Hey there, fellow Airbnb host! Are you wondering how to create a budget for your short-term rental? Well, worry not! We’ve got your back. Creating a budget for your Airbnb can seem daunting, but it’s an essential step to ensure that you’re able to cover your expenses and make a profit while providing a positive guest experience. In this post, we’ll walk you through the basic steps you can follow to create a budget for your short-term rental property.
Step 1: Estimate Your Rental Income
The first step in creating a budget for your Airbnb is to estimate your rental income. To do this, you’ll need to research comparable properties on Airbnb to get an idea of the average nightly rate you can expect to charge based on your location, property size, and amenities. Once you have a rough estimate of your nightly rate, multiply it by the number of nights you expect to rent out your property each month to calculate your monthly rental income. (Hint: if you don’t know where to start for estimating your revenue, we recommend using a platform called AirDNA).
Step 2: Estimate Your Expenses
The next step is to estimate your expenses. As an Airbnb host, you’ll incur various expenses, including cleaning fees, utilities, property maintenance, and supplies like linens and toiletries. It’s essential to research local laws and regulations to ensure that you have accounted for all necessary expenses, such as taxes and licensing fees. You can also use Airbnb’s host fee calculator to estimate your expenses more accurately. (Note: Depending on which booking platform you use, your fees may change. For example, Airbnb and VRBO have different cost structures for your expenses as a host. It’s important to research and be aware of these!)
Step 3: Calculate Your Profit
Once you’ve estimated your rental income and expenses, it’s time to calculate your profit. Subtract your estimated expenses from your estimated rental income to determine your potential profit. Keep in mind that unexpected expenses can arise, so it’s a good idea to budget for contingencies.
Step 4: Adjust Your Prices
If your estimated expenses exceed your estimated rental income, you may need to adjust your prices to ensure that you’re able to cover your costs and make a profit. Alternatively, you can look for ways to reduce your expenses, such as outsourcing cleaning or maintenance tasks. As we mentioned earlier, don’t forget to factor in any fees charged by Airbnb or other booking platforms you use. (Hint: if you use a third-party pricing platform like PriceLabs, the nightly rate will be automatically adjusted for seasonality and demand, which can increase your overall profit. For example, the second weekend in May in Spokane is Bloomsday, where nightly rates can be significantly higher than normal. You want to ensure that your pricing takes events like these and overall demand for your area, into account!)
Step 5: Monitor Your Budget
As you begin hosting on Airbnb, it’s essential to track your income and expenses to ensure that you’re staying within your budget. You should adjust your budget as needed to reflect changes in demand, expenses, or other factors. When creating your budget, it’s important to factor in short-term rental expenses like Airbnb host fees, property maintenance costs, and contingency budgeting for unexpected expenses. You can also consider using property management services to help relieve stress and increase your revenue. Property Management companies are experts in this field and can manage your property, including rental income calculation and pricing optimization, seamlessly. If you are in the Spokane, WA area please don’t hesitate to reach out to Slumber Spokane, one of the incredible professionals in our area!
By taking the time to create a budget for your Airbnb, you’ll be well on your way to hosting successful stays and earning some extra cash. Remember to keep an eye on your expenses and be prepared to adjust your prices as needed. And don’t forget, if you ever need a helping hand, there are plenty of tools and resources available, like PriceLabs and property management companies, to make your hosting journey a little easier. So what are you waiting for? Start crunching those numbers and get ready to welcome your next happy guests!
Written in collaboration with Slumber Spokane Property Management.