
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.**
Table of Contents
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.
If you are renting in a city like Las Vegas, then I’d assume rent will be much cheaper than a city like San Francisco. The actual amount would vary from city to city or town to town.
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.
Final Words
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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Interest in learning how to build your rental arbitrage empire? You can subscribe to my blog and learn tips and insights on my process of creating a profitable 6-figure passive income business using other people’s home. I write on the regular and offer free tips and insights.
Rico
Posted at 06:58h, 15 OctoberHello,
Im really curious why you not just rent unit that has already been fully furnished? Why you start with empty unit and buy all the furniture from scratch?
Thank you
Sam
Posted at 05:35h, 17 OctoberHi Rico,
Good question. From my research, there are benefits of doing this from scratch.
1) Furnished units cost a lot more… sometimes 3x as much as a normal empty unit.
2) Furniture can be used to minimize tax or deducted as an expense.
3) You have complete control in what goes into your unit- IE you can dictate how you want to decorate the unit.
Hope this helps!
Sam
Rico
Posted at 07:00h, 18 OctoberSam,
Then what happen if the unit is not profitable? What you do with all the furniture you bought?
From your experience, how high is your success rate?
For example from 10 unit you rent,
how many property that makes profit after paying the rent and other cost?
Have you tried to rent out your unit like HMO business? For example, you rent unit with 3 bedroom. Have you rent out those 3 bedroom separately? Or maybe make the living room to be 4th bedroom so you have total 5 bedroom to be rented out. It can be really boost our profit. Will it work with airbnb?
Rico
Posted at 07:02h, 18 OctoberEdit:
I mean “so you have total 4 bedroom to be rented out. It can be really boost our profit. Will it work with airbnb?”
Btw thanks a lot for making this blog and sharing your experience.
Sam
Posted at 02:30h, 21 OctoberHi Rico,
1)Market research is really important to eliminate any unprofitable areas. For example, I would never go into a small rural town in Wisconsin where there are no businesses or tourists.
2) Because I choose highly profitable areas, all of my units are revenue positive.
3) That model could work. I haven’t tried it yet, so I don’t know what the outcome would be. However, I imagine it’s more work and potentially more conflicts between random roommates.
4) Absolutely, Rico! Thanks for subscribing and commenting. I appreciate your feedback and questions. 🙂
Ian Pulley
Posted at 14:15h, 25 NovemberHello,
I am looking to get into this business with one of my father. I am just out of college. Do you think it is possible? I just worry that it would be hard to make much money back if you fail. Though I honestly want to do this. This business model seems really great but as a college student myself funds are low that’s why I wanted to do it with someone.
I live in a popular tourist town in Virginia so I think it could really work here.
Sam Zuo
Posted at 12:18h, 28 NovemberI can’t tell you what to do. But if you believe in yourself, do your research, and be open to challenges, then I think it’s very possible.
Keep me posted.
Sam
MKP
Posted at 13:39h, 28 DecemberDo you spread all your units across the state depend on profit or focus on just where you live?
Sam Zuo
Posted at 13:50h, 28 DecemberYou should narrow in a profitable area near you then focus on that (scale). Once you become an expert, find areas that are more profitable in your own state or other states.
Denise Lee
Posted at 16:18h, 23 FebruaryI live in Bluffton, S.C. right outside of Hilton Head, S.C. so I think I have a good location for rentals. I have a 3 bedroom house that I could easily divide but one side wouldn’t have a kitchen. It would have a large bedroom, small bedroom and a bath. All of this is new construction. It’s a quite neighborhood with a fenced in backyard. I also have a 30 ft. camper that I can rent. What are your suggestions. My husband will retire in the fall and we’ll need extra income. We are both 70 and when we travel we usually stay in a bed and breakfast……that’s located in a small town close to a college. We also have a college near us.
Sam Zuo
Posted at 09:42h, 24 FebruaryThat sounds like a great market to be in, Denise.
If you have more questions, please send it to Brenda@www.passiveairbnb.com.
Kevin Williams
Posted at 15:10h, 22 OctoberPlease call me 954 856 1708
Sam Zuo
Posted at 09:51h, 24 OctoberI’ll have my assistant reach out and schedule a call.
Amir
Posted at 13:29h, 07 FebruaryHi Sam,
I would like to start this business. I have no idea about this business, but I am following your advice. I hope to get on the right track.
Sam Zuo
Posted at 03:48h, 08 FebruaryGood for you and good luck!
Stanley Aikoriogie
Posted at 17:22h, 23 MayGreat Post
Sam Zuo
Posted at 05:13h, 25 MayThanks Stanley!
Pachi
Posted at 19:43h, 18 JuneHello, Sam. I know you can’t tell me for sure, but I’ll ask anyways: do you think Orlando, FL (disney world, universal studios, etc) is a good city to start an airbnb arbitrage in 2021?
Sam Zuo
Posted at 01:06h, 21 JuneI’m sure lots of families go there without looking into it too much.
Serena Walker
Posted at 06:57h, 29 SeptemberHi Sam, How hard is it to have a rental property in another city? I live in St. Louis but I know the Nashville and Memphis markets are doing much better with Airbnb. I am getting ready to quit my job and I want to rent property in the most profitable areas.
Sam Zuo
Posted at 12:48h, 29 SeptemberAre you willing to commute to set it up first? You can outsource once your unit is up and running.
Ryan Lesser
Posted at 16:19h, 08 NovemberI looked at your price breakdown for everything you spent and am having troubles figuring out how you made $1,000 in profit on the first property in the first month. Are you not accounting for the fact of breaking even on your investment of $7,480? How much were you charging a night and what was your occupancy rate that first month?
Sam Zuo
Posted at 10:27h, 10 NovemberDon’t remember. It was almost 5 years ago.
Ryan Lesser
Posted at 17:56h, 10 NovemberI feel like we could be painting a clearer picture for your readers. Those who are starting from scratch need to understand how long it will take to break even on their initial investment (furniture, first month’s rent, security deposit, etc.). If we say that’s about $7,000 and you make $2,000 in revenue your first month (where rent is $1,000), and keep making that much, then it will take you 7 months to break even on your initial investment. That’s a very different picture than making $1,000 in “profit” your first month, as you mentioned in your blog.
Granted, you did talk about how you can slowly raise your prices after you’ve beat out the competition, so perhaps that time can be shortened a little bit. But I think this is an important consideration to mention for your readers so they can understand a more realistic picture, especially for people like me who may not have $7,000 just lying around to invest and would need to get a loan from the bank. In that case, the time to regain the cost of investment will be slightly lengthened for interest on the loan.
Sam Zuo
Posted at 11:44h, 11 NovemberRyan- keep digging. I’ve mentioned my breakeven month in my blog posts and in my ecourse. You haven’t gone deep enough. My profit in this case was gross minus monthly expenses. This industry have evolved so much in that last 5 years. You can now lease furniture which could significantly bring down your upfront costs.
I’ve turned people away from my course when I found out that they didn’t have enough to put down for a security deposit. Remember, this blog is free – just because you read a few blog posts of mine doesn’t make you suddenly a seasoned Airbnb host. I implore to start your own and then come back to this blog post and contribute rather than taking the disguise of “moral indignation” to criticize my work from almost 5 years ago. I don’t need this kind of contribution on my blog.
Granted, I was a shitter writer (probably still am) back then. I admit that without shame.
Ryan Lesser
Posted at 13:40h, 11 NovemberI apologize. I didn’t mean to criticize you or your work. I actually highly appreciate your work and the fact that you are sharing it in such an open way with everyone. I acknowledge that your course probably dives much deeper into the details. I was just concerned cause after reading as many of your blog articles as I could get my hands on, things still weren’t adding up for me. I wanted answers because I really hope to make this model work for me some day. If you could kindly point me in the direction of your articles that talk about break-even numbers, I would love to read it. Thanks, Sam!
Sam Zuo
Posted at 07:38h, 14 NovemberTwo thoughts – paralysis by analysis – don’t fall victim to them. 2) Perfection is counter-productive when starting something new. I hope this model can work for you too in the future. You can always start by renting out your property first before taking on extra risks.
Ryan Lesser
Posted at 13:29h, 15 NovemberVery wise. Thank you!
Sam P
Posted at 02:43h, 15 DecemberHi! Isn’t it hard to find a landlord you rent from that will let you host Airbnb’s? I’m pretty sure you have to have something special written in your contract agreement about this.
Sam Zuo
Posted at 12:42h, 16 DecemberNo. And yes, it should be written in the contract.
Nichole Maina
Posted at 20:48h, 23 JanuaryHey Sam! I’ve been diving into the endeavor of starting my own AirBnb as well. This forum is great and I commend you on your journey thus far. To double tap on the last question, is it as simple as looking for a place of your own and simply asking the landlord if they’d be okay with the AirBnb idea? or in what instance would you typically bring up the proposition? Great job!
Sam Zuo
Posted at 06:05h, 24 JanuaryYes, ask even though it’s really awkward in the beginning. There’s a template that could help (landlord outreach email template).
Mark
Posted at 04:50h, 24 JanuaryEverywhere I’ve looked so far the long term rents don’t leave enough for profits on the short term when comparing on Airbnb. How did you find a long term rent so low that you could undercut the competition?
Sam Zuo
Posted at 06:03h, 24 JanuaryI got into Airbnb in 2017. I’m not sure where you are, but it takes some more research and I’m sure you didn’t look “everywhere” as that’s impossible.
Jesika
Posted at 14:17h, 19 MarchHello Sam! Loved you’re article and free e-book! Quick question, how do you determine the best rental property type for your Airbnb? Ex: are your units homes? Apartments? Did you build your own? Thank you so much
Sam Zuo
Posted at 04:36h, 20 MarchCheck out my email list. One of the lessons is on how and where to choose.
Grace Ann
Posted at 06:54h, 06 JulyHi Sam. Your column has been the most helpful and in depth. So far, I have been able to understand how to go about getting and holding a property. However, one thing that I still need help understanding is the NET 30 which everyone advises. I understand what it is and how it works, I just don’t see anything that I could purchase from these companies and actually use. Do you purchase these things and just give them away or are there companies that actually offer items you could actually use for your business. I would really like to hear your answer.
Sam Zuo
Posted at 08:53h, 01 AugustI’m not sure what you meant by “purchase from these companies?” I used Amazon for a lot of stuff. You can check out some furniture leasing companies too.
I wrote about it if you do a search.
Derek Phelps
Posted at 06:58h, 08 OctoberI’m in AZ, Phoenix suburban area, Chandler. I have a 2 bedroom townhouse I live in solo. I’m thinking of starting my Airbnb business from my home, as a live in host. Currently, it’s messy. What is a suggestion for getting it cleaned and organized, as well as decluttering. How do you establish basic rules for guests, and communicate what they can expect from you as the live in host?
How to cater the guests for 5 star reviews without spoiling them, so they don’t walk on or abuse the privileges?
Is it possible to start as a Airbnb Business, from your own, as the live in host?
Thanks.
Sam Zuo
Posted at 14:10h, 08 OctoberYou can find all your answers here.