Here’s how to make money and protect yourself from the risks.
Fact checked by Pete Rathburn
Reviewed by Khadija Khartit
Peer-to-peer short-term rental services such as Airbnb are an alternative for many travelers. Some are looking for the feel of a home away from home. Others want accommodations that will cover large groups in one place. Many also look to short-term peer-to-peer rentals as a less costly option than the standard hotel room.
You should keep several things in mind and be sure you understand the process, however, if you’re thinking about bringing in some extra money by renting out a room or your entire home.
Key Takeaways
- Airbnb lets you generate passive income from your home or spare room.
- Being an Airbnb host involves listing your property on its platform which handles bookings and communications with guests.
- Hosts are paid based on guest stays.
- Guests often find that Airbnb is cheaper, has more character, and is homier than hotels.
- Risks of hosting include renting your place to rude guests, theft or damaged property, complaints from neighbors, and potential regulatory violations that can depend on your location.
How to List With Airbnb
Listing with Airbnb is free and you can individually approve potential guests. Consider the going rate in your area by looking at competing listings when you set your price.
Keep the costs of hosting in mind including cleaning, higher utility bills, and taxes.
Important
Airbnb’s host fee is 3% for payment processing. Your guests pay Airbnb’s 6% to 12% booking fees.
Make sure you understand Airbnb’s hosting standards for listing accuracy, communication with guests, keeping your reservation commitments, cleaning your place for each guest, and providing basic amenities such as soap and toilet paper.
You’ll want to clean and declutter your space before you photograph it to present it in the best possible light. Airbnb will even send a professional photographer to capture your space for free in most cities if you’re an active host. Your listing will be displayed on Airbnb’s website and you can also cross-promote it through social media or your own website.
Think about what makes your place unique when describing it. Try to consider it from an out-of-town visitor’s perspective. Is it within walking distance of public transit? Is it located near great restaurants, nightlife, or cultural activities? What amenities can you offer? Wireless internet, a fully stocked kitchen, cable television, an outdoor patio?
Legalities and Taxes
You might need permission before listing your place on Airbnb. Check its rules to make sure you’re allowed to host if your property is controlled by a homeowners’ association or co-op. You’ll want to get your landlord’s blessing if you rent. Airbnb suggests adding a rider to your contract with any of these entities to specifically address hosting through them.
Your locality might also require that you have a business license and you might owe local taxes on any income you earn. You may have to pay a transient occupancy tax, the same tax that applies to hotels. Hotels usually pass this expense on to their guests. You can look up Airbnb’s information on many cities’ regulations.
You’ll also owe federal taxes on Airbnb income. It will be reported to you and the IRS on Form 1099. You may be able to reduce your taxable Airbnb income by deducting business expenses such as cleaning fees and insurance, however.
Personal Safety
You’re probably not at risk of physical violence if you’re renting out your home when you won’t be there but you’ll want to find a safe place to store anything of high sentimental or financial value. Your wedding dress, Grandpa’s gold watch, photo albums, your emergency cash, and your tax returns are all things you’ll want to secure. Don’t give guests an opportunity to steal your possessions or your identity.
Things get trickier if you’re renting out part of your home while you’re continuing to live there. You can keep a closer eye on your stuff although you’d still be wise to safeguard it. You’re physically vulnerable, however, if your guest turns out to be dangerous. It’s not realistic to run criminal background checks on guests before they book or before they check-in. You can do some basic internet sleuthing but it’s not a failsafe process.
Reviews from previous hosts can offer reassurance and you can always decline a reservation or even cancel a booking. Airbnb will impose penalties in some cases, however. You can also limit the reservations to only accepting guests who have completed Airbnb’s Verified ID process. Both hosts and guests can have Airbnb verify their identities by uploading a valid government-issued ID and connecting a Facebook, Google+, or LinkedIn account to an Airbnb account.
Airbnb Home Safety
Airbnb also provides guidelines for hosts to help them make their homes safer. Minimizing safety risks to guests minimizes your risk of being sued by a guest who is injured on your property.
Guests might also give you lower ratings if you haven’t taken basic precautions to protect them such as by installing smoke and carbon monoxide detectors or eliminating or pointing out any trip or fall hazards. Airbnb could refuse to let you continue to host if you’re particularly negligent.
Insurance and Liability
Airbnb’s host guarantee provides up to $1 million in insurance coverage for property damage in 29 countries including the United States, United Kingdom, and Canada. But its insurance isn’t a substitute for homeowner’s or renter’s insurance and it doesn’t protect against theft or personal liability. Talk to your homeowner’s or renter’s insurance company to make sure your policy will cover your property, your possessions, and your liability while renting out your place.
Important
An umbrella policy might be the ticket if you need extra coverage.
Airbnb offers liability insurance for U.S. hosts up to $1 million per occurrence. It’s secondary to any other insurance such as your homeowner’s policy or your landlord’s insurance that might cover the incident. Airbnb’s liability insurance has conditions and limitations like any insurance policy so read the fine print thoroughly if you want to know exactly what’s covered and what’s not.
Airbnb’s host guarantee doesn’t protect against wear and tear to your place but you can charge a security deposit to cover possible damage. It’s important to inspect your property after each guest checks out because you’ll have no way of knowing which guest caused the damage otherwise. This will prevent you from filing a claim.
Document any damage with photos and substantiate the “before” value of the damaged property. Airbnb asks that hosts first try to resolve any problems directly with guests before filing a claim. You’ll need first to file a police report to file a claim with Airbnb for more than $300. Hosts have a limited window to do so: 14 days or before the next guest checks in, whichever is sooner.
“Airbnb provides an option to procure a refundable security deposit which is what I do for each guest,” says Deb Glassman who has been renting out her Venice, California, home on Airbnb for several years. “In one or two situations where I have had to collect the security deposit for minor issues, Airbnb has always backed me 100% with the guest.”
She adds that staying in the studio in the back of her house while renting it out seems to be an automatic deterrent to potential guests who might want to party.
Payment Guarantees
Is it possible for a guest to crash and dash, to stay overnight in your place without paying you?
Guests pay you through Airbnb and Airbnb will release your payment within 24 hours of your guest’s arrival as long as there are no problems. You’ll receive it within one business day if you elect to be paid via PayPal or via Payoneer prepaid debit card. It can take a few days for a bank transfer or 15 business days for a mailed check.
Guests must notify Airbnb within 24 hours of check-in if there’s a problem that warrants a refund. They might be allowed to complete their reservation and receive a partial refund if you don’t respond to guests who try to contact you about a problem.
Airbnb could require you to refund a guest’s payment if you cancel a reservation at the last minute, forget to leave the key, misrepresent your listing, don’t clean your home, or otherwise fail to meet Airbnb’s hospitality standards. Make sure you describe your room type, number of bedrooms and bathrooms, and amenities accurately in your listing. Make sure they’re clean if you choose to provide linens and towels. Note whether there will be any animals on the property.
You could get burned if you arrange payment with a guest outside of the Airbnb website. A guest might try to do this to avoid paying Airbnb’s guest fee or might be planning to rip you off. You’ll only save 3% by not going through Airbnb’s payment system and Airbnb could refuse to do further business with you if you get caught.
Airbnb suggests that you make sure you’re available within 24 hours of guests’ scheduled check-ins to address any concerns they might have because many problems are easily resolved.
Can You Make Good Money Hosting an Airbnb?
Success with Airbnb will depend on several factors including the desirability of your property’s location, its amenities, condition, and price point. The typical U.S. Airbnb Host’s income reportedly averaged around $14,000.
Airbnb provides a calculation tool on its website to give you an idea of what your place may be worth.
What Are the Best States to Host an Airbnb in the U.S.?
The top five states for Airbnb host locations in 2024 were reportedly:
- California
- Hawaii
- New Jersey
- Washington
- Kansas
Which Dates Are the Most Profitable for Airbnb Hosts?
Airbnb data show that these are the highest income-generating dates:
- Labor Day Weekend
- Memorial Day Weekend
- July 4th
- Thanksgiving
- October 2nd (Fall Travel)
- August 2nd (Summer Travel)
- Christmas
The Bottom Line
The sharing economy offers ways to make extra income. Many of these opportunities require that you be comfortable navigating unclear local laws, sharing your most valuable possessions with strangers, and taking on additional legal liability. You could make thousands of extra dollars a year if you’re willing to take on the risk.