ADU GUIDE

Starting an Airbnb: Renting Out Part of Your Main Home and Live in Your ADU

Starting an Airbnb is an appealing side hustle that can earn you extra income. Learn how to do it by renting out part of your home with an ADU.

CottageJanuary 01, 2018

Airbnb is more popular than ever, and it’s easy to see why. After all, it fosters a mutually beneficial relationship between guests and hosts. Hosts reap benefits in the form of rental income that can be quite lucrative in touristy destinations like Los Angeles and San Francisco, while guests get a unique and comfy place to stay.

NOTE: Many municipalities have local regulations that prohibit homeowners from renting their ADU for less than 30 days at a time. However, you can either rent out the ADU for a longer period of time or live in the ADU yourself and Airbnb your main home for however short or long of a stay as you’d like.

If this sounds appealing to you, here’s what you need to do:

What Is Airbnb and How Does It Work?

Airbnb is an online platform that lets property owners rent out their spaces to guests looking for a place to stay. Airbnb provides guests with a more personalized approach to travel. Instead of dealing with a corporate hotel chain where all the rooms are the same, guests can interact with a local host and a unique space.

Unique spaces on Airbnb can range from shared rooms to private bedrooms in single-family homes, to entire mansions, cottages, cabins, yurts, castles, and more. With Airbnb, guests can have accommodation experiences they otherwise wouldn’t be able to have with more personality and flexibility involved.

So how does it work? Airbnb is part of the “sharing economy,” wherein property owners share their spaces with guests in exchange for a fee.

Property owners list their spaces on Airbnb’s online platform. They provide information, rules, and photos of the property. They also set prices and availability calendars for booking.

From there, travelers browse listings and find one that meets their needs and budget. They work directly with the host to book the listing and continue to communicate with that host up until arrival and throughout the stay.

Why Should You Start an Airbnb?

There are so many different reasons why you should start an Airbnb. Some people love the idea of hosting people in their homes. This process offers an opportunity to meet new people from different cultures and learn about different parts of the world. However, almost everyone loves the financial benefits of starting an Airbnb.

Starting an Airbnb can provide you with a ton of extra income that you can then use to cover your mortgage, education expenses, retirement, etc. The possibilities are nearly limitless. To get an idea of what you can earn on Airbnb, you can use their website to gather more information. You just need to input your location, accommodation type, and accommodation size to get an estimate.

For instance, you can rent out your entire place for four people in San Francisco, California, for up to $4,012 a month. You can rent out your entire place for two people in Los Angeles, California, for up to $2,985 a month.

Factors To Consider Before Starting an Airbnb

However, before you rush into starting an Airbnb to earn extra money, you need to consider the money and time that go into it. Running an Airbnb is just like running a business. This venture requires both initial and consistent investments of time and money.

For starters, you will likely need to invest time and money into transforming your property into a rentable space. You will need to consistently spend money maintaining the space while spending time managing it.

Different Ways To Start an Airbnb

There are so many different ways that you can start making money with Airbnb, including long-term and short-term rentals.

So, whether you have a tiny home, mobile home, or ADU, here are some different methods for you to consider before you take the Airbnb plunge:

Real Estate Investing

Perhaps the most obvious way to start an Airbnb is to invest in real estate. This method involves purchasing an investment property and renting it out on the Airbnb platform and other rental platforms like VRBO. With this method, you’re not actually living at the property, you’re just managing it.

Since this is exclusively an investment property, this means that you solely focus on maximizing your return on investment. So, double-check that the property you purchase is in a desirable location. Also, ensure that the property has the features that renters are looking for. Finally, make sure that you’re able to cover your monthly mortgage costs, property taxes, and maintenance costs with the rental income you’re earning. These will vary based on the particular city, county, and state.

Investing in Your Existing Property

If you don’t have the capital or the desire to invest in a new property but already own the property where you live, you may want to consider investing in your existing property. You can transform part or all of your current space into a functioning Airbnb space. The good news is that this doesn’t mean that you have to move out.

Instead, you can change how you use your existing space to make it useful for rental purposes. There are several different ways that you can do this. For starters, if you have a spare bedroom, you can rent out just the bedroom through Airbnb. Just keep in mind that you would need to share spaces like kitchens, living rooms, and bathrooms with your tenants.

On the other hand, you could choose to rent out a separate but attached part of your home, like a basement or garage unit. Transforming these spaces into rentable units would likely require renovations to add a bathroom and bedroom space, and if possible, a kitchen and living space as well.

Finally, you could utilize your existing property to build a separate rental unit that you can list on Airbnb. These units provide the most privacy for both you and your tenants. At the same time, you’re still right next door if they encounter any issues during their stay. You can also charge premium prices for these units since they’re considered by Airbnb to be “entire places” — rather than private rooms.

The Best Way To Start an Airbnb

Based on these different methods, the best way to start an Airbnb while saving money is to use the property you already own to turn it into a rentable space. That way, you don’t have to take out a second mortgage and can earn extra income that you can put toward your current mortgage.

This option is also more convenient when it comes to management. If a tenant has any issues during their stay, instead of driving across town, you can simply walk next door and take care of it. Many people feel more comfortable knowing that their host is close by and is familiar with the area.

Finally, starting an Airbnb on your existing property will likely add to your property value. So not only will you benefit immediately by earning extra income to help cover your mortgage costs, but you will also benefit in the long-term when you decide to sell the property as potential buyers will take note of the rental possibilities.

How to Start an Airbnb?

If you’ve decided that starting an Airbnb is right for you and are ready to earn some extra income, it’s fairly simple to get started.

Follow these straightforward steps:

Step 1: Prepare the Space

First of all, you need to prepare the space you’re renting out. If you need to build onto your existing home, this process can quickly become complicated and costly. For this reason, it’s a good idea to work with professional and experienced builders who are familiar with codes, safe building practices, and local builders and craftspeople.

Cottage offers customized ADUs and cottages based on our clients’ needs. For example, if you’re looking to maximize your rental income and you have the space, you could build a two-bedroom ADU with a full-sized kitchen, multiple bathrooms, and even a laundry space so that you can list the unit for an optimal rate.

On the other hand, if you’re looking for something smaller-scale or are working with limited space, you could build a studio efficiency unit that’s equipped with everything a renter will need but nothing that they don’t. No matter what type of Airbnb you’re looking for, we can help you achieve it with our team of designers and our portfolio of vetted contractors.

Step 2: Create the Listing

Once your space is ready, you need to create a rental listing so that people can start renting the unit and you can start making money. While Airbnb is one of the most popular rental platforms, you should also consider platforms like VRBO and Booking.com to maximize your reach and visibility with potential renters.

Create accounts on these platforms and provide all the necessary information about the unit, including its size, features, rules, etc. Try to be as detailed as possible so that potential renters can feel confident about booking it. You also need to include multiple high-quality photos of the unit: from top to bottom and inside and out.

Step 3: Manage Your Listing

The work isn’t over once your listing goes live — in fact, it’s just beginning. You need to constantly check your messages and respond to questions and bookings. You also need to work to ensure that your tenants have a good experience staying with you. Good reviews will lead to more bookings, while negative reviews can effectively end rental prospects.

Airbnb Best Practices for Success

After you have started your Airbnb, here are some best practices to keep in mind so that you can have a positive experience on the platform and experience success with your rental unit.

All of these individual steps make for an amazing guest experience:

Help Guests Make the Most of Their Trip

If you’re renting out a part of your full-time home, you likely know a lot about the area. You should share your knowledge with your guests to help them make the most of their time in your town. Provide restaurant recommendations, nearby supermarkets, and things to do.

Be Flexible with Check-In and Check-Out Times

While you should definitely have set check-in and check-out times, you should still remain as flexible as possible and be willing to work with guests. After all, guests choose Airbnb over corporate hotel chains for more personalized and flexible experiences.

Use Keyless Locks

The best way to be flexible about check-in and check-out is to use a keyless lock that provides guests with easy access to the unit using a personalized key code. That way, you don’t have to worry about meeting them in person to exchange keys when they arrive and depart.

Turn Up the Charm

Guests also choose Airbnb over corporate hotel chains for a more charming experience. Provide local touches to your unit so that guests feel like they’re having a more authentic experience. Also, incorporate special and memorable design features that people are likely to love and remember long after check-out.

Prioritize Quality

Although you’re in the Airbnb business to make money, that doesn’t mean that you should skimp on quality items for your unit. Make sure to splurge on items that guests will care about the most, like sheets, towels, and mattresses. When it comes to things that are unimportant to guests, feel free to make more economical choices.

Keep it Clean

Another thing that guests care a lot about is cleanliness. As a result, make sure that your unit is properly cleaned in between guests. You can either do this yourself or work with a cleaning service to ensure that the unit is completely spotless when each guest arrives to check in.

Keep it Simple

You should also keep your Airbnb space simple to avoid clutter. So when it comes to decor, it’s best to take a minimalist approach rather than crowding the space with things your guests won’t really need. Keep things off the floor and off surfaces like tables and countertops so that your guests have the room they need to spread out and enjoy the space.

Stock Bathrooms and Kitchens

You provided towels in the bathroom, but guests will truly appreciate a bathroom stocked with useful extras like shampoo, conditioner, body wash, face wash, blow dryer, etc. Also, make sure to provide extra toilet paper. You also need to stock the kitchen with cooking basics like salt, pepper, and oil and cooking tools like pots, pans, plates, and silverware.

Be Responsive To Any Issues

Issues are inevitable when starting an Airbnb. And even though you’re just next door, you still need to be prepared to quickly deal with any issues that are beyond your capabilities — for instance, plumbing problems — with trained and experienced professionals.

Honestly Above and Beyond

The key to running any type of business, going above and beyond is helpful when it comes to starting an Airbnb. Be honest on your listing in terms of the features of the unit and provide accurate photos.

Then, make sure to go above and beyond with things like cleanliness and small touches that show that you care about your guests. For example, your guests might appreciate extra touches like local postcards and stamps to send home to friends and family.

A Trip of a Lifetime

So to get started with your Airbnb journey, reach out to Cottage for an ADU consultation. Cottage can help you design and build the perfect ADU for your needs to create a space that you and your family will love every day. We can also provide guidance around local regulations and how you can and cannot use your ADU and main home for Airbnb.

Sources:

15 Rules for Every First-Time Airbnb Host | Travel & Leisure

The Sharing Economy - What It Is, Examples, And How Big Data, Platforms And Algorithms Fuel It | Forbes

Is running an Airbnb profitable? Here's what you need to know | CNBC

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