This is the update you have all been waiting for!! 😉 As you may have read in a previous post of mine, I converted one of my Indianapolis rental properties into a full time AirBnb vacation rental. I have never had or managed a short-term rental before so I have been learning as I go and trying to figure out the best and most efficient way to run this new business of mine. How is my Airbnb experiment going so far you ask? Well here you will see my actual Airbnb income and expenses after two months of being in operation. The income comes from Airbnb as well as VRBO (Although I have only had 1 booking through VRBO so far).
As you will see, each month has been progressively getting better for me which is what I originally expected. This is due to a strategy I used to start the listing at a very affordable price. The plan was to start off with a low-priced (cheap if you will) listing so that I can get bookings and more importantly good reviews! As with Amazon or any other service including AirBnb and VRBO, it’s all about the reviews and pictures!! And I had zero reviews to start. 🙁 So with that being said, the strategy seems to have paid off and I am quite pleased with how its turning out so far. I think I have all the kinks worked out now and am anticipating great months ahead. Ill keep my fingers crossed.
My listing first went up on January 24th with my first booking coming in on January 28th. So the info you will find below consists of pretty much two whole months (Feb and Mar) and a few days for January.
Reported Income and Expenses for an Airbnb
Short Term Rental Income
Total Guests/Bookings = 19 (Jan, Feb, Mar)
|January (1 week only)||$464.35|
Short Term Rental Expenses
|January (1 week only) Fees||$13.93|
|Jan Monthly Expenses||$103.75|
|Feb Monthly Expenses||$422.86|
|March (VRBO) Fees||$98.25|
|Mar Monthly Expenses*||$413.02|
*Monthly Expenses – Consist of the following monthly bills we have to keep the airbnb running: Utilities/Internet/Netflix/Insurance/Alarm System
- These monthly expenses are higher than what I originally anticipated and wanted. What it comes down to is the Insurance and Alarm system costs that are hurting me. Between the two of these, it’s an extra $138 per month in bills. These aren’t requirements or necessary depending on who you ask. If you have been following my blog then you know that I like to play it safe and conservative to basically cover my butt if things go bad. And that is exactly why I have these two “unnecessary” expenses. See my analysis below for more info on why I have additional Insurance and an alarm system.
**Misc Expenses: Consist of cleaning supplies, extra towels and blankets and other random stuff we missed on our initial conversion of the property.
- After the first few weeks we realized we needed more towels (bath/kitchen/hand) and blankets to accommodate when we have 4 or more guests at a time so we had to do a small round of additional purchases. We also decided to buy cleaning supplies and coffee cups (keurig) in bulk from costco after the first month so because of those reasons, these misc expenses were high and should not be this high going forward. I think it was just a matter of working out some of the kinks to start. The supplies we have now should last us awhile before we have to replenish. We’ll have to see how it goes.
Actual Income (after expenses) = $2568.74 (for 9 weeks of operation).
This actually is not bad at all. I admit I wanted the income to be higher but considering the circumstances that we just started out, worked out kinks, intentionally set the listing price lower, and the fact that we have a few “unnecessary” expenses makes this a good start and I am satisfied with this income amount. As mentioned above, I am expecting all future months to look like the March numbers or better. That would make it a super great rental for me.
Is Additional Insurance Necessary?
In short, No! It’s not necessary but depending on who you ask. For the time being, I personally do think it’s necessary for my own peace of mind at least. AirBnb and VRBO both offer “insurance protection” for your rental property. I did some research on these and heard some horror stories about it which is what led me to go out and get additional Insurance. The normal landlord insurance policy I originally had on this property was no longer valid when it converted to an Airbnb so I cancelled that policy. I could actually only find a few companies that provide short-term rental insurance. Proper and CBIZ seemed to be my best options. After requesting quotes, I proceeded with Proper Insurance. I definitely feel a peace of mind knowing that if something goes horribly wrong and the Airbnb/VRBO insurance doesn’t cut it, that my additional insurance will take care of it.
What I hate about this though is that darn cost! It’s $113 per month for me to insure this property through Proper. That is a lot of money!
Is an Alarm System Necessary?
In Short, No again! This is not necessary either but it really comes down to where your property is located and how comfortable you feel leaving the house vacant throughout the month. My property is in a downtown neighborhood and although I love living here (I live in the same neighborhood as my vacation rental) and love the appreciation occurring here, there is crime here. It’s mostly petty crime and I personally haven’t had any issues to date with it (knock on wood), so it comes with the territory for having a property so close to downtown. I chose to go with the SimpliSafe alarm system which is a self installed system and costs me $25 per month. To me this one is worth it and necessary. I don’t mind paying this expense.
What about Guest Reviews?
After 9 weeks of operating and 19 actual bookings/guests, we received 15 great reviews . Not one bad review has come in. That is super awesome and exactly why we started the listing at an affordable price to start out with. I would highly recommend you use this strategy if you decide to start your own short-term rental. It works!! In about a week, our airbnb host profile will be converted to a “Super Host” which is awesome!! I’m hoping this attracts more bookings. It’s very important to have this status of “Super Host” per airbnb. Because of this I have been slowly increasing the nightly price for the listing already for the up and coming months. WooHoo!!! More money potentially!!!
How Many Hours Do You Spend on your AirBnb per Month?
I know some of you have been asking me about this and here is the info although you will see that with time, the time spent gets lower. The reason for this is because it took us a bit of time to really become efficient at cleaning the property. We have it down to a system now and are able to turn over the property quick.
30 Minutes per month on Administrative Duties: This includes answering emails/questions. Its super easy to do this and doesn’t take anytime at all. It’s actually probably less than 30 minutes, I am just guessing here as I haven’t been keeping exact minutes spent on this one.
1.5 Hours per cleaning: This number changes month by month because it depends on how many bookings you get and also how dirty the guest left the property. 1.5 is an average time that I am estimating although there have been times when its only taken me 30 minutes to turn it over and there was a few times it took us 3 hours. What I have noticed here is that the more we clean the property, the faster we get at cleaning it. As for now, it takes my wife and I about 1 hour to get the property ready for the next tenant on average.
So to give you a better understanding of how much time I am spending here, here are some numbers on a per month basis for cleaning.
January hours cleaning: 4 hours (2 bookings)
February hours cleaning: 14 hours booking (7 bookings)
March hours cleaning: 9 hours booking (9 bookings)
As you can see, the time spent got better in march even though we had more bookings because by then, we were really good and efficient on the steps taken to get the house turned over. So in March, with lets say 9.5 hours spent and about $1700 in income (after expenses), that makes it about $178 per hour. Now since my wife and I are both spending about the same amount of time. Lets break that in half. So we are averaging about $90 per hour for my wife and I each on the hours spent in March which I think will be more realistic numbers going forward.
Is It Worth it to start an AirBnb?
It’s still early to tell to be honest. With only 2 months under our belt, I need to gather more data to be able to tell for sure if its worth it. What I can tell you though is that if the numbers remain the same or get better compared to our March numbers, then yes this will absolutely be worth it. It would essentially be doubling our income on if the house was still a normal rental property. Normal rent price would have been $950 per month minus about $60 insurance per month.
In the future, maybe after another few months, I will do another post running these same income and expenses so we can see if there has been any improvement and also to check on my status on whether or not this whole airbnb experiment is working out for me. Let me know if you have any questions about it or if you have any advice that would be great as well.