Secrets Of Running A Six-Figure Airbnb Business

Renting rooms on Airbnb can be a pretty good business, even if that’s not how the company really wants you to think of it.

It’s easy to tell that nobody actually lives here.

The bedroom is furnished with matching dark-wood Ikea furniture. The large, empty closet is occupied only by a handful of hangers pushed to one side and an ironing board that doesn’t look like it’s ever been used. In the kitchen, there’s a cutting board; two wine glasses and two tea cups; four plates, four glasses, four bowls, four forks, four knives; and three spoons.

But that’s just about it.

My Airbnb host is leasing three apartments just like this one, all in the same building. He posts two of them on Airbnb, as he does with two other apartments in two other buildings. The third he just acquired, so he’s busy setting it up. When he’s done, he will have a total of six apartments listed on the short-term rental site that has been used by more than 4 million guests.

A few years ago, my host--whom I agreed to to call "Bradley" (his choice) for this article--moved to San Francisco for a job as an options trader. He was laid off eight months later, about the time computer programs started making the same decisions he made in a fraction of the time. So he went to work for himself. Now he wakes up on New York time, about 5:00 a.m. in San Francisco, makes trades until the early afternoon, and spends the rest of the day checking people in, doing laundry and cleaning apartments for his next Airbnb guests. For this part-time job--he spends a few hours per day on it--Bradley could make a six-figure income next year.

Airbnb insists it's not a hotel. Even while admitting that its hosts should be responsible for hotel taxes. While defending itself in New York City--where the attorney general demanded user data on 15,000 hosts in order to crack down on “illegal hotels”--the company pointed press to a survey showing, at least by its own measure, that 87% of Airbnb hosts are the primary residents in the homes they rent out to guests. In San Francisco, it’s 90%, according to another survey.

But among the other 10% are people like Bradley, who very much sees being an Airbnb host as a business. “With trading, you look for arbitrage opportunities, where you have an opportunity to buy things for cheaper and sell them for more,” he says. “In the same way, I was like, I can rent apartments for $2,000 a month, but if I were to rent them on Airbnb, I get $150 a night.”

At 90% occupancy, Bradley can make about $4,000 per apartment on Airbnb. He pays about $2,000 of that in rent and utilities. That comes out to about $2,000 profit per apartment per month, or $24,000 each year. With six apartments, he could make up to $144,000 in a year.

Getting Started

Bradley has never stayed in an Airbnb apartment as a guest. He got the idea to start an Airbnb hotel from his ex-girlfriend, who used to stay at his apartment most nights and rented out her own apartment for extra income. “I was like, wait a second, ‘you’re pretty much living here, you’re not paying a split of rent, and you’re making a profit off your place,'” he remembers thinking. “I could recognize who the fool was in that situation." His next though was: "Why don’t I do that?”

In the first four months, he rented four apartments. Most of them were in an apartment building owned by a family friend, who knew of his business plans. Others were in small buildings that were unlikely to have live-in landlords. He was careful not to sign leases at two apartments managed by the same company, which would inevitably raise a red flag.

He purchased four apartments worth of furnishings from Ikea, because the furniture maker charged a flat $85 for delivery no matter how much was in the order. In the end, each apartment cost about $8,000, with deposit, to set up.

At first, business was great. All of his units were full most of the time, and he was earning back his investment. He figured he would rent another apartment every month, and have 12 of them by the end of the year, enough to comfortably quit his day job.

Then January hit. Hotel prices dropped enough in San Francisco to reduce demand for Airbnb alternatives, and Bradley took a $6,000 loss. “That’s when I slowed my roll,” he says. But he didn’t stop. He rented two more apartments over the next eight months.

Making A Living In The Sharing Economy

Aware that I am staying in an apartment maintained by a young, single man, I am surprised one morning to discover a hairdryer under the sink. “I try to put in everything that a hotel would,” he says. This philosophy also explains the $4 coffee maker (“I don’t think anyone has ever used it, but people notice that you have it”), the iron, and the single piece of artwork in the apartment, which is a bright graphic image of a phone with a cartoon bubble that says, “SLAM.” Bradley used to put Banksy prints in his apartments, but nobody noticed. “I think that one was $10 at Ikea,” he says.

Running an Airbnb hotel doesn’t necessarily come with the freedom you might think. “Even though it’s easy, it’s still a hustle,” Bradley says. “You have to be on top of it. You have to respond to all your inquiries. You have to run it like a business.”

Bradley sometimes pays a woman who he refers to as his “assistant” $50, plus tip, to clean apartments and $25 to check people in. But he tries to do as much of the cleaning himself as possible. He notices things that need to be fixed when he cleans.

None of his guests has ever trashed an apartment during their stay. Some people are just messy, leaving, for instance, puke residue on the toilet seat or pizza sauce on the duvet cover. Guests have asked him on dates, he says (he declined). Others have shown up with obvious plans for extra-marital affairs. But even after hosting about 200 guests, there’s not been anything too weird. “No meth labs,” Bradley says.

Staying Legal

In New York, a man named Nigel Warren was recently fined $2,400 for renting his room on Airbnb for a few days. Eventually, with the help of Airbnb, he won an appeal of the fine on the argument that his roommate was home at the time. Others, like Fast Company's Chris Dannen, have faced similar fines for renting out space in their apartments. But the question of whether or not Airbnb is legal remains confusing.

Laws about renting out an apartment for a short-term stay vary by city. A law in New York, for instance, makes it illegal to rent an apartment for less than 30 days if the owner is not around. There’s a similar law in San Francisco. City officials who argue that Airbnb is illegal cite public safety issues and regulations that hotels must follow, and they argue Airbnb hosts owe occupancy taxes, which assure tourists pay their fair share for police, street cleaning, and other public services they use while in town.

This month, Airbnb said it was willing to help collect hotel taxes in San Francisco and New York (San Francisco ruled Airbnb landlords were responsible for paying the taxes back in April). "While the laws in San Francisco and other cities can be confusing and even contradictory, we are eager to work with policymakers to clarify the laws and make them more fair, and to help cities collect any and all applicable taxes," Airbnb said in a statement provided to Fast Company.

In a blog post after Warren’s court victory , Airbnb CEO Brian Chesky emphasized that Airbnb renters are mostly people who don’t treat Airbnb as a business. “They include hosts like Teya, a student who loves cooking for her guests and will use the money she has earned on Airbnb to buy her apartment in Harlem. Or Javier from Brooklyn, who works in the restaurant business and likes to show off his favorite Latin dance spots to travelers from every corner of the globe. And hosts like Lauren and her husband who are using the money they earn on Airbnb to pay off their student loans,” he wrote. “We all agree that illegal hotels are bad for New York, but that is not our community.”

From Bradley’s perspective, however, there isn’t any harm being done by the small percentage of Airbnb hosts using the sharing economy as a way to turn a profit. The apartment owned by his family friends is happy to have him as a tenant, even with the Airbnb business. He’s shown them every aspect, from his profile page to how he checks people in. “They said, it looks really good,” he says. “It actually looks like you take better care of the units than our other tenants.”

The other landlords don’t know. “But,” he says, “I pay my rent on time every month, and they haven’t gotten complaints.” Not all Airbnb hosts are so lucky.

Airbnb installed a pop-up window on its site to remind hosts that they should follow their local laws when they register, and Bradley plans on paying San Francisco’s 14% hotel tax (that's on top of the 3% that Airbnb charges for payment processing). Airbnb sends its hosts 1099s so they can pay taxes on what they earn, and he also plans to pay income tax on his Airbnb revenue.

Bradley doesn't follow the controversy too closely, but he isn't too worried about it, either. "I think San Francisco is a big advocate of embracing its own tech companies and welcoming the disruptive technology," he says.

But still, he tells me later, “Please don’t break your leg in my apartment.”

[Image: Flickr user Porsche Brosseau]

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15 Comments

  • Great tips about how to create a manage a succesful Airbnb listing. I have used the site go generate $10k in over 6 months with my primary residence. The extra money helps with the bills. To learn how to create your own perfect Airbnb listing, check out " The Expert Guet to Earn Money with Airbnb" on the Amazon Kindle: http://www.amazon.com/gp/product/B00J4RX0IY/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=B00J4RX0IY&linkCode=as2&tag=mydaibibver-20

  • Asheville Jo

    I glad to hear that this person actually has permission from his landlord to rent his apartments on airbnb- most don't and are forbidden to do so- kudos

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  • Crystal Strain

    Having used Airbnb for the first time the past week - I will not contribute to this "side business" again. The host grossly misrepresented his "cozy and quiet" cottage. It was no more than garage that had been converted into a living space. The shuttle driver from the hotel asked us if we were certain we wanted to get off "because it is not a safe area". The "few blocks" to public transport was more than a few... And to top it off there was no mention that the road was being re-built. The fumes from the asphalt being poured gave me an instant head-ache. I called him immediately and let him know this was not going to work and received a lecture. I called the company was given attitude by the sales rep and then was hung up on by the supervisor. My issue is being sent to a trip experience board. I don't have a lot of confidence in resolution or monies back.

  • Jim Youll

    He's destroying communities here in San Francisco. This guy is a leech, breaking contracts, not paying taxes, pretty much cheating in every way possible to get ahead while denying housing to legitimate tenants... and you make him out to be a hero. He's a criminal.

  • HowtoGuide4AirBnB

    Using airbnb for an additional tool to drive income on residential hotels is great!
    Being involved in the industryfor teplus years there is no shortage of demand

  • Proprly

    Hi Sarah-

    Really enjoyed this article. Your readers in NYC (and soon S.F.) may be interested in Proprly.com which helps airbnb hosts manage much of the logistics around the cleaning, guest check-ins, and welcome gifts.

    Proprly takes a lot of the hassle out of the process freeing up a ton of time for the host all with an eye towards hospitality. Whether airbnb hosts think so or not, the minute they accept $1 for someone to stay, they are in the hospitality business and their guests rightfully have higher expectations.

    Anyhow, the article was great. Thanks!

    -Randy

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    www.proprly.com
    Property Management for the Sharing Economy

  • BearBnB

    He is sub-leasing without disclosing the activity to some landlords or property owners. He runs a business sharing property that in most circumstances he does not own. I am all for disruptive enterprises like digital currency and the sharing economy but they should run responsibly and within regulation and law.

  • Chad Kazinkski

    This is the Killer Advantage Mr "Bradley" (the fake name) had, that the writer mentions in passing.

    Most of them were in an apartment building owned by a family friend, who knew of his business plans.

  • Asheville Jo

    Indeed- it should be emphasized that the landlord being in the loop Is extremely rare. We have a mini housing crisis in the city where I live and I believe airbnb is partially to blame because people are renting out apartments they do not own.

  • You didn't read on...that's only one of his apartments. He's taking a gamble on the others. They (landlords) can terminate his lease any time if they aren't aware of a sub-leaser and they become aware.

  • 1Lionel

    "Please don’t break your leg in my apartment". Breaking a leg will be welcome compared to the consequences when someone is raped and/or murdered in his apartment