The dream of renting out a space for a price far above market rate and paying down the mortgage in half the time or renting a space and sub-letting it out for a profit sounds too good to be true. However with Airbnb that’s exactly what Marshall Haas has done, explained in detail for people who want to crunch the numbers. The savvy Marshall explains how it took a few goes to get the correct formula, but with the right eye and a appetite for risk it seems there is money to be made.
Perhaps the most well documented Airbnb case is Jon Wheatle, who in 2012 had the idea of buying an apartment specifically to rent out on Airbnb and manage it remotely (a testament to the thriving US services economy). He did just that and after hunting around settled for a $40,000 apartment in Las Vegas. He spent $10,000 on the interior and fit out, all up a $50,000 investment and by his current calculations it will take him a little under 4 years to pay the entire apartment off.
But there are perils when renting out your pad on Airbnb, as Ari Teman recently found out. After returning for his bag, the Manhattan resident discovered his apartment being set up for a sex party, which had been advertised for weeks online.
As a property owner or investor how can you make the most of Airbnb? Here a a few hints;
When buying, pick an apartment with nice volume. It’s not necessarily the square meter size, but the height of the ceiling that can make even the smallest apartment feel roomy. As can natural light and the aspect of the property. Something that is comfortable and aesthetically pleasing. You may be able to photograph a dingy room well, but be aware of your guests ability to publicly share their opinion. Go with a space that has a good feel.
When choosing a place to stay (apart from ratings and past referrals) all people have to go on is the pictures. Take advantage of Airbnb’s free professional photography service as this will make a big difference. Interiors and spaces that photograph well are a plus. Deliberately placed furniture and a structured interior are all the rage. So too are interiors with clean lines, deliberate bold pieces, thoughtful colour choices and a modern chic Parisian feel. The art is in capturing a level of warmth, while still remaining clean and chic. Clean modern or classical vintage furniture and a keen eye for art and posters can make all the difference when searching through pages and pages of listings online. Choose pieces carefully and be sure to leave space for your guest’s items.
Little details that you, the host can offer go a long way and will do wonders for that all important rating. It can be as simple as having an Apple TV account with some movies pre-loaded, or a personalised guide to your favorite restaurants and bars in the area. Being on call to answer any queries your tenant might have. This helps maintain a high rating, a critical factor in the success rate of your Airbnb venture. Without it, you can kiss you dreams of paying off the mortgage early goodbye.
Location, location, location – we talk about bundles a lot here at Secret Agent. The concept is simple. The more boxes that can be ticked the better off you are. Close proximity to public transport, bars, restaurants and universities are all very helpful and will increase the rentability of your space. It is essential to know your market and cater to it. Are you after the student, holiday maker, or professional in town for business? Once you decide on this choose your location accordingly.
The openness of ones write up makes guests respectful of the owners belongings. For example “full use of our picnic basket is also part of the deal” – these comments attract a certain type of person (fun, urban, adventurer). A good write up can help attract like minded guests who will suit your space.
CASE STUDY IN CARLTON
Athan, a successful airbnb’er argues that many places present well on the site, and it is about differentiating your listing. Check his Beautiful Light-Filled Carlton Pad out for yourself. He differentiates his inner city apartment extremely well, in a holiday rental market that is drawn to either the cheapest price or lavish and unique experiences.
Athan says; “While I wanted the benefits and freedom airbnb would provide, I had a clear framework in mind; I wanted to minimise the amount of displacement I had renting out my place, while maximising the amount of yield per rental to make the most out of my efforts. Basically I needed to make my place less available and more expensive than the rest of the pack. After a bit of trial and error, I found an effective way to rent my place out that matched my specific needs.”
His strategy looks like a classic sales model: Capture your customers attention with key imagery in order to get considered, then use price to translate a perception of quality, and support it with value and assurance.
“You only have one picture to get noticed by potential airbnb’ers. What are they looking for? Warmth, cleanliness, trust. They want to get this perception from the get go. They’re on holidays remember! Your first photo is key to translating this. Try a few different options and test out which photo gets the most hits month to month. You’ll quickly realise what works with your audience. Most people put bedroom shots for their key photo opportunity, however it’s not the bedroom that is always the key selling point. Use specifics to determine what your audience wants and what they respond to best.”
Most people associate certain feelings of quality and value through price points alone. A burger that costs $20 should be of higher quality than the $4 burger, right? Price point helps sell in a vision that the photo alone can’t do.
“…it tells people what you’re worth and the perceived quality they’ll be getting. I played around with pricing to find my premium equilibrium; the point at which it was priced well enough to get the request volume I wanted vs their duration of stay. Started off cheap to get a few reviews, then bumped the price up to where I got zero requests. I have now found a sweet spot. Price strategy also filters out the type of people you don’t want – high prices tend to filter out younger travellers, while cheaper long-term rentals can target specific home-buyers while they look for a property of their own and younger holiday makers.”
One of the key selling points to be considered, is to talk about the value-add and be as responsive as possible adding the human element.
“First, the value. While I charge a premium, I promote that they have $50 credit on the AppleTV and access to US streaming services such as Hulu and Netflix. I also offer my entire pantry and cooking utensils for those eager to get their hands dirty. Basically I want to show them that while they may never use any of these things (travelers tend to want to always be out exploring) that they could have this stuff, and that if no one else is offering it specifically it must mean that this apartment is offering significantly more value.
Then, you want to make sure people feel comfortable with their choice. A lot of people are still first-time users on Airbnb – they’re paranoid that security might be an issue, that it might be a dump and the photos were misleading, and that their personal safety might be in danger in an area they don’t know. I make specific calls out about cleanliness (I use professional cleaners before they stay, not after like most), security of personal items and their safety (I mention the building’s security measures, key and swipe access only, and car park features).
I also assure them from a communication standpoint. Online bookings, especially for an older and less digitally confident audience, tend to feel like they’re not real. A lot of people can feel like they haven’t actually confirmed a booking unless they’ve been in contact with you and discussed some of their key concerns. You need human confirmation to feel 100% confident. Make sure your response rate is as close to perfect as possible – this is what builds confidence in your apartment, versus the other listings that have a low response rates and average reviews.
One other thing you always want when you’re in a new city is the local’s guide to what to see and where to eat. Melbourne is famous for it’s coffee, so what we did is provided a guide to Melbourne’s inner north – the area surrounding the apartment – and made it a feature booklet that is also used to sell the place. Our guests love it, and continue to reference it every time they come back to this beautiful city.”
At the end of the day, no amount of strategy or sales technique will make a dirty or inhospitable place look amazing. The ultimate strategy is provide a clean and friendly environment, with a thought out interior space and ensure your guests expectations are met and exceeded. Make your place somewhere that people want to stay and give them an accommodation experience that no hotel could ever offer!