How to Start an Airbnb Business

If you own more than one property or have an extra room to spare, you might consider operating a vacation rental business like Airbnb or Vrbo Sharing homes is a booming business, as U.S. tourism is expected to increase in 2022, surpassing pre-COVID-19 levels by 6.2% and injecting nearly $2 trillion into the economy.

That growth is happening worldwide, as well. The number of global international tourist arrivals more than doubled in January 2022, increasing 130% compared to the same period in 2021.

AllTheRooms has reported that in 2021, North American Airbnb hosts each earned an average of $41,026. That’s a number that’s likely to go up as tourism rebounds, which may increase occupancy rates and drive up short-term rental prices.

What does it take to own and operate a short-term rental? A lot of work goes into any start-up, no matter the industry. We’ll walk you through some of the steps you may need to consider to launch your new vacation rental business.

1. Identify and purchase a property (if you don’t already own one)
2. Write a business plan
3. Form a legal business entity to operate your rental business
4. Ensure you understand and comply with insurance and tax regulations
5. Open a business bank account
6. Prepare your rental space
7. Set your price and list your space
8. Market your rental
9. Learn from previous visitors

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1. Identify and purchase a property (if you don’t already own one)

If you don’t already own a space that would make a good rental, one of the first things to think about is finding a home to use as your vacation rental investment.

Some points to keep top-of-mind when looking for the right vacation rental property:

• Location: Consider not just how tourist-friendly the area where you’re searching for property is but also where within the city the property is located. Is it downtown? On the outskirts of town? Near a major highway? How easy is it for rental guests to find the property? Is it a relatively safe area? Is the area walkable?
• Local regulations: Do local laws allow short-term rentals? Do you have to get the permission of the housing association if you want to rent out a condo in a multi-family building? What local fees and taxes will be charged? Diligent research before buying any property is always useful.  
• Budget: Understand what budget you’re working with and what you can afford. In addition to buying the property, you’ll have other costs to consider, such as homeowner’s insurance, utilities, property tax, maintenance, and furnishing the property.

2. Write a business plan

This is a good time to start thinking about your company’s business plan, which includes all the integral information about your vacation rental business, including:

• An executive summary or overview of how you operate
• A company description
• Any employees you might have
• An outline of your business structure
• A market analysis
• Financial projections

A one-off rental property doesn’t necessarily need a formal business plan, but going through the thought processes of creating and following a structured plan can be eye-opening. This is an opportunity to be sure you understand the work involved and the formal requirements. Doing the market analysis and making financial projections will help you feel more confident that pursuing a vacation rental opportunity is really a good idea.    

If you need help turning your ideas into a detailed, actionable business plan, Project Catalog ™ has hundreds of projects ready to go.  

3. Form a legal business entity to operate your rental business

The next step involves determining the best legal business structure to operate your vacation rental. The four most common business types are:

• Sole proprietorship
• Partnership
• Limited liability company (LLC)
• Corporation

Each entity has its own list of benefits and disadvantages and will impact every aspect of your company—from how you’re taxed to how much liability falls on your shoulders personally.

An LLC is a common choice (but not the only one) for operating a vacation rental business, in part because it allows for a single business owner and is an easy business structure to establish and maintain.

The Small Business Association (SBA) can be a good starting resource to understand business structure options. You may want to hire an independent business consultant on Upwork to help you determine the best structure for your company.

At the state level, you might need to register your entity name, depending on the business structure you’ve chosen. Besides any possible legal requirements for naming, creating a catchy name for your rental property may also be good for business, especially if you research keywords to help rank on the search engines. If you’re having difficulty coming up with a name, Project Catalog can help you find a slogan writer to develop the perfect name for your business.

4. Ensure you understand and comply with insurance and tax regulations

In addition to complying with local zoning and licensing regulations, you’ll likely need to ensure your home is properly insured and you’re meeting your tax requirements.

Many homeowners’ insurance plans cover a short-term rental only if it’s a one-time event. If you’re regularly renting out your home to visitors, though, you may need additional insurance,

For example, Airbnb offers AirCover for hosts, which boasts offering up to $1 million in liability and damage protection, as well as income loss, deep cleaning, and pet damage protection. This might not cover everything you need, though, so do your research.

In addition to property taxes—which vary depending on where your rental home is located—you’ll also need to consider federal business taxes. Vacation rental platforms are now required under law to withhold up to 30% of your rental income if you don’t provide them with a W-9 form.

While your actual tax rate may be lower than this, without that document, your overpayment can be withheld for the year.

You might also have state and other local taxes to pay. If you have employees or simply operate as a solo business owner, you’ll have taxes for Social Security and Medicare to consider. Many cities, counties, and states also collect tourism or sales tax on rentals.

If you have questions about having the right insurance for your rental or what taxes you owe, consider finding a financial consultant or legal consultant through Project Catalog.

5. Open a business bank account

You don’t need to open a separate bank account for your vacation rental property, but doing so can help you manage your business better. With a separate account, you can track your rental business cash flow—both income and expenses—in one place without mixing it up with your personal funds, which simplifies your bookkeeping and taxes. This can also help you present a professional appearance.

Once you choose a bank, you’ll generally need the following to open a business account:

• Employer Identification Number (EIN) or Social Security number (SSN)
• Identification
• Business formation documents (such as Articles of Organization)
• Business license
• Ownership agreements if you’re running the company with others
• Certificate of assumed name (if it’s different from your business’s legal name)

A financial consultant can help with your banking and bookkeeping needs, so you make sure you start off on the right financial footing.

6. Prepare your rental space

With all the paperwork done, consider the property itself and prepare it for renters. You want to create a space that is warm and welcoming—both in person and in the pictures that you share on your vacation rental host profile.

Consider a few tips for presenting the ideal rental for potential guests, inspiring those positive reviews, and earning superhost status.

• Make sure the property is clean and well maintained.
• Remove all clutter and personal items.
• Consider using warm, bright lighting, as well as warm color tones in the decor.  
• Enhance the mood with flameless candles and music.
• To ensure your space is hospitable, provide all the needed essentials, such as kitchen tools and accessories, extra pillows and linens, and towels and washcloths.
• Don’t forget safety—check your smoke detectors, carbon monoxide detectors, and security system before each guest.
• Add a local touch to your space. Consider hanging art by local artists, offering discounted tickets to local attractions, or providing tourist guides for your region.
• Hire a property manager if you don’t have the time to dedicate to overseeing the rental.
• Create a binder of all the helpful information you can think of, such as how the TV and appliances work, when and where to take out trash, any restaurant recommendations, emergency phone numbers, etc.

7. Set your price and list your space

Knowing what to charge for your vacation home can be complicated. That’s why it’s important to have a strong pricing strategy from the beginning.

Airbnb provides some tips for effectively pricing your rental:

• Consider your costs. This could include everything from the mortgage you’re paying on the rental to your insurance to anything you spend on professional services.
• Check similar rentals in your area to see what they’re charging per night. Do your market research. If you’re charging much higher than what rentals are going for on average where your property is located, you might not get many bookings. Remember the price of a large, four-bedroom house will be much different from a smaller, one-bedroom apartment.
• Factor in the fees. Remember that your customer will perceive any fees for services you’ve added, such as cleaning or extra guest charges, as part of the total price.
• Set higher nightly rates during busier times of year. If you live somewhere people flock to during the summer to hit the beach or in the fall to watch the leaves change color, consider increasing your prices during these periods, as there will be more demand for rentals.
• Use Airbnb’s Smart Pricing option. This feature automates prices, adjusting them based on local demand and helping you optimize pricing.

With your pricing set, you’re ready to list your rental. Don’t skip over some integral parts of your listing.

• Price
• Great photos (Consider investing in professional, quality photos of your rental by hiring a professional photographer)
• Square footage
• Number of people the space sleeps
• A well-written and enticing description of the space
• Detailed information about the check-in process
• Nearby attractions
• Any special amenities, such as a pool, elevator, Wi-Fi and cable, kitchen, washer and dryer

8. Market your rental

Once you’re ready to start booking your rental, create a marketing plan including ways to build your brand and expand your reach. Marketing your own property as a rental requires some hustle. Consider some tips for implementing a plan that gets your vacation rental noticed.

• Create social media pages for your rental. This will help those who aren’t actively using vacation rental platforms to find it.
• List your rental with local tourism organizations and websites.
• Offer special offers to first-time and returning guests.
• Create a video to promote your property.
• Collaborate with social media influencers.
• Partner with local attractions and businesses.
• Hire a marketing professional to handle your social media, email marketing, and other marketing initiatives.

9. Learn from previous visitors

By paying attention to the feedback you receive from previous visitors, you can improve your vacation rental property reputation, potentially drawing in new and repeat customers. Take any customer complaints seriously—especially if you see common issues popping up in your reviews—and make the changes necessary to keep your guests happy.

Entering the vacation rental market is a hot trend, and Upwork can help

Running a successful Airbnb or other vacation rental business can be a great way to bring in some extra income. It might even become your full-time focus depending on how successful you are. There’s a lot of work in becoming a property owner, setting up your rental, and creating a small business, though.

Project Catalog can help you every step of the way, whether you need help with marketing, bookkeeping, business formation, legal expertise, or something else. You have the team you need right at your fingertips to help you build your vacation rental brand.

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Upwork does not provide legal advice, and this article is provided for informational purposes only. Each reader and company should adequately analyze the laws, and regulations, and other requirements that may apply to their business endeavor.Upwork is not affiliated with and does not sponsor or endorse any of the tools or services discussed in this resource—these tools and services are provided only as potential options for each reader to consider.