This post originally appeared on Cheapism.
If you have a room or second house to spare, you're sitting on a potential gold mine. So you should just post a rental notice and watch the money flow in, right? It's not quite that easy, but many people are earning extra income by listing their space on peer-to-peer rental marketplaces. Some even stay at a friend's house several nights a month while their home is rented out. Cheapism.com spoke with several hosts about the time and costs involved as well as the ups and downs of the experience.
- Rental Marketplace Options
- Understand the Laws
- Pay Your Taxes
- Getting Started
- List Your Place on Multiple Platforms
- Cover Your Vacation Costs
- Consider the Ongoing Expenses
- Factor in the Time
- Be a Respectful Host
- Earn More With Short-term Rentals
- Set an Appropriate Price
- Raise Your Price Through Added Value
- Note the Reviews
- Screen Guests
- Hire a Property Manager
Airbnb is one of the largest and most popular online peer-to-peer marketplaces in the United States, but it's not the only one to consider. HomeAway, FlipKey, and VRBO are three other popular listing services, and there are others in the international market, as well. Some sites specialize in particular groups of people; Misterbnb, for example, focuses on gay-friendly accommodations.
The websites that let you list your home may not indicate whether you're complying with local laws. It's your responsibility to know the regulations and proceed accordingly. Notably, hosts in New York City have been fined thousands of dollars for renting their apartments through peer-to-peer services. In some cases it may be worth going the formal route. That's what Dustin and Laura Floyd did when authorities in Deadwood, South Dakota said they needed to be licensed as a bed and breakfast. They now must prepare a hot breakfast for guests and keep the place clean while holding fulltime jobs, but they enjoy the work and meeting the renters.
Depending how much you earn by renting out all or part of your home, you may receive a tax form from the marketplaces that list your property. Even if you don't receive any documents, it's your responsibility to report the earnings when filing your tax return. Take this into account when balancing your costs versus potential earnings.
There's a lot of work to do before listing your space. Create a binder with the house rules, local attractions, the Wi-Fi password, your contact number, and other pertinent information. Not all guests will be familiar with the area or country you live in, so it's important to include 9-1-1 and other emergency numbers. You'll also need to make an initial investment in extra sheets, towels, and soap, and consider installing cable if you don't have it already. The online pictures and description usually sell the space, so be sure they're enticing and high quality.
Don't start and stop at Airbnb. Listing your property on multiple sites increases the chances it will be seen and booked. Each site has its own rules and regulations. Make sure you understand the fee structure and insurance coverage before listing your property.
Rachel Burke lives in California and concedes that keeping her apartment rental ready involves a lot of work, but she is a big fan of Airbnb. Most renters are clean and respectful, she says, and she often covers the cost of a vacation if she rents her place while she's away. She experienced one mishap when a guest forgot to return a parking permit, but Airbnb reimbursed her for the cost of replacing it.
You'll have lots of start-up costs, but the real expenses come in the form of an ongoing stream of consumables (e.g., soap, cleaning supplies, and toilet paper) and rising utility bills. Save money and time by buying items in bulk, – as renters are unlikely to be overly concerned about wastefulness. Allison Ramirez of Los Angeles says she charges a $35 cleaning fee to offset some of these costs and to pay her for the time spent cleaning before and after guests rent her studio apartment.
In some cases you'll have just a few hours between a departure and arrival to turn over the space. You may be able to find a reliable cleaning service to help you out but that will eat into your profits; on the other hand, the DIY route means flexibility in your schedule to complete the task. Additionally, you must stay connected to your phone and email to answer inquiries about the space and answer questions for current guests. HomeAway estimates that people with a vacation home spend an average of 8.4 hours every week trying to market and manage it.
Renters who use peer-to-peer marketplaces don't expect a hotel-like reception and often say they enjoy the more personal interaction with the host. Don't carry this too far and try to become the guests' best friend. After greeting guests and making sure they have everything they need, give them space. If they have your contact information they'll reach out to you with questions.
Although a traditional long-term lease is easier to manage, listing your space on Airbnb, HomeAway, or another of the peer-to-peer marketplaces can be more profitable. Paula Plant has shared her experience as an Airbnb host on her site Afford Anything and estimates she took in 50 percent more than she would have with a traditional lease.
Although you can name your price, the market sets some bounds. Check the local competition as well as nearby hotels and hostels to get a sense of the price range. Thomas Nitzsche, a manager at the nonprofit ClearPoint Credit Counseling Solutions, rented several rooms in his house for a while through Airbnb and now rents the entire place after posting it on Craigslist. Because the home is located near the University of Missouri-St. Louis as well as an airport, he found renters easily but couldn't demand more than the local market could bear. Conversely, if you're always at 100 percent occupancy, your price may be too low
Sometimes you can increase the value of your space with add-ons. For example, if you're near a beach consider getting snorkel equipment, boogie boards, and a cooler that renters can use. It's a small upfront cost and the free extras lure guests; alternatively, you might find that guests are willing to pay a slight premium for the convenient extras. To appeal to groups, some hosts set a low price for the first two guests and add on for each additional guest.
As a host, reviews of you and your space posted on the listing service are crucial to staying in business. Always treat guests politely and when mistakes happen (as they inevitably do) own up to the problems and do your best to resolve them. Guests don't expect luxury treatment, but they will notice when you go above and beyond. Even if it's just greeting them with a glass of cold water or setting out a dish of local fresh fruit, small acts can help you earn positive reviews.
Reviews at peer-to-peer rental marketplaces go both ways and you should be sure who you're welcoming into your home. Dan Nainan, a comedian based in New York City who rents out two apartments, says that if he sees anything that's even a little dubious in a review of a guest, he won't agree to the rental. Other hosts abide by a more general rule of only allowing guests who have garnered a few positive reviews, and some insist on speaking with the guest before approving the rental request. Although there have been several stories in the news about renters trashing apartments or hosting sex parties, the majority of guests don't cause problems. If you're worried, SafelyStay offers guest verification services and additional insurance.
If all this sounds like too much, turn to a property manager. Andrew McConnell, co-founder and CEO of Vacation Futures, says that some of the people who rent out their second home want to remain in control no matter what, while others like the idea of letting a property manager handle things. Vacation Futures guarantees homeowners an upfront rate for the season (most property managers take a cut of rental income but don't guarantee bookings) and arranges for all cleaning, utility payments, repairs, key exchanges, and resupplying the units. Another option is to hire a friend or relative to help manage the property.
Check out more from Cheapism:
50 Amazing and Affordable Vacation Rentals in Every State
30 Things You Can Share to Save Money