Ben Todd | Apr 16, 2017 | 3
A Rough Guide On How Much To Charge For Your Airbnb Rental
Airbnb is a company that runs a home stay network. It is a peer-to-peer marketplace that operates online. People are able to arrange to stay at other people’s houses in return for a fee. It matches people who wish to let (hosts) with people who wish to stay (guests). The host has to leave the house and the guest moves in for a short time if a full space plan is chosen, or may stay if a shared plan is chosen. It is a little like renting a house or an apartment for a short while, except that it is typically cheaper than short-term renting, cheaper than using a hotel and cheaper than using a B&B.
Airbnb make their money by taking a fee from each transaction. The cost of the accommodation is set by the host, but things such as local competition and Airbnb limits create restrictions on how little or how much a host may charge. The host is not allowed to stay in the house while it is occupied if a full space plan is chosen, nor is the host allowed to nip back for things, and the host is not allowed to charge extra outside of the system. People who try to use Airbnb to give contact details so they may conduct the transaction outside of Airbnb are typically banned from the network. You are also not allows to rack up a negative set of reviews, quit, and then start a new profile with the same address.
Is Airbnb Causing Problems?
The government in Berlin seems to think so, as they have say that the home owner/renter should remain in the house because renters are only allowed to rent rooms and not a full house.
There has also been accusations that the company pushes up rental prices in areas with few vacancies, but for that to be true, a city would have to have between 20% and 30% of the renting population using Airbnb, which is simply not the case in any city.
Airbnb is not causing problems, it is not increasing local rental prices, it is not flouting laws, and it is not negatively affecting local hotel or B&B prices in resort destinations.
The Cancellation Policies
There are six cancellation options, but only three are likely to ever apply to you. The three you will probably use are flexible, moderate and strict, but there are also super strict 30 days, super strict 60 days and long term. Follow our link for a full explanation of AirBnBs cancellation policy.
Tip 1 – How To Let To Break Even And Make A Saving
Take the cost of your rent or mortgage; add in your utilities costs, and home running costs. Add them up and divide them by 28 to get your break-even rate.
Rent ($750) + Utilities ($100) + Insurance ($55) = $905
905 / 28 days = $33 Per day
In this case, you would make $33 per day your minimum rate. Why not simply charge your lowest rate? After all, you are making a saving, and if you are going to be out of the house anyway, then you are making your housework for you while you are away.
For example, if you are going on holiday, or if you spend your weekends around your partner’s house, then your house would only be stood on its own doing nothing anyway.
Having People In Your House While You Are Away Will Reduce Crime
If you clear away or lock away your valuables and important documents–then you are actually making a profit by charging a breakeven amount. You have somebody in your house when you are out, which lowers your chances of being burgled or having your house trashed. It is almost like having a powerful security system in place by having people occupy your home when it would normally be empty.
Tip 2 – How To Let To Make A Small Profit
Enter the AirBnB website and look around your area at what other people are charging for rooms. One assumes they are charging more than your breakeven amount, so try to stay somewhere between the cheapest and almost the cheapest. In many cases, you will still find that still pays more than your breakeven amount.
Once you have a good idea of how much others in your area are charging, you may become competitive without charging too much. If you are near a holiday resort or a place where people vacation, then you should also look at local hotel and B&B rates. You must remain cheaper than the local hotel and B&B establishments or you will lose all your customers to them.
If there are few local prices for you to judge your price, then your area not have a very high demand for rooms and/or houses to rent. In that case, add between 10% and 20% to your breakeven amount (explained in Tip 1 above) and hope for the best.
Why Charge Cheaper Rates?
The first reason is because you are not running a hotel or B&B a have no right to charge a massive fee. Secondly, nobody is going to pay hotel and B&B prices to stay in a person’s house when they can get better service at a hotel or B&B. You have to remember that the hospitality trade is not the same as the taxi or banking industry. The hospitality industry is not jammed with overpaid proprietors and people out to rinse you of your cash. When you stay in a hotel or B&B, you usually get the service you pay for. You are competing with companies that are doing a good job, not companies that are screwing people over. Here are some more reasons why you should only make a small profit.
- You will get far more customers
- You will fill your bookings earlier
- People are less likely to cancel because they found a better price
- People will give you a better rating because you do more for less
- Guests will shy away from giving you bad ratings
- Guests will want to return
- People who want to return will tend to clean up more
- People who want to return will pay for their damages
- Repeat custom is better than one-off high payers
Tip 3 – Don’t Host To Make A Big Profit
If you charge too much, or even charge above the local average, then people will expect a lot more, and they will be angry when they do not get it. They will rip you apart on your AirBnB reviews, which will make it very difficult for you to gain new customers and make money in the future. In addition, people may feel cheated and feel they deserve to help themselves to your toilet rolls, towels, wine, groceries and so forth.
If you charge too much, then people will not wish to return. This will make them less likely to clean up after themselves and less likely to declare and pay for any damage they caused.
Tip 4 – Create A Long-term Discounts For Lengthy Stays
Preparing the house for guests on a frequent basis is a little time consuming and quite labor intensive. A long-term visitor is going to save you time and money in the long run, which is worth creating a discount for. In addition, other AirBnB users are going to give long-term discounts, so you should too.
Tip 5 – Start With A Very Low Cleaning Fee
Many of your guests are going to clean up after themselves. They may not vacuum the house, but they will probably put their pots in the dishwasher and dust and so forth. Start with a low cleaning fee to bring people into the house and get your first bookings.
Think of how much you would charge if you were cleaning another person’s house for money. You would probably charge between $7 and $10 per hour, so budget for the same. It will probably only take two or three hours to clean, so a cleaning fee as low as $14 is quite acceptable.
Some people try to skim extra profit by charging a high cleaning fee, and frankly, it is a joke. It is just asking for a poor review because your house had better be spotless when people arrive to justify the high cleaning fee. Even stained surfaces are going to anger your guests. If you are charging a high cleaning fee, then they expect the place as clean and sterile as a surgeon’s operating theatre, and if it isn’t, then bad reviews will follow.
Tip 6 – Insure Yourself Cleverly
Make it clear to your insurance company that you intend to regularly have people staying in your home. Sometimes they are paying and sometimes they are not. Tell them that you want insurance to cover you for having people stay in your home, including if they leave the front door open for thieves to enter, including for damage they cause, and including anything they steal.
Take the time to get a very good policy that pays out well for damage, theft and so forth. That way, even if you have a little bad luck, you can still look forward to a tasty insurance settlement. Just make sure they include all the coverage you demand while having people pay to stay in your home. Take your time, get a good quote, and check what they are actually covering to be sure you can make a claim. In some (dare I say…many) cases, you are going to make a profit if the renters cause damage, leave your home open to crime, or steal something.
Tip 7 – Rent Your Entire Space Rather Than Sharing
The truth is that you may charge a little more if you are offering the full run of your house or apartment. Plus, people prefer to have the run of your house rather than having to share with you. If you have to share, then do it during your working week so you are out of the house, and make sure your impact on the house (mess, friends over, and so forth) is as minimal as possible.
Tip 8 – Concentrate On Building A Great Profile
Obviously, you are going to be able to draw more people in if you have a great profile. Plus, over time, you may be able to charge a little more. What you should concentrate on is getting repeat customers. Your repeat customers will generate a more sustainable income, and they may treat your place with more respect.
Tip 9 – Consider A Security Deposit
If you charge a security deposit, then you are going to scare a lot of people off. Many are wary of paying a security deposit because they are afraid you will rip them off and keep it by accusing them of doing things they did not do. Your best bet is not to charge one, but if you must charge a security deposit, then charge just one night’s rate as a security deposit.
Conclusion – Build Your Profile To Make A Small But Consistent Profit
It is far better to build a fantastic profile and gain regular guests than it is to try to make a killer profit. Every time your house is empty when you intended it to be full is a big loss. For example, if you decide that every weekend you are going to rent out your home, then it is best to have guests every weekend than it is to have high-paying visitors some weekends and no guests on other weekends. In that scenario, it is better to have guests every weekend that generate a lower profit, than it is to have an empty house.
Do not rip people off with cleaning fees or extra fees, do not charge overly high security deposits, and do not create a strict or mean cancellation policy. Go out of your way to be fair, honest and hard working–and people will return again and again. Especially consider renting your space while you are not there because people prefer it. Try to put yourself in your renter’s shoes and ask what you would prefer, especially with regards to your presence, the presence of your pets, your friends, your family, the cleanliness of your house and the smell of your house. Put yourself in their shoes and give them 100% more than what you would expect or demand for yourself. If you do that–then you cannot go too far wrong.