Airbnb, which literally started with an air mattress in San Francisco, has now become arguably the biggest thing in hospitality. This app and website reached a level where many people run entire businesses, particularly in communities with lots of tourism. But is this a good real estate investment? And can you make money on Airbnb without owning property? Here’s what you need to know.
A financial advisor can help you create a financial plan for your business needs and goals.
5 Ways to Invest in Airbnb Without Owning Property
Despite the layer of technology involved, running an Airbnb is an old fashioned property business. You either lease a short term rental or sub-lease one, depending on whether or not you own the underlying property. This means that you’re effectively running a bespoke hotel that rents out one suite at a time. It can make a lot of money but getting the property also requires a lot of money up front, not to mention the cash involved with setting the place up and making it look nice.
This, however, isn’t the only option. If you would like to invest in Airbnb without having to own property, here are five common ways to make money:
Invest in Airbnb. First, we’ll go for the low-hanging fruit. You can always buy stock in Airbnb, which has been a publicly traded company since its IPO in 2020. It trades on the NASDAQ under the ticket symbol ABNB and is available to anyone who can legally trade stock in the United States. As an investor, this means that you can invest in Airbnb as a company with relatively little effort. But this is not a cheap stock. In March 2023, it traded over $115 per share and was commonly available.
Rent your home. You can also go back to basics. Today, people rent out dedicated short-term rentals on Airbnb, but it’s a double-edged sword. For travelers, it has created a fantastic alternative to traditional hotels, offering a full apartment without the costs of unwanted features like a concierge, swimming pool or room service. For local residents, dedicated Airbnb rentals tend to increase rents and reduce housing supply, often significantly.
Airbnb started as a way to rent out space in your spare bedroom. So if you live in a popular destination, and are willing to open your home to strangers, consider listing it on Airbnb. Whether you use the spare bedroom or your whole apartment, it’s a good way to get on the platform without needing a second home. Although, as noted below, renters should make absolutely certain that they can legally do this because cities increasingly have laws limiting short-term rentals.
Sublease an Airbnb. This can work, maybe. You don’t always need to own a property to rent out an Airbnb. Sometimes you can use an apartment that you have simply rented. As noted above, if your landlord and the law allows, you can always lease a place long-term and then re-list it on Airbnb for short-term stays. Also known as rental arbitrage, this lets you get into hosting without needing the cash to own property, just the cost of a security deposit. Nor do you need to take on the risk of owning property. If the rental doesn’t go well, your biggest risk is one year’s worth of rent and then you can let the whole thing go. You have less control over the product, since there are significant limits to how you can redesign a rented apartment, but it’s easier and cheaper to stand this business up.
But be very careful. Many landlords ban this practice in their leases, and many cities have laws specifically addressing short-term rentals. Make absolutely sure that you can do this, otherwise you might find yourself stuck with an apartment that you don’t need and can’t rent.
Co-host with a property owner. This is also known as property management. Under a co-hosting arrangement, you agree to help run an Airbnb for someone else who actually owns the underlying property. You handle the check-ins, check-outs, guest services, furnishings and feel and potentially even cleaning. Your partner handles the mortgage.
Exactly how good an idea this is can vary depending on the deal you make. Generally speaking, if you co-host with someone you want to make sure that you get a percentage of the unit’s profits. The odds are good that, as the owner, your partner will take more of the money than you get, and that’s fine. But don’t work in exchange for a fixed-rate either. If you just get paid to manage and clean the apartments then you have a second job, not an investment. You want an actual share in the business’ success.
Co-hosting can be an excellent way to build up capital for buying your own Airbnb properties. Especially if you live in a city, you can manage several properties at once this way. And a good manager can make all the difference to a property’s success, so you are bringing real value to the team.
Just be a little bit careful. Airbnb continues to struggle with scams, and it’s not uncommon for third parties to use managers as the face of an otherwise illegal operation. This is particularly true in cities like Chicago, in which Airbnb hosts are known to use local managers as a way to evade laws around local ownership. Make sure you know who you’re doing business with, then bring your sense of style and hospitality to an operation that can make you some real money.
Do consulting and marketing for Airbnb hosts. This one requires a high degree of skill, but it can be worth a lot of money for the right person. Running a successful Airbnb can be very lucrative, but it also requires much more than just the physical space. A good Airbnb needs a sense of style that sets it apart. It requires good photos and marketing presence, so that it stands out to potential guests. It needs a layout that allows someone to stay there comfortably. Just think about how many times you’ve stayed at an Airbnb and known instantly that the host had never spent a night there and you’ll understand how valuable this kind of expertise really is.
This is where consulting comes in. For some people, Airbnb consulting can mean working as a professional photographer for rental properties. For others it can mean working as a consultant when hosts want to decorate or design their space. Still other people can work as social media marketers, or they can sell or lease furniture to Airbnb hosts in their area.
A good Airbnb requires a lot of different skills and physical assets. You can bring some of those to the table. Now, this is probably not spot work. If an Airbnb host is hiring a photographer or a decorator they will likely want a professional. So this probably isn’t a great fit for someone who wants an on-ramp into being a property owner. If you do have those professional skills, though, this can be a valuable business model.
Bottom Line
The most common way to make money through Airbnb is by owning a property and renting it back out. That’s far from the only way, though. In fact there are several ways to get started on Airbnb if you’re willing to try.
Property Investing Tips
- Do not go into property investment alone. A financial advisor can walk you through the benefits and risks for your financial plan. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Buying an investment property is high-risk, high-reward, but it can pay off handsomely if it works. Here’s what you need to know before you invest.
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