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AirBnB Financial

What is AirBnB?

AirBnB is an online platform where those looking to rent out their furnished properties (hosts) can find people looking to rent properties (guests), normally for short-term stays. AirBnB provides a more home-like alternative to hotels.

Pros and Cons of using AirBnB

Benefits:

• For the guest, it offers a more autonomous alternatives to hotels. At a hotel you cannot cook or do laundry for example and often requires using the hotels services which can be costly. As you are staying in a home, it can feel more comfortable and familiar than a hotel.

• AirBnB allows hosts to earn additional money, sometimes so much that they make it their full-time job.

• It is very flexible and allows the host lots of freedom. The host can choose to pause and resume the rental of their property anytime. Outside of the check in and check out dates, there isn’t a lot that the host actually has to do, allowing them freedom to do other things.

• Using AirBnB widens a hosts client base enormously. The number of people a host can reach using AirBnB is significantly increased than without. AirBnB only takes 3% for this service.

• AirBnB provides a great opportunity for hosts to meet new people and have connections with people from a variety of different backgrounds.

• Hosts don’t have to pay to list their properties.

• Hosts decide how much to charge their guests.

• Any damages are largely covered by AirBnB. Without any additional fees, Airbnb provides as much as $1,000,000 to cover damage to the property where the host is not responsible. This insurance however doesn’t cover everything, namely stolen cash, damage to expensive artwork, jewellery, and pets.

Benefits of using a template:

• Templates provide potential hosts with details of every step of a Short Term Rental project. This can help reduce the number and gravity of mistakes they make in the process of starting out and allows hosts to assess the financial feasibility of them becoming AirBnB hosts. The templates outline information such as the initial rent of the apartments, renovation costs, operating costs per apartment and per stay, projection of revenues and cash flows, financing options (Debt & Equity) and project valuation & Exit Assumptions.

• Templates save you time and money. Without templates, hosts would make a lot more mistakes at first which could lead to wasted time and money. Templates allow you to avoid these pitfalls that are themselves often costly and cause delays.

Disadvantages of becoming a host:

• Damages can cause problems for hosts. Airbnb’s Host Damage Protection program provides some assurance, but it may not cover everything. Significant damage to ones property can cause the host considerable inconvenience and postpone their ability to make money from AirBnB. For some people, namely those who host full time, the consequences can be grave.

• In certain countries, hosts will have to pay VAT. Depending on their location, hosts may need to pay rental income taxes. However, in the US, Airbnb collects taxpayer information from hosts so they can provide an account of their earnings each year. This facilitates the tax paying process for American hosts.

• AirBnB may not be legal where you are. In certain parts of the world, it isn’t legal to do AirBnB without specific permits of licenses. Potential hosts must check local laws and regulations to verify if short term rental is legal where they are or if permits or licenses are required.

For more on AirBnB Financial Models

What are AirBnB financial models

Pros and Cons of AirBnB

AirBnB financial model template

Financial Feasibility of AirBnB rental

Benefits of becoming an AirBnB host

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