I was laid off from my high paying corporate job at the beginning of 2013 and, against the advice of my colleagues, I booked a one way ticket to Bangkok to explore the world. Instead of packing my stuff up in storage while I was away, a neighbor recommended that I list my Santa Monica apartment on Airbnb. I snapped a few photos with my iPhone, created a listing, recruited a friend to manage the apartment in exchange for free use of my SUV, and away I went! Within a week I was flying over the Pacific, nervous that I had just opened the doors of my home to a bunch of lunatics.
I got my first booking just two days later from a sweet retired couple from Wisconsin. Upon hearing that I was in Southeast Asia they proceeded to send me pages of recommendations from their trip to Thailand the previous year. I was instantly reassured that this world is full of interesting and trustworthy travelers. Within three weeks I had six different guests come and go without incident and I had already earned enough money to cover my $3,000 rent for the month.
Returning to Santa Monica a few months later, I decided to further postpone the 9-5 grind and see if I could support my new lifestyle by continuing to rent my one-bedroom apartment full-time on Airbnb. My girlfriend was nice enough to welcome me into her cramped apartment with only a couple bags of clothes and a vision.
Using skills I had acquired from my previous life in corporate operations I began analyzing the business. Cutting utility costs, automating check-in processes, and improving my pricing until I was able to see $6,200 in income each month while reducing my work to less than 4-hours a week.
See how much your place is worth on Airbnb!
I had proven that I could make a significant profit from an existing apartment that was already furnished. But would it work to rent and furnish another apartment just to list it with Airbnb? After a month of researching and number crunching, I decided to pull the trigger and rent a high-end penthouse apartment for $3,695 a month.
I made my money back on that investment in less than four months and am now profiting $7,000 each month. Without owning any property, I’ve received rental income of $156,800 and a profit of over $66,000 in one year. It seems unreal when I calculate my new hourly income of $319 per hour. I don’t think corporate America is going to be paying me that much any time soon.
A Review of the Numbers
Property 1 – “Bachelor Pad”
| Revenue | $74,890 |
|---|---|
| Cost | $35,250 |
| Profit | $39,640 |
| Rent | $33,600 |
| Furnishings & Supplies | $845 |
| Cleaning & Maintenance | $420 |
| Insurance & Other | $385 |
Property 2 – “Penthouse”
| Revenue | $78,920 |
|---|---|
| Cost | $52,235 |
| Profit | $26,685 |
| Rent | $44,340 |
| Furnishings & Supplies | $6,915 |
| Cleaning & Maintenance | $645 |
| Insurance & Other | $335 |
Total Profit: $66,200
Tips and Tricks to Becoming Uour Own Rentalpreneur
Stand out from the Crowd
- Target Business Travelers – In order to turn a significant profit your neighborhood needs to see a mixture of tourist and business travelers year around. You are going to encounter a lot of mid-week vacancies if you don’t cater to the corporate jet-setter. Adding a printer and small workspace will help you target these deep pocketed visitors.
- Offer a Unique Experience – Visitors are looking for alternatives to stale hotel rooms and are looking to experience your city like a local. Offer free beach cruisers, kayaks, or golf clubs that will allow visitors to experience your area without lugging all of their junk from home.
Pricing for Success
- Get Creative with Pricing – Research your local 3-4 star hotel prices. How are they pricing their weekdays vs. weekends. What are they doing for holidays? Hotels have spent millions figuring out the right price/demand equation. Use their information and copy their pricing structure.
- Maximize your Beds – Buying a pull out sofa can increase your nightly rate by up to 30%. Even adding a blow up mattress can drive a significant increase in bookings. Think of your place’s value in terms of price per pillow. The more heads you can support, the more you can charge.
Automate EVERYTHING
- Self Check-in – Create an automated guest check-in process by using hide-a-keys, a lockitron, or lockbox. Do whatever it takes to separate yourself from hand holding each guest as they come and go.
- Outsourcing isn’t just for India – There are plenty of fabulous people in your neighborhood that you can find through sites like Taskrabbit.com. They can clean between guests, mow the lawn, feed the fish, or just about any chore you’re tired of performing for less than $20 per hour.
- No Checks Please – Checks and wire transfers are a thing of the past. One of the biggest efficiency improvements in the vacation rental business is introduction of the financial intermediary. Airbnb handles all of the payment processing.. all you have to do is shovel cash from Paypal to your bank account each month.
- Get Tech Savvy – From electronic locks, to wireless thermostats, to steaming entertainment, technology is automating many of the time consuming and costly aspects of old school property management.
Want to learn how to become your own rentalprenuer? Visit Rentingyourplace.com to learn more.
Yaaayyy for your official launch! the site looks great!
I am an airbnb host too! And it’s been great, even though I’m just renting out a very small single bedroom in my London flat, I’ve managed to pay off debts, refurb, and start building savings. However Scott, was wondering where your cost for tax is? Does that come under other? Having just done my tax returns I’m fully aware of how this cuts into your profits. Happy days! Antonia 🙂
Hi Antonia, I limited my tax liabilities by investing much of my profit back into the business by acquiring the second unit at the end of the calendar year. Taxes are so unique in each state/country that I didn’t include for this blog. I do cover it a bit in the “playbook”
Good stuff. Agree entirely. My balance sheet isn’t too far from yours, though I spend a bit more on cleaning than you do. 95 dollars for cleaning a penthouse for 7 months sounds as if it isn’t lived in! I’m grossing $150,000 a year on my penthouse now and all my efforts are into making it as distinctive and memorable as I can.
Hey Pete, I’ve been lucky enough to have longer term tenants there (avg. about a month) so I I just get my hands dirty and do the cleaning myself. Have only hired a cleaner once.
Thanks for the note and congrats on your success