Short-term rentals like AirBnB are taking over the rental market. With options for corporate housing, vacationing in a house instead of a hotel, and month-to-month rentals without a lease, there are several ways to use and market an AirBnB. The thing that most new hosts don’t think about however, are the financial implications of starting this type of business. They want to take a few pictures and jump right in, but it’s best to consider all these factors before you get started.
Many homeowners’ insurance policies do not cover short-term rentals without additional coverage. It’s important to note this because any damage caused by a renter or injury to them would make you personally liable. Liability insurance helps protect you financially when you’re running an AirBnB business, especially if you get liability for injuries or other incidents that happen to people while they are on their property.
Some states require business licensing to legally operate an AirBnB out of your home. It’s important to check with local guidelines and zoning to ensure you abide by the laws around short-term rentals. If there are no codes in your area, then just go ahead and use best practices. On this note, it may be important to also register a business with your state. This can be in the form of an LLC or corporation. You can talk to a business lawyer to discuss the right option for you.
Once you get a business set-up, you can get a separate bank account for your new business. It’s important to keep these finances separate from your personal accounts so that you don’t mix expenses. It also helps you track your income if it’s all in one place. Business banking is one of the best financial decisions you’ll make for your AirBnB venture.
Getting some extra cash can help you remodel a room, a basement, or a second home. You’ll need money to put in the right furniture and create a specific vibe especially if you rent out a house that’s different from your own. You can start your business locally with options like small loans in Lawton, OK and in the surrounding towns. Look for options like home equity loans, personal loans, and even small business loans to get started with your business.
Ways to Get Started
There is more than one way to run your AirBnB business. Some people are simply looking for a little extra money each month, so they rent out a spare room or basement in their home. Others want to turn it into a full-time business, so they choose a different path.
Rent Your Property Out
The easiest and most obvious way to create an AirBnB is to rent out a property you already own. This can be as small as one room or as much as the whole house. If you live in a town that’s short on rental properties but has a big need, this can provide you with a steady stream of income. Maybe it’s just enough to cover the mortgage each month, and perhaps it’s enough to pay most of your bills.
Buy a New Property to Rent Out
The most expensive and most complicated option is to purchase a second property and use that as an AirBnB. You’ll not only need money to make repairs to the home, you’ll also need to purchase a whole house worth of furniture. This can get pretty expensive with down payments for the home, closing costs, monthly mortgage payments, utilities, and more. While it’s doable, it comes with a lot of up-front work to turn it into the rental experience you want.
This newer way of getting an AirBnB on the market requires some research on your part but is a much more affordable way to build up an AirBnB portfolio without needing to buy a new house every time. Basically, you agree to a lease for at least a year. You are personally responsible for paying the rent each month, and any damages to the property. With that said, you can often rent out the property for a much higher rate than you’re paying each month. You’ll still need to furnish the property, but this method is great if you have limited amounts of cash when you’re starting out.