Now that you've pulled the trigger on your AirBnB rental home, here are some tips on how to prepare your listing for success as you begin taking reservations.
It is a very exciting moment when an offer you make on a property is accepted and you know you will shortly be the owner of a new AirBnB. However, that excitement can quickly turn into a new set of questions about what you need to do to in order to get your property ready to list on AirBnB.
While you are dealing with your real estate agent, escrow agent, and lender to ensure a smooth closing on your property, you will also likely be preparing a checklist of things to do to get listed on AirBnB. This can be a stressful time with seemingly many things to juggle.
I have personally gone through this process a few times and admit that it can feel overwhelming. I have created a checklist here based on what I have learned to make sure that you don't forget any key steps. Hopefully, you can use this as a shortcut for you as you prepare your own property to list on AirBnB, VRBO, and other sites. After all, being a host should ultimately be a fun and rewarding experience after you get through some of the initial leg work.
Decisions To Be Made Prior To Closing On Your Property
1) Negotiating For Furnishings
If the property you are buying to AirBnB was also previously a vacation rental, it might be a good idea to negotiate with the owner to have the existing furnishings left with the property. This can save you thousands of dollars required to furnish your home. Additionally, due to problems in the global supply chain in 2022, it has taken increasingly longer to buy furniture or acquire materials to renovate a home (with some common items now taking 3-6 months for delivery). Being able to have furniture that is ready to go right after closing can allow you to list your home much faster and start generating income.
2) Should I Honor Existing Bookings?
If the property you are buying was previously a vacation rental, there might be existing bookings that the seller might want you to honor. It is typically not required for you as the new owner to honor any previous bookings made by the seller after closing. However, there are some sellers that might make it a required stipulation of them selling to you. The reason sellers might want their bookings honored is because they don't want to hurt their AirBnB or VRBO ratings by cancelling existing reservations with guests.
If a seller requests that you honor their bookings, there are a couple things you should consider to see if it is worthwhile. First, if the seller is adamant they will not sell to you unless you honor their bookings, you should consider the easiest ways to transfer these bookings. Unfortunately, there is no way for a host on AirBnB to transfer bookings to another host directly. What likely needs to happen is to coordinate with the seller to first cancel the existing bookings with their guests, while at the same time providing the guests with your new AirBnB listing to rebook directly through you. This is obviously a hassle, but if it is what is standing between you and closing the deal, you should at least consider it.
Second, it could take some time for you to ramp up new bookings after you close on your home. For example, if you are buying a property in a city where people generally book a minimum of 3 months in advance, you might want to honor previous bookings from the seller as it might be very hard to fill up your calendar in a short period of time. However, if you are buying in a city like Las Vegas (where last second trips are very common), you might be less inclined to honor any of the bookings since it would be relatively easier to find new bookings quickly, even if you don't keep any of the previous bookings from the seller.
3) Identify A Property Manager Or Local Partners If Needed
If you are buying in a location that is not driving distance to your primary home, it might make sense to hire a property manager to help you manage the property. Personally, I believe that everyone can self-manage due to all the easy-to-use hosting tools provided directly in AirBnB and VRBO. There are also additional 3rd party tools for more advanced features around pricing and automated messaging to make hosting easier than ever.
While it is very easy to manage guest bookings and communicate directly with guests through AirBnB and VRBO, having a local partner (i.e. driving distance to your property) to handle cleaning and perform maintenance checks is highly recommended. In fact, some cities require you have a local partner in order to receive a permit to operate a vacation rental. Personally, I have a local partner in Maui that arranges cleaners for the property, checks for damages pre and post-stay, and coordinates with guests in case of emergency during their stays (as I live in California and can not resolve emergencies in person). I pay a fixed monthly fee for this level of service, which is still significantly less than the 25% average that most full service property managers charge (since I do all my own bookings).
Decisions To Be Made Right After Closing
1) Make A List Of Items To Replace
During the escrow process, sellers will have to provide an inventory list for all items included as part of the sale of their property. You can start getting a good idea of what items you will want to keep and what new items you will want to buy to replace current items in your property. Start putting together this list early as some items you need (particularly furniture) could take several months to deliver.
2) Map Out Which Stores You Will Get Your Items From
Once you are done with the list of items to replace, you will need to map out the stores or websites where you can procure your items. I am a big proponent of locating the closest Target or Costco to your property as you will probably end up buying more than 80% of the items you need from one of these big box stores. Amazon is also a great option for electronics, but the bulk of household good items you will need will usually be found more easily at a brick and mortar retail store like Target or Costco. When I was setting up my first AirBnB, I spent almost 10 hours in Target over the course of 3 days to buy most of my furnishings!
3) Select A Professional Photographer For Your Listing Photos
One of the key milestones that signal your house is ready to be listed is when you schedule a date for a photographer to take your listing photos. Yes, PLEASE schedule a photographer and DO NOT attempt to take listing photos yourself. This is a small expense ($150-$300 on average), but will increase your performance on AirBnB significantly. I have seen way too many listings with fuzzy photos from obscure angles on AirBnB and VRBO. It is amazing how much better a good photographer can make your place look. After spending so much time and money in getting your property ready to list on AirBnB, don't be stingy and try to save a few hundred bucks here. Give your property the attention it deserves and have it professionally photographed.
Creating The Listing
1) Which Platforms Will You List On?
The decision to list on AirBnB only or on multiple platforms (e.g. VRBO, Booking.com, and others) comes down to a couple factors. First, are you able to generate enough demand on one platform to achieve the income you want? If so, then only listing on one platform (e.g. AirBnB) will be easier administratively as you will only need to manage one availability calendar and one messaging system to deal with guests. However, if you want to maximize your chances at achieving full occupancy for your property, it is a better idea to list on both VRBO and AirBnB. If you want to check what most owners in your city do for their listings, you can even look on AirDNA to see what percentage of people in your area list on AirBnB, VRBO, or both.
As of 2020, AirBnB reported having 5.6 million listings on their platform, while VRBO reported having 2 million listings. AirBnB and VRBO are the two largest vacation rental sites in the US and make it very easy to list and get started. However, when managing across two platforms, you need to make sure to sync your calendars between the two in order to prevent double-bookings, as well as keep pricing up to date on both sites. Luckily, both AirBnB and VRBO allow syncing with one another's calendars (through iCal) so it is just a simple one time "copy and paste" to setup the connection. Additionally, you will have to manage two different inboxes to communicate with your guests when you use both AirBnB and VRBO. However, if you would prefer to consolidate your AirBnB and VRBO inbox and calendar into one app, there are some good tools like Hospitable.com and Guesty.com that allow you to manage all platform bookings and communications within one experience for a monthly fee.
2) Do You Have All Your Tax And Permitting Ready?
There are different tax requirements for every city so be sure to check what is required in your area. Some areas have taxes specifically on short term rentals (sometimes called a transient accommodation tax), while others also charge a permitting fee to have the legal right to operate a vacation rental in that city. You will have to check on the local city and county regulations to make sure you are comply with the permitting and tax payment requirements for your specific area. For taxes specifically, there are companies like Avalara.com that can keep track of and remit your local required taxes for a monthly fee if you don't want to handle paying them yourself. Typically, these taxes can be passed onto guests through AirBnB and VRBO as a separate line item in the guest charges.
3) When Should I Take My First Bookings?
In order to go live with your listing you will need to figure out the earliest date that you will be able to accept bookings. Even if you are not honoring bookings from the previous owners, you should still pick a date that gives you enough time to make sure your place is ready to accept guests (e.g. all key furnishings are in the house, full cleaning has been done). I like to keep a rough start date in mind even when I am going through the escrow process as it helps me work backwards on a timeline of what I need to get done by when.
Ongoing Tracking Of Expenses And Time
1) Track Your Expenses For Tax Purposes
You will need to keep track of your expenses going forward so that you can write off those expenses against your vacation rental income at the end of the tax year. There are many tools to track expenses but I just use Google Sheets to record every item or service I purchase on behalf of my vacation rental. I also use Google Drive for my receipts so I can drop them in there after I make any purchase for my properties. One of the great things about real estate investing is that almost any expense related to your rental (including airline tickets and meals you have while "checking in" on your property) can be written off for tax purposes.
2) Track Your Time For Special Tax Statuses (REPS Or Material Participation)
There are special tax statuses (e.g. real estate professional status or material participation) that some real estate investors can qualify for if they spend enough hours annually on real estate activities. These statuses convey certain tax benefits if you meet the requirements, but require that you track your time spent on real estate to qualify. I personally use repstracker.com, which allows you to easily create time entries for every task that you perform on behalf of your properties. This app was created specifically for achieving either of these special tax statuses by having time-stamped entries, which make the records more reliable in case of an audit. For more information on the specific benefits and how to qualify for REPS status or material participation, please consult with your CPA.
3) Consult With A CPA for RE Tax Strategies
There are several tax strategies that can save you money and apply specifically to owning a short term rentals. As I am not an accountant, I do not want to provide specifics on how to qualify. However, short term rentals are unique from long term rentals in that they potentially constitute a more active business, which you might benefit from if you materially participate in the management of your property. In short, talk to a real estate specific CPA about potential tax strategies for your short term rental as there are significant potential tax savings versus other types of real estate investments.
The Bottom Line
There are several steps that need to be completed before having your listing ready for prime time on AirBnB and VRBO. I hope that you can take my suggestions above as a way to shortcut the learning curve and give you more confidence that you didn't forget any key steps in preparing your listing. While setting up your listing can be a time consuming task, just know that it is mostly a one-time cost, and doing it right the first time will save you many more headaches down the road so that you can focus on the fun parts of being a host. 2023 is as good of time as ever to get started!
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