Social media activity to drive direct bookings to your vacation rental website
Last but not least, ponder over your brand name: should you stick with your host persona or create a distinct holiday rental brand?
7. Financial projections for an Airbnb investment
Airbnb investors do not require a down payment in the traditional sense. Instead, a property manager would typically negotiate the terms of the lease agreement with the landlord, including the monthly rent, lease duration, and any other relevant things.
The financial commitment for a 2-bedroom property investment in Europe could look like this:
Airbnb investment costs
- €400-700 – first month’s rent (or €14-20 per square metre in Europe)
- €2000 –security deposit for the landlord, which is typically 2-3 month rents.
- €0-7000 –commission for a lawyer, real estate broker (could be 5-10% of the total annual rent) or a fee for using online marketplaces for landlord research.
- €7000 – room furnishing and decor.
- €1500 – towels, linens, toiletries and other supplies.
- €3000 – collaborator fees for management and cleaning services.
- €1000 – marketing budget including photo session, advertising, and cost of social media manager.
- Total: up from €15,200 per property.
Sometimes investing in property renovation can be a necessary move to reveal the true value of your Airbnb proposition. This could start at €5000 for miscellaneous kitchen repairs or landscaping.
The costs in the example above may significantly differ based on your negotiation power and specific situation. You can potentially save on expenses for a security deposit or a lawyer by securing the use of a neighbouring property. Or you can buy good quality furniture from a flea market at a low cost.
Airbnb projected revenue
Consider the average daily rate (ADR) and occupancy rate (OR) for similar properties in your target location.
For example, if the ADR is €150 and the expected occupancy rate is 70%, the monthly revenue projection would be:
€150 (ADR) x 30 (days) x 70% (OR) = €3,150
If your monthly revenue minus costs per property yields a relatively low profit, it may be wise to reconsider the viability of this opportunity. Of course, the initial months’ profit could be lower.
A Forbes featured Airbnb arbitrage businessman Chi Ta uses a strategy to research areas where Airbnb is already in demand and where the monthly profit should exceed $2000.
8. Airbnb risk management
What risks do you anticipate in the Airbnb arbitrage business, and how do you plan to mitigate them?
- Income volatility: rental arbitrage is highly dependent on the property’s location, occupancy rate and nightly rates.
- Property damage risk: guest screening might be a good idea, allowing you to avoid potential disputes with the landlord
- Lack of control: As a sub-tenant, the manager may have uncertainty when it comes to long-term planning and contract extensions.
- Lack of experience: be sure to use professional tools like channel manager, dynamic pricing and keep customer satisfaction at maximum. At Your.Rentals you can have a dedicated manager helping you optimise your host routines.
Think of a contingency plan for unexpected things, such as changes in regulations or another wave of the pandemic.
9. Rental arbitrage software you should be using
When it comes to Airbnb management it’s all about time and ability to coordinate activities on the go. Therefore, we highly recommend getting some useful apps from day one of your Airbnb business. Just to name a few:
- Host Assist apps: within Airbnb, depending on your country location, you as a host might be eligible for useful host apps, like channel managers, utility and property management apps.
- Your.Rentals: we are an all-in-one channel manager and communication tool which doesn’t have a monthly fee, pay per booking as you grow your vacation business.
- PriceLabs: dynamic pricing.
- AirDNA: data and analytics for hosts.
- TouchStay: a digital welcome book useful for the guest experience.
- Turno: cleaning services.
