The sharing economy, in which owners rent out their property for extra income, has made it possible for homeowners to profit big.
And the big thank you goes out to the niche favorite, Airbnb (originally known as AirBed & Breakfast), which launched in 2008—and, rightfully so.
The company has since helped book more than 160 million guests' short-term rentals, vacation rentals, single-family homes, two-bedroom apartments, and more in 190 countries.
More importantly, it has significantly transformed both the travel and rental space.
The sharing economy hit its stride in the aftermath of the 2008 recession, as people were searching for ways to cut costs and increase income.
Despite the economy improving post-recession, the continued success of Airbnb has proven that the concept has staying power.
Regular folks are realizing just how profitable it can be to rent out their home (or a portion of it) through Airbnb.
In fact, Airbnb hosts rake in an average of $924 a month for the units they list.
That makes it one of the more profitable opportunities in this thriving "gig economy" that includes companies like Uber for car services, TaskRabbit for tackling the to-do list, and Fiverr and Upwork for business tasks.
So, what's behind this growing work-from-home trend?
Put simply: People no longer need to own stuff—especially the expensive stuff.
For a lot of pragmatic folks, actually owning things like luxury cars and vacation homes has lost its appeal and are instead viewed as white elephants—requiring expensive upkeep and storage costs.
In large cities, for example, many people prefer to take an Uber when needed.
They deem it a much better option than paying expensive rates for a garage for their car and having to deal with the hassle of finding parking or even having to raid their emergency fund when bringing their car in for repairs.
The sharing economy grants people on-demand access to a broader array of services and experiences at a cheaper cost than owning them.
It promises them access to what they need (a car, short-term vacation rentals, etc.) when they need it.
Consumers have morphed into "borrowers" who prefer on-demand access over permanent ownership, whether through sharing, swapping, renting, or more.
If you're thinking of joining the sharing economy by turning your home into a profitable rental property on Airbnb, read on.
Hitting it big as an Airbnb host
Airbnb hosts who rent out a two-bedroom house or apartment can expect to make an average annual profit of $20,619, according to SmartAsset.
Those who rent out one room in a two-bedroom home can reap as much as 81% of their rental costs—making it potentially more lucrative than simply getting a roommate.
Now, it goes without saying that the level of income you can generate through Airbnb is location-specific.
Full apartment listings, for example, earn more money in Miami and San Diego, while private room listings fare best in cities like Houston and Philadelphia.
Some hosts are even making six-figure incomes off of Airbnb!
Instead of renting an apartment out for $2,000 a month, they rent it on Airbnb for $150 a night.
A typical month will net them double the going rent—though it does involve more work, such as cleaning the apartment in between stays.
Focus on the room and board revenue boosters
If you're considering renting out your home or investment property using Airbnb, there are some key factors to consider.
Make the right moves, and you'll be able to turn your home sweet home into a sweet earning machine.
Location, location, location. Do you live in a hot tourist destination?
If so, you're likely to earn more than you would if you lived in a remote place people don't often visit.
The number of bedrooms matters. The size and quality of your listing is also a key determinant of income.
If you live in a family-friendly destination, you'd probably do better posting a large home with multiple bedrooms on Airbnb.
If you're located in a big city that is home to many conferences, however, a small apartment may net you a bigger return.
Full-time gig, or occasional moneymaker? How often you choose to rent out your place will undoubtedly play a role in how much income you make.
‘Tis the season. Every place experiences periods of high demand (think winter vacation, or spring break for warm-weather climates), and other times when it's very quiet.
Keep that in mind when deciding when and how often to rent out your home.
In it for the long-haul?Do you cater to people looking for a two- or three-day stay, or are you set up to attract longer-term renters?
How much money you earn is dependent on how committed you are to being an Airbnb host.
Figure out if renting out is right for you
When deciding whether it makes sense to rent out your home on Airbnb, be sure to consider all of the costs of hosting.
These include cleaning, maintenance, amenities, higher utility bills, taxes, and Airbnb's 3% host fee (guests pay additional fees to Airbnb).
Also, be honest about whether you feel you are cut out for this gig because not everybody is.
That means determining if you prefer to make it a side-gig, a steady source of income, or a serious full-time business that involves renting out several Airbnb properties.
Scope out the competition. Before signing on the dotted line and getting started with Airbnb, visit their page and search for other properties similar to yours that are available on Airbnb in your area.
Look at how they are pricing these properties, and whether enough demand exists at that price point to keep them all full.
If there are very few similar properties available in your area, do some research to find out whether this indicates a vacation rental niche market for you, or if the properties aren't advertised because demand just isn't there.
Don't forget insurance. If you plan to rent out your home via Airbnb, your homeowner's insurance isn't enough.
You may not be aware, but the insurance company can deny your claims because of the "business activity exclusion" clause.
Airbnb offers free Host Protection Insurance, which protects against third-party liability claims of property damage or bodily injury of up to $1 million during a stay.
So if a guest seeking affordable housing slips on a rug while staying in your Airbnb property and sues you for damages, this may cover you.
There are exclusions, however, so read the fine print carefully.
And if you live in the home you are renting out on Airbnb, this insurance product doesn't apply at all.
In that case, you definitely want to reach out to an insurance agent to discuss commercial insurance and/or umbrella insurance for further protection.
Prepare to succeed by preparing well
Avoid unpleasant surprises and unanticipated costs associated with your Airbnb by planning ahead and taking several simple measures to protect yourself and your property.
Lock up any valuables. When renting your home out to strangers, it is wise to remove any valuables from the space, put them in a safe, or lock them up in an out-of-the-way cabinet.
And be sure to keep any private documents, such as tax returns or credit card bills, away from prying eyes.
The last thing you want to worry about is your guests peeping through your papers and using sensitive information to steal your identity or apply for a credit card in your name.
This is rare, of course, but you can never be too careful.
If you're living in the space you're renting out, you'll have a better opportunity to keep an eye on your stuff.
However, you do need to take measures to protect your personal safety.
Consider limiting guests to those who have completed Airbnb's Verified ID process, or do some background checking of your own.
While you do have the right to decline a reservation or cancel a booking, Airbnb may impose penalties—and you could even be accused of discrimination.
Protect your guests, too. Before putting your single-family home or short-term rental on Airbnb, you'll want to make sure it meets all safety codes, and that all the smoke detectors and carbon monoxide monitors work properly.
You'll also want to keep a fire extinguisher handy and fix any tripping hazards.
Check to see if it is legal. Before becoming an Airbnb host, make sure you are legally allowed to do so in your jurisdiction.
If you are a renter yourself, you'll need permission from your landlord.
Check your lease to ensure that it doesn't prohibit you from renting your home out to a third-party (this clause is becoming increasingly common in leases).
Some affordable housing units restrict you from renting out your home.
And even if you own your own home, you may need to get permission from your homeowners' association or condo board.
Then there are local laws and regulations to consider.
Some cities require you to register and get a license in order to become an Airbnb host.
The Airbnb website offers a listing of cities with special regulations.
In New York, for example, you may be required to obtain a special business license or permit.
You also can't rent out certain spaces in New York for periods of fewer than 30 days (a "shared space" rental may be OK).
If you live in rent controlled or stabilized housing, there may be special rules that apply to you. Be sure to research those before moving forward.
Don't forget about taxes. Depending on where your Airbnb property is located, you may need to pay state sales and use taxes, city hotel room occupancy tax, state and city nightly room fees, and even hotel sales taxes.
Whether your Airbnb rental qualifies as a hotel is a murky issue.
Your best bet for finding out if it does is to contact your accountant and/or attorney before renting your home out on Airbnb.
How to Maximize Airbnb Profits
Once you have overcome all the legal and tax-related hurdles, and have determined that renting your home on Airbnb would be a good idea, it's time to think about how you can maximize your profits.
Here are tips that veteran Airbnb hosts recommend for bringing in the big bucks—to the tune of $20,619+ a year—with Airbnb rentals:
Get the price right. Sometimes, having a solidly booked Airbnb calendar for your space isn't exactly a good thing.
For one, it may be a sign you're pricing your property a bit too low.
If you list your home for $100 a night and are booked solid, try upping the price to $150 a night.
You probably won't get as many bookings, but you may break even or even earn more while doing less work.
If you're just starting out, however, you won't have as many positive reviews.
Therefore, your best bet is to undercut the competition (at first) by lowering your price.
This is a short-term strategy.
Once you have 5–10 stellar reviews, you can gradually begin adjusting your price to market level.
Another important pricing tip: charge more for weekends than you do for weeknights.
Sure, it's the same property, but learn from hotels on how to adjust pricing based on demand and weekday vs. weekend pricing structures.
Similarly, if a popular conference is coming to your area, don't be afraid to raise the price of your booking.
Remember, price is dictated by demand. As demand increases, so should your price.
One last pricing tip: Ignore the rate Airbnb suggests—many hosts lament they are way too low, and will result in you losing money in the long run.
Do your own market research to determine the right price for your Airbnb rental.
Score 5-star ratings. To succeed with your Airbnb business—whether it's a full-time effort or a lucrative side job—you're going to want to make customer satisfaction your top priority.
That's because customers rate the properties, and a good rating is essential if you want to keep your Airbnb property booked solid and your earnings maximized.
Providing that stellar customer experience will involve a time commitment, as well as friendly demeanor and a healthy dose of patience.
That means responding quickly and politely to every inquiry you receive.
So turn on notifications in your Airbnb app so you can reply right away.
Airbnb tracks your response rate and prefers to highlight those who respond quickly.
Treat your guests to a luxurious experience. In addition to being responsive, you'll want to make sure you do your best to provide guests with a positive experience, which will help your ratings soar.
Provide some low-cost extras that make their stay memorable, such as providing luxe toiletries or leaving a bar of chocolate and some bottles of water out for guests to enjoy.
You may want to create a welcome basket with toothbrushes, toothpaste, shavers, and other "must-have" items that will make your guests feel like they are checking into a hotel and being pampered.
Encourage guests who have enjoyed their stay to leave a positive review.
After all, the more social proof you have, the more income you will make.
Pay attention to your online listing. Spending time (and money) making your listing attractive online and in real life is critical to generating real income from your Airbnb property.
Ask a writer friend to help amp up the listing headline so it stands out from the rest.
Pay attention to your description, making sure to keep it inviting—but also accurate.
The last thing you want is to get your visitors' hopes up, only to dash their expectations when they arrive and see the real-life apartment looks nothing like the amazing gem of a place portrayed in the description.
Images are critical—don't skimp in this area. In fact, Airbnb will send you a professional photographer to take pictures of your place, for free.
Take the time to tidy up before the pictures are taken.
Ask a friend with good taste to go shopping with you for a statement piece of art, or new throw pillows to beautify your space and enhance the images.
The first photo in your listing is the most important since it is the thumbnail image that shows up in searches.
Have the photographer get a wide-angled shot of the space that is attractive.
And don't forget the captions—people actually read them.
Fill out your house rules. You may never have articulated your house rules before, but now's a good time to do so.
Think about whether people can smoke in your home, bring pets, or cook in your kitchen.
You may want to specifically prohibit parties, overnight guests (without permission), drugs, and other illegal activities.
You should also specifically detail your policy should something gets damaged on your property.
Also, let guests know how to return their keys, and what to do before leaving your home.
Beef up your profile. Don't skimp on your individual Airbnb profile—guests want to learn more about you before they book your space.
Aim for authenticity, as well as showcasing that you're reliable, clean, and friendly.
Be sure to add a photo of yourself, too—you'll want to pick one where you look approachable and kind.
Adding hobbies or interests helps round you out, so guests feel comfortable and like they sort of know you.
It's not just about the listing
To maintain a strong rating on Airbnb and garner dozens, if not hundreds, of positive reviews, you'll want to shift your focus from your online listing (once it's a winner) to real-life aspects of the guest experience.
Amp up your amenities. Put yourself in your guests' shoes and think about the amenities that would benefit them most.
Maybe it's a blow dryer in the bathroom, or a Keurig with K-cups in the kitchen.
Consider making up a list of popular tourist destinations—and favorite off-the-beaten-path venues) that are within walking distance from your property.
If you live near a subway line or other form of public transportation, consider leaving a schedule and map out, along with a one-day pass.
Little gestures like these that boost convenience can go a long way.
Keep it clean. Nobody wants to stay in a hovel. Keep your home clean and bug-free.
Check your property on a regular basis to see what maintenance work needs to be done.
Bring in friends who have never seen the space and ask if anything negative catches their eye, or if there's anything they would recommend to upgrade the look and feel of the space.
If you think your space could use a bit of home improvement or remodeling work to make it really stand out on Airbnb, consider taking out a personal loan to finance the job instead of using your credit card.
Personal loans usually come with lower interest rates than credit cards, especially if you have decent credit.
Keep guests safe and secure. If your apartment doesn't have a doorman, consider other ways to increase the safety of your guests.
Just be sure to let them know if you have installed any security cameras in the home itself—they'll want to make sure their privacy is assured.
Start getting paid for your extra space
Ready to take the plunge and list your home on Airbnb? Eager to convert your extra space into cold, hard cash?
Start by researching price points and filling out your online listing and profile.
Get professional pictures taken.
Look at popular listings and see how you can improve your own.
Before long, you too may be earning a six-figure salary with Airbnb!
Have you rented out your home using Airbnb?
Was the extra cash worth it?
Share your experiences and money-making tips by commenting below!