02 Oct How much will this Airbnb Business Cost Me to Start?
In this post, I’ll be sharing with you some of my personal numbers to give you an accurate estimate of how much it costs to get one unit up and running.
It’s important to know just exactly how much money a business will cost before deciding to invest in it. There are several factors that will determine the total costs for one unit.
**Please note that your startup costs will be different from mine.**
Airbnb Business: Factor #1 – Rent & Security Deposit
Typically, your landlord or property management company will ask for a cashier check that is equal to 1st-month rent and a variable security deposit.
For me, I have units in Mountain View, California. My rent ranges from $1800 to $2800 dollars a month. Then you tag on a variable security deposit that ranges from $500 to $2000 dollars. It is not atypical where a landlord will ask for one month worth of rent as a security deposit.
Airbnb Business: Factor #2 – Insurance
Luckily, I didn’t have to worry about it because I am covered by Airbnb 1 million host guarantee. Now, if you are a landlord yourself, then perhaps, it’s actually a good idea to get double coverage. It’s also important to note that if your clients are primarily large groups of people because your house is set up as such, then it’s particularly important to look for an insurance policy that will cover you as a business.
Pro-tip: Even though a larger group can lead to more profits, but the revenue is incremental compared to the headaches of a larger group.
All major insurance companies use similar forms developed by ISO. These forms have changed over the years, but one thing has remained the same; all homeowner’s policies carry a “business pursuit’s exclusion”. In other words, any claim involving a business would be denied on the HO form.
Insurance can get complicated, so if you’re interested to know more about it, check out these two options that are on the market today.
Airbnb Business: Factor #3 – Furniture Costs
Based on my own numbers, my furniture costs were around $2,000 to $3,000 dollars. This would depend on how many bedrooms that you’d need to furnish. 1 bedroom apartments will be cheaper to furnish than a 2 bedroom apartment, and so on.
Here’s the link to my detailed costs breakdown per unit. You can check it out. Again, my costs will be different from yours.
If you’re looking to hire an interior decorator, then I’d highly suggest you taking a quick look on one of our Design Templates.
Airbnb Business: Factor # 4 – Utilities and Subscriptions
Utilities can also vary from month to month. Heating bills will cost more in the winter months than summer. My bills have varied from $40 dollars to $70 per month.
You should always get internet services for your new unit. This is one your must-dos. If you were to pick only one– pick internet. It also helps you to rank higher in Airbnb’s search algorithm.
For my second unit, I decided to get a Smart TV. Now, getting a smart TV meant extra subscription costs like Netflix and HBO. I pay $10 dollars a month for Netflix and $15 a month for HBO. You don’t need both, so I’d pick Netflix if you’re just starting out.
A TV is a really nice feature for a family because it would keep small children entertained. This is something to think about depending on who your clients are.
Airbnb Business: Factor #5 – Soft Goods
What are soft goods? It’s goods like pots and pans, or things that you have in your real home. The reason why Airbnb is better than a hotel is that guests will have access to the kitchen. For a small family, access to a kitchen will help them keep the costs down.
Check out this shopping template that I have created for you.
Airbnb Business: Factor #6 – Replenishable Goods
Things like toilet paper and paper towels are what I call replenishable goods. When you set your cleaning fee, be sure to include these costs into them. For example, if you’re thinking about charging $40 dollars per clean, then tag on another $10 dollars so that you can cover for these goods. I tag on another $20 because I also provide green cleaning products for my maid.
Airbnb Business Factor #7 – Services
These services include interior decorators, furniture assembler, and a professional photographer. The rates will vary depending on the market…
If I were to only pick two, I’d definitely prioritize interior decorator and a photographer above the furniture assembler. Having a furniture assembler is nice, but it’s not a must…
Let’s Tally Up
Again, your costs will be different from mine because of the location. Silicon Valley is extremely expensive in terms of rent and living costs.
Generally speaking, for a 1-bedroom unit, it’ll cost between 6-7 thousand dollars.
A 2-bedroom unit will cost around 8-9 thousand dollars.
As you become more experienced, you will know exactly what to cut and save on expenses. As you can see, my second unit was significantly cheaper than my first. I saved about $1,500 dollars. You can definitely do the same.
**Update: I’m going show you a couple of different ways to acquire furniture that could bring down the initial costs by up to 30~50% in my premium course.
Separately, you can read my guide on making money with Airbnb Hosting.
Be smart about your investment. Keep track of all the initial costs because you just might get most of it back when it comes to tax season! I use Google Sheets to keep track of them all.
Want to get a headstart on Airbnb Arbitrage? Digest this e-book in 30 minutes or less.
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