Starting an Airbnb business is a great way to earn passive income but you need to make sure you cost your Airbnb setup expenses appropriately before hosting your first guest. Proper preparation can greatly increase your chances of a successful launch, which includes having a well-defined budget and successfully structuring the expenses whether it’s one rental unit or multiple properties.
In this article, we will make sure there are no confusing financial mysteries left unsolved by providing a guide on calculating Airbnb setup costs.
How to Estimate Airbnb Setup Costs
Running an Airbnb business without properly estimating expenses can cost you greatly. If done right, budgeting correctly will allow you to avoid:
- Overspending
- Unrealistic profit expectations
- Ineffective fund allocation
- Under equipping your Airbnb property
Being able to shift the focal point and adapt the conditions to properly cost out the Airbnb setup expenses not only increases your investment award but increases profitability in the future as well.
Key Factors to Consider When Calculating Airbnb Setup Costs
1. Property Acquisition or Rental Costs
The purchase price will be your greatest concern if you plan to put up a property on Airbnb as a host. The different areas of expenditure encompass:
- Acquiring full ownership or making a down payment
- Costs incurred at the final stages of paperwork
- Taxes levied on the property
- Policy costs for the property
Renters also have their fair share of expenditures. Some of the expenses include:
- Initial deposit
- Rent for the first and last month
2. Furnishing and Interior Design
To make a unit appealing to potential guests, Airbnb should have simple furniture and pleasing designs. Some of these expenses may include, but are not limited to:
Installation of beds and bedding sets
Sofas, tables, and chairs
Basic kitchen cookware and cutlery
Towels and non-consumable toiletries
Other Items for Interior Design
The average cost for furnishing an Airbnb typically ranges between $5,000 to $2000, however, this amount majorly varies depending on the dimensions and design of the property.
3. Utilities and Maintenance
Utilities and service charges are the basic expectation of any guest wanting a comfortable stay, so do not forget to add these costs:
- Electricity
- Water
- Internet & cable
- Gas & heating
Other ongoing expenses such as cleaning, plumbing, and maintenance work around the house should also be included in your projected expenditure estimates.
4. Security and Smart Home Features
Investing in smart locks, security cameras, and smoke and carbon monoxide detectors gives peace of mind to Airbnb guests as security and convenience is critical to them, increasing their reviews and experience.
5. Cleaning and Housekeeping Services
Cleanliness is next to godliness. Therefore, I suggest that frequent house upkeep be fundamental to an Airbnb owner’s strategy. Since upkeep is expensive, cleaning equipment should be budgeted too.
Cleaning supplies: $50-200 a month
Professional cleaning: $50-150 per visit (depends on location and size of the property)
6. Photography and Listing Optimization
Booking an Airbnb is similar to a business investment and just like any wise business person knows, high-quality images capture more attention, leading to multiple bookings without any additional expenses.
To enjoy such perks of becoming an investment owner, one should hire a professional photographer as photographs greatly elevate the value of a listing. The usual fee for such services is from $150 to $500 per session.
7. Licensing, Permits, and Airbnb Fees
Airbnb property couldn’t be listed without licenses. Each area usually has its regulations. Some common expenses to consider in your accounts include e.g. permits for short-term rentals, business licenses, compliance legal fees, etc. Also, don’t forget that Airbnb imposes an additional service charge (normally 3 percent of every reservation), so include that in your pricing calculations.
Step-by-Step Guide to Calculate Airbnb Setup Costs
Having concluded the most cost-effective ways to set up an Airbnb, let’s walk through the steps for setting up an Airbnb in the most economical way possible.
Step 1: Subsidiary 1 Expense or Charge List Scrutiny
Dissect all prospective expenses like property purchase or rental- checks for utilities, cleaning services, permits, and furniture.
Step 2: Seek the Specific Rate Breakdown
Analyze the market and figure out the local rental value for property furniture, utilities, and cleaning or other charges. Evaluate how different competitors in the spaces charge and how much you can save easily.
Step 3: Demarcate a Post Allocation Space set aside
In a situation where there is a high risk of needing to cover the expenses that arise due to unforeseen circumstances, ensure to put aside a further ten to twenty percent of the budget. A buffer helps mitigate any damages that may arise due to unexpected expenses.
Step 4: Net Investment Set Unlocked Expenses Adjustment
Determine the overall budget required to set up the Airbnb premises following the combination of pillows, cleaning supplies, and furniture.
Step 5: Arrangement Evaluation Against Assumed Revenue Comparison Analysis
Make sure to check what arrangements were made against what was assumed to be the projected earnings. It is important to note what the rental revenue potential in the local vicinity is based on occupancy ratios, competition, and nightly rate pricing.
Setting up an Airbnb requires careful planning and budgeting. By taking the time to calculate Airbnb setup costs, you can prevent financial surprises and ensure a profitable rental business. From property acquisition to furnishings and marketing, every detail matters when preparing your Airbnb for guests.
Now that you know how to calculate Airbnb setup costs, are you ready to start your Airbnb journey? Let us know in the comments below
