This article was originally published on Business Insider.
Since I was young, I have always had an entrepreneurial spirit. Growing up, I sold lemonade in my father's barbershop every summer. In high school, I provided beauty treatments such as eyelash extensions and brow waxings from my home. I have always done odd jobs.
When I was 16, my brother died. It was a big wakeup call. I realized that life was short and I didn't have time to work a 9-5 job every day. I would rather work for myself to have more time with my loved ones.
After high school, I decided to forgo college and try other ventures like stock trading and drop-shipping. Once my partner and I made the decision to try Airbnb in May 2021 there was no turning back. This year, we've generated more than $375,000 in revenue. Our best month was May of this year, when we earned $58,120.
Airbnb is not a requirement for home ownership
Inayah McMillan, one of McMillan’s listings in Downtown St. Louis. "The Sunrise Penthouse Master Bedroom"
It's a common misconception that in order to be an Airbnb host, you need to have a lot of money saved up (I recommend between $8,000 and $15,000), or have a high credit score. But you don't even have to own a property.
We rent out all our listings, and then list them with Airbnb. You should check the government website of your state to see if rental arbitrage is allowed in your area. Also, you must get your landlord's approval before you can do this.
The startup costs will vary depending on the location and size of your home. I usually budget between $8,000 and $15,000 for each listing. This covers the first and final months' rent, security deposit, furnishings, and supplies. We had the majority of this money in savings, but I used personal credit to get started. We use business credit now that our company is an LLC.
Rent, utilities, cleaning and automation services are our regular monthly expenses. Our lower-priced listings, such as our one-bed and one-bath properties cost around $1,500 per month in expenses, but bring in between $2,500 and $3,000 per month - netting you up to $1500 each month.
Our largest listing with four bedrooms and two bathrooms costs around $3,500 per month and generates between $7,500 and $10,000. This means that we can make a monthly profit of up to $6,000.
For deciding what to charge for a night I recommend using dynamic price automation (we use the PriceLabs software), which determines pricing based on similar listings, time of the year, demand overall, etc.
We signed our first lease in our names in May 2021. A few months later, we formed an LLC. This was the key for me to scale my Airbnb business.
Inayah McMillan, one of her listings in Central West End St. Louis, is the "Beaming Carriage Home". Inayah McMillan
We then signed a new lease for another property in November. In 2022, we expanded our portfolio. We signed two properties in January, two more in March, two more in May, and two of our most recent properties in June. This makes 11 listings in total -- 5 houses and 6 apartments -- and a few are still signed, but not yet running as Airbnbs.
You can use corporate leases once you've formed an LLC. The corporate leases are essentially the personal ones, but we were able to sign four properties simultaneously by renting under our company's name. This is something that landlords would not allow us to do. If I could turn back time, I would register my Airbnb business from the beginning as an LLC.
An LLC can also provide tax advantages (we are able to deduct business expenses such as rent, utilities and transportation). It makes a huge difference in rental arbitrage, as you can present yourself to landlords more professionally by presenting yourself as an LLC rather than a person.
It wasn't complicated or expensive. InkFile is a website for creating LLCs that does not charge any fees except the state fee. Although my listings are located in Missouri, I reside in Nevada. So, it cost me around $500.
Automating your business is essential.
Central West End St. Louis, "Beaming Carriage Home",
A private booking site is another thing that makes me stand out. When I contact landlords, I send them an e-mail asking if they accept corporate leases. I then direct them to my website. This gives them an online pitch that shows what we offer, who we are, and how we can assist them as a rental company. It's not uncommon for me to get more noes than yeses. But it's all about numbers, so I try to reach as many people as I can.
When we started, we handled most of our operations manually. Automation tools are essential for scaling up. I have been able to spend less time on my business every week thanks to these apps.
Nest doorbells ensure that our guests are safely checked in
My business is now almost completely passive. I spend only an hour or so a week working. This time is spent responding to guests with specific requests that cannot be answered by an automated message, or checking on a particular property.
AirDNA and Airbnb are my first stop when I am looking to rent out a property. AirDNA provides estimates of average rates, occupancy and annual revenue for a specific location. It also shows the top zip codes or cities. We also compare the nightly prices of other Airbnbs that are in the same area and similar size.
After I've run the numbers, and predicted my expected costs and profit, I look at the ratios to decide if I should move forward. Scaling Airbnb is simple -- it all depends on the time and money we have available to set it up.
Although there is a lot uncertainty in the current market, I haven’t noticed any unusual dips in my business. Our slower season is November to February, so revenue has been down a little, but we have stayed fairly consistently booked.
You should always choose properties that are suited to your target audience. We cater to corporate business travelers. Our properties are a mix of smaller and larger apartments, and our locations are close to universities and hospitals. This group of travelers will continue to travel year-round even in a recession.