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Making $1,000/Month with Airbnb

We’ve been trying our Airbnb experiment for over a year now and we’ve learned a lot.

First, some quick stats for 2018:

Trips hosted: 70
Nights booked: 214
Five star reviews: 97%
Revenue: $12,959

Sounds great, right?

It has been great. We’ve met some lovely people from all over the US, and even Hong Kong, Italy, and the Netherlands. Students, grandparents, couples, you name it. We even earned the coveted superhost status.

However, most stories about side hustle successes conveniently leave out the expense side of the income statement.

Our Airbnb expenses for 2018 totaled $6,174.

Ouch.

Let’s break that down.

There are two certainties in life: death and taxes.

Some of that 2018 revenue was actually tax payments we had to collect from our guests. Our city and state now work with Airbnb to automatically collect lodging and sales tax, which makes life a lot easier for us and our guests.

If you rent out your place for more than 14 days like we did, short term rentals in your primary residence fall into the vacation home category of the tax code.

This means net income counts as regular income, not passive income. Our full-time rental property is currently generating passive losses and passive losses can’t offset ordinary income above a certain income level or unless you’re a full-time real estate professional.

That said, we are allowed to deduct prorated utilities, mortgage interest, and insurance costs from our Airbnb revenue based on the square footage of the space relative to the rest of our house and the number of days the room was rented.

We have to pay those costs either way, so they actually keep our taxable income lower, which keeps more money in our pockets.

We love deducting these expenses on Schedule E, especially with the new tax code raising the bar for itemizing personal deductions on Schedule A.

2018 Expense Detail

  • Platform fees paid to Airbnb: $372
  • Taxes collected: $515
  • Supplies: $1,802
  • Fixed costs – prorated mortgage interest, utilities, property tax, insurance: $1,500
  • Appliances and other expenses: $1,970
  • Earnings before tax (EBT): $6,785
  • Avg nightly¬†EBT: $32

Doesn’t look that great, does it?

It’s also important to consider the other cost of hosting: time.

It takes roughly 60 minutes to turn over each stay (laundry, clean, restock). Most of our guests stayed for multiple nights, some for almost a month!

Corresponding with guests before, during, and after their stay and managing the calendar also adds roughly ten minutes per stay.

Add in roughly four hours a year for scanning receipts and handling taxes as well.

All told, a conservative estimate is around 85 hours for 2018.

On an hourly basis, this works out to $80 in net pre-tax income. Adding back in those fixed “costs” we get to deduct and the effective EBT is $97 an hour, which is over $200,000 a year assuming a 40 hour work week with two weeks off!

Now we’re talking!


Lessons after a year

Bookings
We started the year allowing one night stays and back to back bookings with 24 hour notice. We had the job flexibility to make this work initially and it was helpful for boosting our review count quickly.

Now we require a minimum two night stay and block off the calendar automatically the day before and after a stay. This gives us flexibility to clean and prep without a mad rush. We’re ok with slightly fewer bookings. Our effective hourly rate is higher for longer stays too…

Pricing
We kept prices low to start as we built up reviews. During the peak travel months, we were able to go over $100 a night on the weekends. There are lot more listings in our area now, but we’re staying reliably booked with a reasonable range of prices. It’s still surprising to me how many guests book with only a week or two to go. Procrastinators of the world, unite!

Guests
Almost all of our guests have been tidy, quiet, and polite. A few stretched our house rules or made last-minute changes, but no disasters. The most popular request is for an early check-in, which our calendar system above now reliably allows.

Amenities
We might add a small mini fridge and more art.

Cleaning
Nothing earth shattering to report here. It’s not glamorous, but does pay close to $100 an hour!

After a year of hosting, would we do it again? You bet!

Interested in learning how to host on Airbnb? Register to receive our custom superhost checklist, learn how much you could earn with your place, and get an extra $30 after hosting your first stay!

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