How much will this Airbnb Business Cost Me to Start

How much will this Airbnb Business Cost Me to Start?

How much will this Airbnb Business Cost Me to StartIn 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.

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 be varied from city to city, or town to town.

For me, I have units in Mountain View, California. My rent ranges from $1800 to $2200 dollars a month. Then you tag on a variable security deposit that ranges from $500 to $1000 dollars. It is not atypical where a landlord will ask for one month worth of rent as a deposit.

How much will this Airbnb Business Cost Me to Start

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.

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

How much will this Airbnb Business Cost Me to Start

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.

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 in another $10 dollars so that you can cover for these goods. I tag in another $20 because I also provide 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.

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 it all.

How much will this Airbnb Business Cost Me to Start

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.

 

5 Comments
  • Rico
    Posted at 06:58h, 15 October Reply

    Hello,

    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 October Reply

      Hi 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 October Reply

    Sam,

    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 October Reply

    Edit:
    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 October Reply

    Hi 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. 🙂

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