HOW MUCH WILL I MAKE?

Income from AirBnB vs. full-time tenants

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tl;dr – I made ~20% more hosting via vacation rental than with full-time tenants on a traditional 12 month lease. My hourly rate came out to ~$100/hr.

Your major considerations

  • What do I expect the nightly rate to be in my area?
  • Do I expect demand to vary significantly with season?
  • How much could I expect to earn from a standard 12-month lease?
  • Am I willing/able to do the cleaning myself, or do I need someone else to do it? If so, how much do I think I’ll need to pay this person? (I paid $25 – $35/room)
  • Are my utilities high enough that they will be a major monthly cost?

Getting into real numbers - how it worked out for me

Income Projection and Breakdown of My Actual Income:

When I initially decided to start hosting, I predicted an annual gross income of ~$90k. If every month had matched my best month’s gross income of $8,501 after all, the annual income would have been >$100k. Unfortunately, a couple key assumptions I made, described below, weren’t quite correct. Getting into hosting is large enough of an investment that it’s worth sharpening your pencil. In my situation, since I generally enjoy living with roommates, the calculation was to compare income for having traditional roommates versus hosting via Airbnb.

Income from hosting on Airbnb or Vrbo vs. having full-time tenants:

Full-time tenants provide a relatively constant income stream, whereas the seasonal difference in income from Airbnb can be substantial. For my home, monthly income from three roommates is $4,110, whereas net income from Airbnb varied from $7,059/month at the highest (summer), to as low as $1,538/month (Winter). The chart below shows the month-to-month net income for the 13 months I hosted Airbnb. The eight months that generated net income (blue box) > $4,110 were profitable, and the five months that generated net income of < $4,110 were effectively taking a loss.

Seasonal variations can be **HUGE**

Though hosting for 13 months brought in $72,707 gross income, after accounting for the different costs associated with hosting Airbnb versus having three roommates on a traditional 12-month lease, hosting only brought in $10,436 more than having roommates, which could have been expected to bring in $50,050 over the same 13-month period ($3850/mo; and also pay 75% of utilities). The primary drivers for the rather modest relative earnings were:

  • Cleaning costs (~$700/month; actual $9,096/year)
  • Paying all household expenses myself (~$3,126/year; utilities, household basics)
  • The large seasonal variation in nightly and occupancy rates (shown in chart below)
  • The relatively high income from renting on a standard 12-month lease, which is the same for every month (the three rooms each rent for $1,100 – $1,500 on a standard 12-month lease)

But wait...should I vary the nightly rate?

As you can see above, the highest occupancy rates were nearly 100% (Sept., Oct), and the lowest was 43% (December). The average occupancy rate for all months was 81%. As a general guide, this high of an occupancy rate indicates that my rates may have been lower than I could have been able to get solid booking rates at. The average nightly rate varied with season (as expected), and was higher the second “Spring/Summer” than it was the first Summer. This increase in nightly rate was likely due to the large number of positive reviews that were posted to my listings, though it also shows a reverse correlation between nightly rate and occupancy rate.

Considering the factors of high rent and a tourism industry that is very season-dependent, for someone trying to host in their home while still  performing well at a reasonably demanding full-time job, a (nearby) suburb of Boston is a less-than-ideal, but still decent place to host Airbnb. If I lived directly in the city (instead of 2.3 miles outside of the city), or in a location slightly closer to the subway (instead of one mile away), the seasonal variation may not have been as drastic. For your situation, be sure to consider the expected seasonal variance when calculating your expected earnings. Are you in a ski town (very season dependent), or in a place like San Diego (where less seasonal variation may be expected)?

To gauge the expected income in your area, I would recommend seeing how much people in your area are charging, and how much of the time they appear to be booked. Also, take into account that before you have many reviews, and/or the status of “Super Host”, you will likely not be able to charge the same premiums as someone with dozens or hundreds of positive reviews (ref the difference in income for the first August versus second August I hosted Airbnb).

Hourly earnings:

For each of the 310 groups of people that I hosted in 13 months, each one required an average of 3 written correspondence, which took about 1 minute each, for a total of 15.5 hours. In addition, each week required about 1.5 hours of time doing Airbnb-related chores such as picking up or ordering household supplies, and updating listings to keep them at the top of the search results. So, doing Airbnb required about 105 hours over the 13-month period. Given that hosting generated $10,436 more than having full-time roommates, this works out to an hourly rate of about $105. While this is a very good hourly rate for a job that is reasonably flexible, considering the overall cost of essentially always being “on call”, it may or may not be worth it for you. Do you live in an area where tourism is high for most seasons? Can your lifestyle accommodate nearly 1,000 discrete interruptions a year?  Do you have the flexibility to do the cleaning yourself? If so, your income may be substantially higher.