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.
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.
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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RicoPosted at 06:58h, 15 October
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?
SamPosted at 05:35h, 17 October
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!
RicoPosted at 07:00h, 18 October
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?
RicoPosted at 07:02h, 18 October
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.
SamPosted at 02:30h, 21 October
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 PulleyPosted at 14:15h, 25 November
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 ZuoPosted at 12:18h, 28 November
I 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.
MKPPosted at 13:39h, 28 December
Do you spread all your units across the state depend on profit or focus on just where you live?
Sam ZuoPosted at 13:50h, 28 December
You 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 LeePosted at 16:18h, 23 February
I 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 ZuoPosted at 09:42h, 24 February
That sounds like a great market to be in, Denise.
If you have more questions, please send it to Brenda@www.passiveairbnb.com.
Kevin WilliamsPosted at 15:10h, 22 October
Please call me 954 856 1708
Sam ZuoPosted at 09:51h, 24 October
I’ll have my assistant reach out and schedule a call.
AmirPosted at 13:29h, 07 February
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 ZuoPosted at 03:48h, 08 February
Good for you and good luck!
Stanley AikoriogiePosted at 17:22h, 23 May
Sam ZuoPosted at 05:13h, 25 May
PachiPosted at 19:43h, 18 June
Hello, 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 ZuoPosted at 01:06h, 21 June
I’m sure lots of families go there without looking into it too much.
Serena WalkerPosted at 06:57h, 29 September
Hi 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 ZuoPosted at 12:48h, 29 September
Are you willing to commute to set it up first? You can outsource once your unit is up and running.
Ryan LesserPosted at 16:19h, 08 November
I 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 ZuoPosted at 10:27h, 10 November
Don’t remember. It was almost 5 years ago.
Ryan LesserPosted at 17:56h, 10 November
I 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 ZuoPosted at 11:44h, 11 November
Ryan- 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 LesserPosted at 13:40h, 11 November
I 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 ZuoPosted at 07:38h, 14 November
Two 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 LesserPosted at 13:29h, 15 November
Very wise. Thank you!
Sam PPosted at 02:43h, 15 December
Hi! 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 ZuoPosted at 12:42h, 16 December
No. And yes, it should be written in the contract.
Nichole MainaPosted at 20:48h, 23 January
Hey 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 ZuoPosted at 06:05h, 24 January
Yes, ask even though it’s really awkward in the beginning. There’s a template that could help (landlord outreach email template).
MarkPosted at 04:50h, 24 January
Everywhere 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 ZuoPosted at 06:03h, 24 January
I 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.
JesikaPosted at 14:17h, 19 March
Hello 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 ZuoPosted at 04:36h, 20 March
Check out my email list. One of the lessons is on how and where to choose.
Grace AnnPosted at 06:54h, 06 July
Hi 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 ZuoPosted at 08:53h, 01 August
I’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 PhelpsPosted at 06:58h, 08 October
I’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?
Sam ZuoPosted at 14:10h, 08 October
You can find all your answers here.