21 Mar The Ultimate Guide: How to be an Airbnb Host in San Francisco
As you know, SF recently passed a law that would require all short-term rentals to register with the city. Where do you even start? So, if you’re thinking about Airbnb hosting in San Francisco, then this is the guide for you.
Table of Contents
Before You Start
Understand Airbnb Rental Arbitrage
The market in SF was driven up by professional hosts. These hosts follow a model called Rental Arbitrage. In this case, you are renting a property out at a lower price and leasing it out via Airbnb at a higher price. For example, you lease a 1-bedroom apartment at $1,000 dollars a month and rent out the same 1-bedroom for $2,000 dollars a month on Airbnb. Your net profit is $1k a month.
Decide What Kind of Airbnb Host You Want To Be
Hosts that are on Airbnb run the whole gambit of part-time, full-time, and professional investors. Let’s categorize on how you can identify which type that you wish to pursue.
Generally speaking, here are the 5 types of Airbnb entrepreneurs. You can read more on that here.
- The Opportunitist Airbnb Entrepreneur
- The CouchSurfer
- The Jet Setter
- The Traditional Vacation Homeowner
- The Full-Time Airbnb Entrepreneur
This Airbnb entrepreneur has at least one property listed on the site year-round with the goal of maximizing revenue and achieving 100% occupancy. This is also the category that I fall into. I have multiple units spread out the Bay Area.
Set Realistic Expectations for Time Management
Before I stepped into this business, I drew up a plan for myself. I wanted to get a new unit up and running every month. So, the questions below will help you narrow down to the type of Airbnb host you want to be.
What kind of business do you hope to run?
I knew that I wanted to run a passive income business that is not dependent on a location. So I made a short list on a very high-level.
- Not tied down to a location or chained to a desk
- the flexibility to work remotely and the freedom to travel when I want
- work fewer hours and stress less
How much time do you have to invest in this business?
When I started this business, I was just transitioning out from a consulting gig for a drone company. I knew that I didn’t want to go back to a full-time corporate job. So right then, I decided to focus on this full-time. I probably worked about 15-25 hours a week in this business. It took me about 6 weeks to get everything up and ready on Airbnb for my first unit.
How much capital do you have at your disposal?
I started with $5,000 dollars in cash. The cash was only used to cover the 1st-month rent and security deposit. For the rest of the expenses, I used my best friend – American Express.
How Does Airbnb Business Work?
The first step is to become an Airbnb host and register your property by submitting photos and descriptions of the space for rent. Once a property is listed with Airbnb it can be viewed by travelers looking for accommodation in the host area. Guests can search the Airbnb listings using a variety of criteria such as:
- dates of availability
- number of rooms, bedrooms, and washrooms
- amenities such as breakfast, hot tub, pets allowed, etc.
- host language
- facilities such as parking, air conditioning, etc.
Before booking a chosen accommodation through Airbnb the guest can contact the host directly for further information via the Airbnb messaging service.
As well as browser access, Airbnb has mobile apps for Apple IOS and Android devices.
For security purposes, hosts must provide acceptable identification to Airbnb. To build a trusted community, travelers can post reviews of accommodations (and hosts can review guests). Reviews are not anonymous.
For guest peace of mind, Airbnb provides a secure payment platform and payments to hosts are withheld until 24 hours after guest arrival. Airbnb has a 24-hour guest hotline in case any issues are encountered during the rental period.
The host sets the price for the lodging and Airbnb charges the following fees:
- Host: 3 percent payment transaction fee
- Guest: 6-12 percent booking fee
Hosts may require a security deposit and may also charge a cleaning fee.
Depending on the jurisdiction, Airbnb may apply state, provincial, or city taxes to guest bookings.
How to Be an Airbnb Host in San Francisco
Before you decide to start an Airbnb business, make sure you are legally allowed to become an Airbnb host in your jurisdiction, and you are prepared to follow local laws and regulations!
Local laws regarding the hosting of paying guests can vary greatly depending on your city/state or provincial laws—in some locations they have prohibited altogether while in others they are subject to an occupancy tax.
As you know, SF has recently passed a law that will require all STR units to register with the city. Thousands of listing perished from Airbnb overnight! This is the link where you can find out the comprehensive and exhaustive list of requirements. Or, you can read on, because I have simplified this process for you.
(Do you want a step-by-step checklist? Click here to download it)
In order to qualify for it, you’ll need to pass these eligibilities requirements.
What Are the Eligibilities Requirements?
- Primary Residency Requirement. To register your listing, you must live there for at least 275 days per year (or, if you haven’t lived there for a full year, 75% of the days you have occupied the unit). This means, in effect, that your ability to share your space while you are present is unlimited, and you may rent out your entire space while you are absent for up to 90 days per year.
- Liability Insurance. The law requires hosts to maintain at least $500,000 of liability insurance. If you host exclusively through Airbnb, our Host Protection Insurance (HPI) program satisfies this requirement.
- Rent Control. Administrative Code, Chapters 37 and 41A contains special rules that apply to hosts in rent-controlled properties, including limits on the amount you may collect each month from guests. If you live in a rent-controlled property, you should review these chapters carefully.
- Building and Housing Standards. San Francisco enforces rules and regulations specifying minimum construction, design, and maintenance standards for buildings, including regulations on habitability, health, and safety. For more information, please review the San Francisco Building Inspection Commission Codes, or contact the Building Department directly.
- Other Rules. It’s also important to understand and abide by other contracts or rules that bind you, such as leases, condo board or co-op rules, HOA rules, or rules established by tenant organizations. Please read your lease agreement and check with your landlord if applicable.
If you are able to pass all of the above, then you have succeeded in moving to the next step. Congrats, you have leveled up! Now, onto the last step of the process.
How to Register with the City of San Francisco
You can apply through the San Francisco Treasurer & Tax Collector’s Portal.
Here is the process for that:
Step 1 – Complete the Application
Step 2 – Sign the Form
Step 3 – Pay the Business Registration Fee (if applicable)
Other Things to Note
San Francisco imposes a 14% Transient Occupancy Tax (TOT) on reservations of fewer than 30 nights. Airbnb collects and remits the TOT in San Francisco; more information about that process is available here.
Do you want to know a loophole to all of this? You can start a monthly sublet of 30 days or longer. This way, you are not required to register with the city.
shhh, don’t tell them that. 😉
Bonus: check out my 121+ most profitable ideas that you can start from home.