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How I Earned $350K from Airbnb Last Year – But It Wasn’t as Simple as It Sounds
When most people think of short-term rental (STR) hosts, they likely imagine someone living the dream—relaxing on a balcony with a breathtaking view, effortlessly earning passive income while guests come and go without a hitch.
Unfortunately, the reality of STR hosting is far from picture-perfect. Last year, I brought in $350,000 in gross revenue from four properties I own, but it wasn’t as easy as it might seem. From identifying the right markets to managing Airbnb expenses and using accounting software, the life of an STR investor can get pretty chaotic. Here’s an honest look at the challenges and rewards that come with running an STR business, and a shoutout to Baselane for helping me keep my finances organized (more on that later).
Scaling Your Business Without Breaking Down
Want to make serious money in the STR business? The secret is expansion. You won’t hit $350,000 with just one property. Multiple units or a larger property are necessary to generate that kind of revenue.
My journey began with a modest home on 12 acres in a regional tourist area. I lived there for a year to take advantage of an owner-occupied loan while saving for a large down payment. With the additional land, I built three cabins to boost revenue and reduce operating costs.
We started small, only launching one rental while constructing our first cabin. Any profit made was reinvested back into the property to keep scaling. Today, each cabin generates $90,000 annually, and the original house earns around $60,000 per year. It wasn’t always easy, and there were several times when I nearly gave up.
Not every host is interested in building a full-fledged STR business, but thinking big can still pay off. Finding the right properties in the right markets is key, and that means identifying locations where people actually want to stay. Your Aunt Edna’s cozy cottage may be adorable, but that doesn’t guarantee it will book like a hotcake.
The trick is finding the ideal balance—locations that aren’t oversaturated but aren’t in the middle of nowhere either. I follow the 60/30/10 rule: within 60 minutes of a major city, 30 minutes from a tourist destination, and 10 minutes from the basics (a gas station counts as civilization). This way, I can ensure steady demand year-round and minimize unexpected occupancy issues.
Harnessing the Power of Technology
When I first entered the STR game, I handled everything manually, and it was far from stress-free. Enter technology: the essential tool that lets me manage my STR operations without losing my mind.
For starters, smart locks have made key management a breeze, saving me from frantic late-night calls. And pricing software? It’s indispensable. Tools like PriceLabs and Beyond Pricing automatically adjust my rates based on market data, maximizing bookings. Gone are the days of manually setting rates and crossing my fingers.
The real game-changer, however, is automation. Booking software now handles everything from guest communication to cleaner scheduling, plus reminders for guests to leave reviews. With these tools in place, I have more time to focus on important tasks—like analyzing coffee beans or, you know, running my business.
Mastering the Art of Money Management
Tracking finances is one of the less glamorous parts of STR success. Scaling your business means managing costs across multiple properties, keeping an eye on revenue, and dealing with the never-ending list of expenses. Without efficient systems in place (thanks to Baselane), I would have missed out on critical details affecting my profitability.
Baselane has been a game-changer for managing my STR finances. Here’s how:
- Banking and bookkeeping in one place: I can set up separate bank accounts for each property, making it easier to track income and expenses for each unit without mixing up funds.
- Effortless expense tracking: Baselane automatically categorizes transactions, so I no longer have to worry about manually organizing invoices and receipts.
- Automated reports: With Baselane’s reports, I can quickly identify which units are performing well and which may need a bit of attention.
- Tax season, simplified: Baselane generates detailed reports that make tax preparation a breeze, reducing the stress of preparing for tax season.
The Realities of STR Hosting
While the income is fantastic, STR hosting is not without its challenges. Here are some truths I’ve learned along the way:
- Guest Behavior: You might get a peaceful couple celebrating an anniversary—or a surprise frat party. STR hosting comes with its share of surprises, from broken appliances to unexpected messes.
- Maintenance: Unlike long-term rentals, STR properties require a team on standby for repairs, Wi-Fi issues, and everything in between. Keeping the property in top shape is essential for maintaining good reviews and high occupancy rates.
- Regulations: STR regulations are constantly evolving. Staying updated on local laws is crucial to avoid fines or property shutdowns.
The Final Takeaway: More Than Just Money
Despite the headaches, running a successful STR business has been incredibly rewarding. Scaling from one property to multiple units, automating tasks, and using the right tools has made this venture sustainable. While the income is certainly a nice perk, the real benefit is the freedom it offers.
With careful planning, a solid sense of humor, and Baselane handling the financial side of things, I’m able to weather the ups and downs of STR hosting. As long as the money keeps flowing and I can avoid midnight key searches, it’s all worth the effort.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
How I Earned $350K from Airbnb Last Year – But It Wasn’t as Simple as It Sounds
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“