Airbnb properties are becoming more popular with travelers as an alternative to hotels. Property owners can use this top platform to list their homes for free, adding personalized listings, photographs, and previous reviews. Airbnb is not only favorable to guests, but property owners can adjust pricing at will and enjoy host damage protection offering up to $1 million of insurance for damages to cover their rentals.

Interested in making money on Airbnb? Here, we'll cover how to get started with Airbnb, including purchasing the right vacation property, pricing, and the best way to set up a home.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Owning an Airbnb: Finding the Right Property

Before investing in a property as a rental or deciding to rent rooms in a personal home or duplex, do some fact-checking to determine if the location is appropriate. Legalities, seasonal factors, and nearby attractions are key considerations.

How to Find Out if You Can Run an Airbnb

The first step is determining whether Airbnbs are legal for a given property's location. Some cities may prohibit these types of rentals, and you'll usually require a license to operate a short-term term rental. Nashville, for example, requires you to get a permit from the Metro Codes Department. Usually, the same site with the permit information will have information on zoning, letting you know where short-term rentals are allowed to operate.

Once you know you're in a permitted zone, you'll have to check the property itself. Are you in an HOA, COA, or another community with bylaws? Condos and townhomes or apartments may have clauses for subletting rentals. Find out if sublets are allowed, and research any permitting and insurance requirements for these types of rentals to avoid facing legal repercussions.

What Makes a Good Airbnb Location?

In some situations, big cities may not be the best place for an investment property to advertise as an Airbnb. However, this can depend on how many hotels are near the property and their price levels. The demand for short-term rentals may be lower if the market is competitive. Cities like Nashville and Austin each offer vibrant nightlife scenes that attract tourists and create year-round demand for short-term rentals. Other good markets include beach towns, ski resort areas, and other vacation destinations.

Small towns can also be challenging locations for Airbnb rentals unless there is a unique draw to the community for tourists. Ideally, investors and owners should find a property near attractions to sustain operational costs and entice visitors, regardless of location.

Consider what amenities are around a potential property with an eye to a vacationer or business traveler's priorities. How close is the nearest public transit? What is the city known for, and does the property have convenient access to it? (Distance to the gondola in a ski town, for example, or being within walking distance of attractions like museums, restaurants, and other attractions.) Finding the right neighborhood for a short-term rental is critical to success.

How to Find a Good Short-Term Rental Property

If you're purchasing a new property to be your Airbnb, there are several terms you'll need to be familiar with to accurately judge the income potential.

• Occupancy rate: Booked nights versus available nights. Higher is better for consistent cash flow.
• Cash flow: Total monthly income minus total monthly expenses, like property taxes, mortgage payments, insurance, management, utilities, etc.
• Cap rate: The annual net operating income divided by the property's market value. What qualifies as a "good" cap rate depends on your investment strategy. The cap rate can be used to indicate how long it will take to recoup your investment and the risk of the investment.

There are many factors that go into choosing a profitable investment property. Working with a commercial real estate agent can help you access more information about particular properties and get you insight into the local market context.

How to Run an Airbnb: Consider the Logistics

Becoming an Airbnb host means you're starting a business, and there are many factors you have to account for in order to run your Airbnb rental profitably.

Property Management

Those planning on posting a listing for a room or guest house on their own property might be able to easily self-manage the unit. However, those who live far away from the rental will need to consider enlisting the help of a property manager, a cleaning company, and someone local to assist with maintenance. Find out how much a management agent or company will cost to ensure that overall revenue will not be steeply cut into.

Airbnb has a native co-hosting system, and you can add up to 10 co-hosts to a single listing. Your co-hosts can help you manage the property, whether you're on-site or not.

Create a set of "house rules" to let guests know what the restrictions are in the space. These rules should include any guidelines concerning smoking, noise, parties, pets, and additional guests.

Next, set up a realistic calendar that allows for reservations only when hosting is possible. The Airbnb system allows for easy updates hosts need, and they can stipulate how much advance notice is necessary for bookings.

Running a short-term rental may take more time and effort than you expect. If you're managing the property yourself, brush up on DIY landlord skills.

Preparing an Airbnb for Guests

Whether you're renting out a room or renting out a building, you'll have to make preparations to ensure it's ready for customers. This goes beyond making sure there are clean towels—some renovations may be in order before you list your space.

Some beneficial rental improvements to consider:

• Installing a keyless smart lock for more convenient check-in
• Upgrading to high-speed internet
• Adding a fully-equipped kitchen
• Having laundry machines and supplies
• Making the space pet-friendly
• Including amenities for remote working

Keep in mind the kind of experience an Airbnb guest is looking for. Being pet-friendly, especially to larger pets, and having a full kitchen can influence travelers to book with you rather than a hotel. Many guests will also be looking for a place that feels more like a home than what a hotel room can offer.

Before guests arrive, you'll want to make sure that there are clean linens, toiletries, and other necessities. The needs of renters may change with the seasons in specific locations. Keeping the place clean and tidy should be a priority. Some owners opt to hire a cleaning company if they don't live on or near the site.

Those planning to rent out a room or part of their private home will want to store valuables in a safe, a locked closet, or a storage facility.

To streamline the experience, hosts should provide accessible check-in details. If someone is onsite to check guests in and out, have set check-in times or make arrangements for someone to be present to welcome them. Owners or managers can use a lockbox with a key if no one is on the property on check-in dates. Hosts can also provide visitors with check-in instructions on the Airbnb app.

Owners will want to consider adding a few unique details for guests. Some may add flowers to the dining table or leave a bottle of wine, champagne, or an appetizer tray. Some also include a "welcome manual" to make renters feel extra welcome.

Creating Your Airbnb Listing

Making the property listing stand out is essential for success in the Airbnb realm. Consider the listing to be an advertisement for the space. With that in mind, owners want to make their listings as compelling as possible.

Begin with the basics, such as location and the type of property. Include details like:

• Number of bedrooms
• Number of bathrooms
• Pet policies
• Guest policies
• Pictures of the property
• Parking availability

Highlight any unique details about the home in the listing title and description. What makes it special? Is there a pool or stunning views? Are there popular attractions nearby? Is it near the business district or a popular convention center? Maximize potential rental income by showcasing all the Airbnb's best amenities.

Then, make sure you get stellar photos of the space to help it catch attention from browsers. Good pictures are essential to help potential guests understand the space's size and are great for highlighting standout features.

How Much Money Can You Make on Airbnb?

On average, Airbnb hosts in Tennessee make over $67,500 per year! It's the second most lucrative state in the U.S. for Airbnb hosting, right after Hawaii.

However, the average doesn't tell the full story. While short-term rentals can be profitable, your location and business plan matter. Are you planning on renting out a single room as supplemental income, renting out a full apartment, or renting out multiple properties as a full-time Airbnb host? What are the average occupancy rates in your city, and what nightly rates can you expect to pull?

When you're starting out as an Airbnb host, keep your expectations on the conservative side. The more effort you put into making an appealing space and the more responsive you are to guest needs, the better your ratings and reviews will be, which can help you increase your profits.

Setting the Right Price for Your Airbnb

What Airbnb hosts charge is up to them, but choosing a nightly or weekly price requires some consideration. Price is a primary factor that guests consider when deciding where to stay when traveling. Regardless of the space's perks, owners can miss out on bookings if prices are not competitive with local listings.

Before listing, conduct market research by comparing what is being offered in the area of similar spaces. However, Airbnb not only serves as a free listing site—the company also has a Smart Pricing tool that considers over 70 factors for setting daily rates.

Smart Pricing helps owners match their prices with demand. Custom pricing controls consider booking dates like weekends and specific seasons. Owners can change these settings at any time, which is an excellent option when special events in the area occur.

When crafting a listing, remember properties with competitive pricing tend to be reserved early and may be prioritized. Yet, it's essential to keep in mind the nightly price you set isn't the price you'll earn. Some owners need to factor in additional costs for:

• Taxes, including sales tax and income tax; take advantage of tax deductions for business expenses
• Service fees, including Airbnb's 3% host fee (which may be higher in some locations)
• Cleaning costs
• Extra guest charges
• Additional property insurance
• Additional amenity fees

Boost Income with an Airbnb Listing

With the right location and a solid understanding of the legalities, an Airbnb property can be profitable. After setting up a listing and the space itself, you will be ready to welcome guests and start earning income that can offset mortgage and operating costs.

Nashville Short-Term Rental Resources

• How to Start an Airbnb Business and Make Money
• 6 Best Airbnb Amenities: Vacation Rental Amenities That Pay Off
• 4 Best Neighborhoods to Buy a Nashville Vacation Rental
• Search Nashville Duplexes For Sale