How Airbnb makes us $600 an hour (sorry for the click bait)

Hi PC'ers,
I've started an Airbnb blog called "The Host Hournal" and one of the most interesting things I came to realise during a post that I wrote was how Airbnb makes us about $600 an hour

Background:
In order to get our most recent loan approved, we had to convert two of our Airbnb's into normal rentals, as the banks wouldn't count our Airbnb income. Here is a breakdown of the cost difference over a 3 month period:

Earnings from Airbnb- $23,974
Less: Airbnb Commission-($719)
Less: Cleaning*-($3500) We charge a cleaning fee but it doesn’t cover the full amount that our cleaner charges so this amount represents the difference
= $19755 income

Earnings from when they were rented "traditionally"

Rent collected: $13325
Less: PM fees (7%)- ($936)
Less: Letting fee - ($2100)
= $10,289 income

A few caveats with these calculations

• -we rented them furnished and bills included which meant we got a ~$100 a week higher rental than unfurnished/ no bills (we did this as we knew we were only doing this temporarily and didn't want the hassle of unfurnishing/ disconnecting connections etc.
• - We also realise some of the up front costs would have been "smoothed" over a longer period of time, had we rented them out traditionally for longer
• - Mortgage payments, council rates, utilities, connections etc all remain the same between the two alternatives so we have excluded those for this comparison.

Summary

• - We have calculated (we actually did a test and recorded / timed every single Airbnb interaction we had) that between my husband and I we spend approximately 70minutes a week on Airbnb (eg responding to messages, scheduling cleaners, and even things like organising new parking permits when the olds one expired.
• This equals to 15.16 hours over a 3 month period (assuming 13 weeks) that we spent working on our Airbnbs. But given we made $9466 extra when comparing Airbnb to a traditional rental, If you turn that into an hourly rate ($9466/ 15 hours), our time spent working on Airbnb is effectively "earning" us $624 an hour!

 

I’m claiming significant damages from a verified and reviewed Airbnb guest who I know has also damaged at least one other Airbnb property and they are jerking me around terribly, I am terribly disappointed in them.

 

I don’t really understand how this follows my logic ? The comparison is under an agent we spend no time managing compared to Airbnb where we spend 15 hours over a 3 months period- and because we make $10,000 a month more on Airbnb, that’s where the $600 an hour comes from. How could we be “earning” $10,000 from something that makes us less money ?

 

Ooops, sorry missed that bit!

 

The short stay income will have additional costs for linen, electricity, water, replacement items etc Also internet, Netflix etc charges. Loads of extra costs impact short stay including far far higher maintenance costs.

However yes net income can be substantially higher BUT only in some locations. Tourist etc locations can be hot and in high demand. Sometimes just seasonal and then it dies. I have doubts about short term maths. We use booking.com and avoid Airbnb and its only used by us to fill short 1-2 days gaps. This leaves us with virtual 100% occupancy. Summer + winter. Our PM handles all things and takes a hefty % but do a great job. It was around 85%. This extra 15% is profit since almost all costs are fixed. Our involvement is around 1 hour a month as a result. No way can I equate this to a hourly rate. The true earnings occur over a year not the hours you are actively involved.

I would avoid trying to put a hourly rate on things since it doesnt reflect many costs which can occur. You are just talking your time, not your costs or your financial involvement. The key issue is net yield as a return on investment.

I would take annual NET rental (NR) and divide it by the total investment cost. If you want to fudge it to look great then use the cash outlay you used and ignore the bank loan. But thats not real either.

 

Is there something funky about your blog that is cutting off the end of the articles when viewing in Chrome?

Cheers,
Inertia

 

Hi Jodes,
It has been sometime since this post but I was wondering if you could share your overall experience with the Ballarat Airbnb? I saw in one of your post that you were turning an Ballarat IP into an Airbnb? But it seems like you have turned that back to a regular rental?. I would love to hear your experience as we are thinking about doing the same. What company did you use for management/cleaning? I wouldn't mind to manage bookings, but can't do cleaning as we are in MEL. Thanks in advance for anything you could share with us.

 

Hi @jodes thanks for sharing! This sounds very good especially for me who needs more cashflow now to balance out my portfolio. Do you mind sharing what insurance you use or would recommend?