money for sure.
There is a whole market segment that is fast emerging and as I predicted on a recent podcast and also in December 2014. This segment is being propelled by the disruptive entrants to the market, such as Airbnb. The early adopters among us could do very well from positioning themselves at the forefront of this next wave. However, as with Uber and other disruptive players, expect a bit of a bumpy ride along the way too! Local markets will react differently to this new trend, some may seek to protect a potential threat to the traditional hotel and leisure industry, whilst others may seek to limit the number of homes being used for non-permanent residential accomodation.
Smart property investors would do well to appraise themselves of this emerging market opportunity, be professional in their approach and highly adaptable to a rapidly changing landscape as well. I should now...I am one of them!