This article originally appeared on Business Insider.
Since I was a kid, I’ve had an entrepreneurial spirit. I used to sell lemonade at my dad’s barber shop every summer growing up, and in high school, I offered beauty treatments like eyelash extensions and eyebrow waxings out of my house. I’ve always worked odd jobs, too.
My brother died when I was 16, and it was a huge wakeup call — it solidified for me that life is short, and I didn’t want to spend mine working a 9-to-5 every day. I’d rather work for myself so that I have more time to spend with the people I love.
I graduated high school and decided against college: I wanted to try out other ventures instead, like trading stock options and drop-shipping. But once my partner and I decided to give Airbnb a shot in May 2021, there was no going back. We’ve made more than $375,000 this year in revenue, and our best month yet was this past May, when we made $58,120 in revenue.
You don’t have to own any homes to start on Airbnb
One of McMillan’s listings, “The Sunrise Penthouse master bedroom” in Downtown St. Louis Inayah McMillan
I think there’s a major misconception that you must have the capacity to buy property in order to become an Airbnb host: While you should definitely have solid savings (I recommend at least $8,000 to $15,000) or a good credit score, you don’t have to own any properties.
By using rental arbitrage, we rent all of our listings and then list them on Airbnb. As a disclaimer, you need to make sure rental arbitrage is legal in your area by checking your state’s government website, and you have to get approval from your landlord first.
Startup costs vary depending on where you’re located and the size of the home, but I normally allot $8,000 to $15,000 to set up each new listing, which covers the first and last months’ rent, the security deposit, furnishing, and supplies. Going into this, we had most of that money saved, but I also used some personal credit. Now that we’ve switched our business to an LLC, we use business credit when needed.
Our regular monthly expenses consist of rent, utilities, cleaning services, and automation tools. Our less expensive listings, like our one-bed, one-bath properties, usually cost about $1,500 in monthly expenses and bring in anywhere from $2,500 to $3,000 a month — netting up to $1,500 a month.
Our largest listing, which has four beds and two baths, costs about $3,500 a month to run and brings in around $7,500 to $10,000, which means we can make up to $6,500 in monthly profit.
To decide what to charge a night, I recommend using dynamic pricing automation (we use PriceLabs), which sets pricing based on the price of similar listings, the time of year, overall demand, etc.
I highly recommend getting an LLC
When we rented our first unit in May 2021, we signed the lease in our own names, and a few months later we created an LLC — this was the key to scaling my Airbnb business.
One of McMillan’s listings, “Beaming Carriage Home” in Central West End, St. Louis. Inayah McMillan
After that, we signed a lease on another property that November. And in 2022, our portfolio really expanded; we signed two in January, another two in March, another two in May, and our two most recent properties were signed this past June. That makes for 11 listings total — 5 homes and 6 apartment unites — with a few that are signed but not up and running yet as Airbnbs.
Once you have an LLC, you can utilize corporate leases. They’re essentially the same as personal leases, but renting under our company name allowed us to sign 4 properties at once — which landlords usually wouldn’t allow you to do otherwise. If I could go back, I would have registered my Airbnb business as an LLC from the very start.
Having an LLC also provides tax benefits (we can write off business expenses like rent, utilities, transportation, supplies, etc.), and it makes a big difference when it comes to rental arbitrage — it allows you to pitch yourself to landlords as a company rather than an individual, which looks much more professional.
The process wasn’t difficult or very costly. I used InkFile, an LLC-building website that doesn’t charge anything except your state fee, which varies. Even though my listings are in Missouri, I live in Nevada, so it came out to around $500.
Automation software is key to scaling
“Beaming Carriage Home” in Central West End, St. Louis
Another thing that sets me apart is having a private booking website. When I reach out to landlords, I usually send them an email asking if they’re accepting corporate leases and direct them to my site. It gives them a professional online pitch showing what my business offers, who we are as a company, and how we can help them as a short-term rental company. Most of the time, I get more nos than yeses, but it’s a numbers game, so I reach out to as many as possible.
When we first started, we managed most operations manually. But in order to scale, automation tools are crucial. These apps have allowed me to put considerably less time into my business each week:
- PriceLabs: sets pricing based on the price of similar listings, the time of year, overall demand, and other factors
- Yale August smart locks: automates our check-in process to allow guests and cleaners to have their own unique codes
- NoiseAware: monitors noise level to make sure guests aren’t being too loud and disrupting neighbors
- Hospitable: automates all messages to guests and cleaning staff
- Nest doorbells: ensures our guests have checked in safely
Now, my business is almost entirely passive, so I only work about an hour or two a week and dedicate that time to responding to guests who have a specific request that can’t be handled with an automated message or checking up on a specific property.
When I’m looking to rent a new property, I do extensive research first using AirDNA and Airbnb. AirDNA shows you estimates for the average rates, occupancy levels, and annual revenue of a given location, as well as top-performing zip codes or cities. We also look at other Airbnbs in the area of comparable size and see what their nightly price is.
After I run the numbers and predict my expected costs and profits, I consider the ratios and decide if it’s worth moving forward. When it comes to scaling, running the actual Airbnb is easy — it really depends on how much time and capital we have to set it up.
The market hasn’t slowed down my business
While there’s a lot of uncertainty in the market right now, I haven’t felt any out-of-the-ordinary dip in business. November through February is usually our slower season, so our revenue has decreased a bit, but for the most part we’ve stayed pretty consistently booked.
It’s incredibly important to choose properties with your customer base in mind. Ours is corporate business travelers — we have a healthy mix of one-bedroom apartments and larger accommodations, and we’ve chosen locations that are near universities and hospitals. Generally, that target group will still be traveling year-round, even during a recession.