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Additional Costs of Running an Airbnb Management Business

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SUMMARY:

Before starting any business, you need to know what your costs are going to be getting started and what costs you will incur as operating expenses.  This video breaks those costs down, including how you can minimize your expenses. 

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This question comes up often as people are looking into starting a business managing properties on Airbnb.  This video will go through the following three topics:

  1. What costs will you incur BEFORE you book your first property?
  2. What are your ongoing operational expenses?
  3. What is the fee structure? What is coming out of your management fees versus what is being paid for by the property owner?

I do not recommend spending a lot of money as you get started, as it is not needed. It is really about what you NEED. I would budget between $200 and $300 to get set up and book your first property. 

First, I recommend setting up a basic website.  The domain will cost about $10-$20 and the hosting will cost another $10 per month.  So, your website will cost $30 upfront and have an ongoing cost of $10 per month. 

Secondly, you will need data for the area you want to manage.  I recommend a data mining company called AirDNA.  It’s a really great tool that you can use to figure out nightly rates, occupancy rates, and seasonal fluctuations. It will allow you to know how much any property can expect to earn in a 12-month period. 

It is important to have that data, as it gives you credibility when you are speaking with property owners. 

It is a monthly subscription based on the area and will run between $30 (small town) and $120 (large city).  However, we have built a tool in the link above that allows you to grab the data once, put it in the projection tool and it houses the data and presents it in an easy-to-read format. Using our tool means this will be a one-time expense of $120. 

That is really all you NEED to start your business.

I also highly recommend budgeting for a coach.  I believe that it is less costly to learn from a coach who has made mistakes than to learn by trial and error.  If you would like to see how coaching with me works, check out the training in the link above.  We are already helping and working with hundreds of people. 

Those will be all of your expenses before you book your first property. 

Next, below are the costs associated with managing properties.  

The first expense will be to hire a cleaner who will turnover the property after each guest. This is something that I do not recommend doing yourself.  What is nice is that Airbnb allows you to set the nightly rate PLUS set a cleaning fee.  This means you will be earning this fee on top of your property management fee. 

The second expense is your software expenses.  You will want some software to get everything centralized onto one backend for guest communications.  

This will cost between $20 and $40 per property per month.  You will want to start using software once you have booked more than five properties. I recommend programs such as SmartBNB and Hostaway that do not charge a percentage of guest bookings but instead charge monthly flat fee. 

I also recommend a program called iGMS if you have fewer than five properties because they do not charge for the first five properties. 

For guest communications, once you have more than five properties you will want to hire a virtual assistant.  This will cost about $30 – $40 per property per month.  With a virtual assistant, it is going to be so important to have the right systems in place to hire and train the right person.  

To get those systems in place, check out our free training in the link above.  

So in total, the expenses you will deduct out of your management fees will be around $80 per property.  

The last expense is something that the property owner is going to pay for and that is the maintenance expenses.  Typically, if you’re managing locally, you’re going to take care of the maintenance and will be coordinating repairs and that sort of thing. 

Hopefully this has given you a breakdown for the income and expenses looks and how it all breaks down. 

If you enjoyed this video and found it valuable for you, please subscribe and like this video! 

VIDEO TRANSCRIPT:

What's up guys? It's James here. And in today's video, I want to talk about a question that comes up pretty often when people are looking into Airbnb management businesses and looking into starting a business. A lot of people wonder, Well, what are the costs involved? Like? What are the costs that I'm going to incur? If I start managing properties on Airbnb?

It's a really, really good question. Because anytime that you're going into a new business, it definitely is very smart and makes a lot of sense to really understand ahead of time, what kind of costs you're going to incur, so that you can have a clear idea of exactly what kind of planning you need to do on your end to be able to get started.

So in today's video, I'm going to break that down for you step by step I'm going to talk to you about number one, what costs you're going to have before getting your first property. And I think that's an important number to know is what costs are you going to have out of pocket before you actually get your first property and start having cash flow coming in.

I'm also going to talk to you at what costs are you going to have that are sort of operational expenses, what we're calling them, those are going to be expenses that you'll have after you get your first property. on boards that are going to come out of your management fees, we want to talk to you about that.

And then I want to talk to you about the fee structure as far as how do you what things are you paying for out of pocket. And I want to also talk about what things your property owners gonna be paying for, because there's typically a fair bit of confusion around what gets paid for by the property owner versus the property manager. And so I want to just really shed light on that. So you can get a whole complete picture of exactly what the financial side of the business actually looks like.

So to start out with, I mean, interrupt myself to start out with, could you please just draw a quick like on the video down below, just if you do if you could, it would mean a lot to me. It really helps me tremendously with YouTube's algorithm. So if you could just drop a like in the comments or in the like bar down below there. Just give the video like I'd really appreciate that.

Jumping back into things. So to start out with, what are the costs that you're going to have before you actually get your first property under management? That's, I think, a really important one. That's probably what most people are wondering. bring about so let's address that one first, the costs you're going to have before you get your first property under management can go very, very high.

However, I really don't recommend it. As with any business business you can spend, you can go and spend $10,000 getting a website set up, but there's really no need to do that you don't need to spend more than $20 getting your website set up. So I want to put an Asterix on everything I'm going to say here that you can get really stupid and really ridiculous with this.

But in terms of what you need to do, you definitely don't need much you only need to spend I would budget about a couple hundred dollars typically about 200 maybe $300 to get everything set up and get your your first property on board under management.

Now, what this is going to go into is going to be for your website number one, I do recommend setting up a website however I recommend setting up sites very, very basic. So what I mean by that is you're going to have to buy a domain which typically is going to cost anywhere from 10 to two dollars.

You can buy it on whatever website you want GoDaddy Bluehost wherever you want, grab yourself a domain for your website, and then set up website hosting. We typically my clients and I, we use a website builder called Squarespace. But if you're familiar with another one like Wix, or WordPress or whatever you want to build that website, that's going to be another about $10 a month in expense.

So right out of the gate, you're looking at about $30 or so to get your website set up plus an ongoing costs about $10 a month to just kind of keep that website up and running. So that's about $30 right there.

The other expense you're gonna have is you're gonna want data for the area that you're going into. So I recommend getting data through a data mining company that I quite like I always get my data from them. They're called AirDNA.

AirDNA is a really, really great tool that you can use to basically just figure out exactly what the nightly rates, what the occupancy rates, you know what the different seasonal fluctuations are in any given area so that you can figure out You can basically using their data, you can basically look at any given property in any given city and anywhere in the world, big city, small city, rural place in the middle of nowhere. Trust me, they have data for it.

And you can say, Okay, how much is this property going to earn over the next rolling 12 month period? What are the seasonal highs and lows going to look like? What are the occupancy rates going to look like? It's a really, really powerful tool for you as a person going and managing these properties to be able to figure out where the biggest opportunity is.

It's also a really, really great tool to use with your property owners because it's a really great way to give them a lot more confidence and help to to close more properties under management because you're just giving them the confidence you can give them projections, you can show that you know what you're talking about.

Now, the the catch with that is that the data you buy it on a monthly subscription. And so for a really, really small town, this is going to be about $30 a month for a major city like the city Toronto here, you're going to be looking at closer to $120 a month. Now I built a tool that helps you to avoid that being a monthly recurring cost. Because obviously that gets quite expensive if it's monthly recurring.

And so I've linked to it down in the description below. It's called our profitability projection tool. And so what that allows you to do is we've custom built this. And it basically allows you to grab the data from air DNA, so you buy one time you pay for it, whether it's 30, are up to about $120, you're going to pay for that data, you're going to grab the data, put it into the projection tool, and that houses all your data for all your areas.

And it breaks it down to really, really easy to read format. So rather than looking at a bunch of raw data, you can look at Okay, you can just basically select on the drop down three bedroom, and you can see exactly how it's going to perform and using data from your specific area. So again, link is in the description below if you want to download that and that's going to keep your cost of you just a one time expense for that for up to a maximum about $120.

So that's basically going to cover you that's where you're going to get a couple hundred dollars in expenses up front.

Now the other thing I obviously very, very highly recommend Also very biased. And so I've always used coaches, I always worked with coaches, I now coach hundreds of people how to run their business successfully. So I'm obviously biased towards getting a coach.

But I really, really fundamentally believe that if you want to start any business, you're going to pay a lot, a lot, a lot less to learn from a coach who's experienced someone who has actually gone and built the business before and learn the mistakes, figured thing out things out as they went, and then can pass that on to you, that's going to be a lot less expensive to go and learn from someone like that, then it's going to be to go and figure things out on your own the hard way, because number one, you're gonna have a lot of trial and error.

So there's opportunity costs associated with that. If it takes you one month longer to get your first property under management, then you're throwing 500 or $1,000 out the window. That's if it only takes you one month longer.

You know, if you make one mistake where you you know you do the wrong thing, it's gonna cost you there, it's gonna cost you again, do you make the mistake like I did when I first got started, I set my cleaning fees to And I didn't realize that because they didn't account for things properly. And that ended up costing me a couple thousand dollars just because I was careless with it. And it took me a while to figure that out that I made that mistake.

So you're gonna want to factor in a couple thousand dollars in my experience, and in my opinion for coaching for finding the right mentors. Now, again, if you want to work with me, I try to make it as affordable as possible.

I've got a link in the description below to a free train that you can go go through that walks through as well, just exactly what it looks like to work with me how we work with people, how that's structured, we're people lifetime, and we already working with hundreds of people right now helping them to grow their businesses. So again, if you want more details about that, you can check the link in description below. Or you can go to b2b mastery.com. And you can check out and learn more about exactly what it is that we do and how we operate.

So that's going to basically be the first category of expenses which is going to be your out of pocket before you actually get the first property under management expenses there.

Now the next category is going to be things that are going to come As costs while you're actually managing properties. And I'm going to kind of combine this with the section number three that I talked about where I'm going to break down which property which expenses are associated with the property owner, meaning the property owner pays for them, versus which ones you as a property manager are going to pay for.

I'm just going to combine those two are going to talk about them as we go. Here, I'm going to explain which ones you're going to pay for as a property manager and which ones the property owner is expected to pay for. So to start off with the very first one that you're going to come across is the cleaning expense.

The cleaning fees are going to be basically paid out to a cleaner when they go in there and they turn over the property every time there's a change between guests. Now, this is something that you can do yourself.

However, I really don't recommend it because it's going to take up a lot of your time. And you're only going to be earning about $60 or so an hour to be doing this depending on what you're setting your clean visa, you're going to be earning maybe 30 to $60 an hour doing this.

It's not really going to be worth your time my opinion because if you're focusing on other things Like growing the business, you can be earning a much higher amount of money for that time that you're spending on actually growing your business focusing on those higher leverage activities.

So with that being said, cleaning expense is the first one you're going to come across. Now the really nice thing about this is that you as a property manager are going to be earning a percentage management fee for managing your properties.

And on top of that management fee, you're also going to collect cleaning fees, because one of the nice things about the way Airbnb platform is set up is that you can go and set your nightly rate for your property, and then also set a cleaning fee rate, meaning that every single time there's a guest turnover, that guest is going to pay, you know, the person that's checking out, they're going to pay $60 $100 $200 on some of the larger properties.

That's going to be a cleaning fee that's separated out from the nightly rates that they're going to pay for every single one of their stays. And so that means that that money is going to go directly from the guest to the clean team. It's going to go through you obviously it's going to come into your bank account, you're going to use it Pay the cleaners, and then you're going to get your 20% management fee on top of that.

So it's not an out of pocket expenses, not something that's coming out of your management fees. But it is something to be aware of, because it's an operational expense with running the business.

Now, the other expense that you're going to come across is software expense. And so while you're running the business, you're going to have some software that you're going to need, or you're going to want at least to get your everything into one centralized back end, to help to automate a lot of the guests communication.

Typically, this is going to run you about 20 to $40 per property per month. So as a baseline, I like to tell people to manage properties only if they're going to be bringing in at least 600, ideally up to about 1200 dollars per month in management fees. So out of that 600 to 1200 dollars a month that you're going to be earning and management fees for each one of your properties.

You can expect about 20 to $40 of that to go towards software's Now there are some really expensive software's out there that take a percentage of your of your overall bookings like For example, guests, he charges a percentage varying between I think it's about one and 3% of your overall bookings to help you with things like guests communication, offer the software, all that, that ends up being grotesquely expensive for a property management company, I can understand how someone who is just wanting to have that for one single property, they don't really mind they're, you know, they're they don't really know what they're doing.

That can be a good service. But I really don't recommend this at scale, because 123 percent ends up being exceptionally expensive, and you're really not getting what you pay for when you compare it to other services other software's like host away like smart b&b that offer the same basically the same service, but for a fraction of the cost because they don't charge you a percentage of your revenue.

They just charge you a flat monthly fee. Typically, like I said, about 20 to $40 a month per property. So that's a really great route to go. And the other beauty of this is that I actually highly recommend that people use a software called air gms now it's actually She called it gms. They did a recent name change, when they're when they have their first five properties.

They're really real beauty of that is that those first five properties, you actually don't get charged by JMS at all they're really cool the way that they work, they only charge you for more than five properties on their software. And so I highly recommend when you're starting out, you just keep your software expense at zero by using idms to get your first couple properties under mentioned, once you grow out of that software, you might want to upgrade to a more expensive one, one of those 20 to $40 per listing per month ones. But your first five properties, you can keep that software expense at zero, which is really nice.

So that's your software expense. Now the third category of expenses and they're only for the third category is going to be for your guests communication. You're typically going to want to put guests communication in place to have someone helping you to communicate with your gas and to their questions, respond to guests booking inquiries, that sort of thing.

That's going to come typically somewhere in the five to 10 properties. ranges when you're going to think that you're going to want to need some help with that, the reality is for the first five properties, you're probably not gonna need much help with it because it just isn't going to be too demanding of your time. So you can probably do all of it or almost all of it completely on your own without really having any kind of a big time burden on it.

Once you get beyond five or 10 properties, that's when you're typically going to want to have some help with that. And so for that I recommend using virtual assistants. Now the really nice thing is that you can find virtual assistants out there that are already experienced with short term rental Airbnb, you know, guests communication type of roles, you can find these on sites like Upwork and then define the right person.

You want to have the right systems because it can create a whole bunch of headache if you hire the wrong person, or you don't have the right systems to train them and set them up properly so that they know how to actually learn and answer the questions appropriately.

As long as you have all that in place, though. And obviously if you don't then just check out the free training down below. I have systems and everything all built out to help you with every single step of that once you've got that off Place though, you can hire these people, and you're going to be paying again about 30 to $40 per property per month is a good figure to ballpark exactly what you'll be paying.

Because the nice thing is with virtual assistants who are doing this, they're typically only going to bill you, if you find the right person, they're only going to bill you for the time that they actually spend, replying to messages, etc. So if they're monitoring your your listings for a total of eight hours, sort of throughout a day, but they only spend three hours actually responding to any messages, rather than getting billed for eight hours, you're gonna get billed for three.

They're able to do this because they match for a whole bunch of different people, a whole bunch of different different property managers, different property owners all around the world.

So they're billing at different times throughout the day to different people, that makes it really nice that you don't actually have to have an in house like dedicated person who you're paying a salary to or paying, you know, for eight hours a day to respond to a few messages. So that's another really great one. So again, that was basically all of the expenses that are coming out of your management fees.

So the really nice thing there is that you're ready really only looking at about $80 a month on the top end, you know, once you have your software setup, once you have your virtual assistant setup, you're looking at about $80 per month per property, mind you, but that's coming out of like I said about 600 to 1200 dollars a month in management fees, if you're managing the right properties that are bringing in enough income to support that, then again, the rest of it is basically just profit.

You may have some overhead if you decide if you get to the point where you're at 30 properties 40 properties, and you have someone in house who's managing things, then you might have a little bit coming out of that as far as overhead goes, you know, anything like that is extra, that's really not something that we're going to consider for the purpose of this video.

I'm really just talking about when you're first getting started, you're getting up to 20 getting up to 30 properties under management, getting to your first $10,000 a month in profit and income now, so that's basically gonna be your out of pocket expenses coming out of your management fees.

There is however, one last category of expenses to be mindful of, but this is one that the property owner is going to be paying for you are going to be responsible for taking care of it. It's the it's the maintenance on the property. Now I say that you're going to be taking care of it.

Because typically in most situations, if you're managing locally, you would be taking care of the maintenance for them. Meaning that if a toilet gets clogged, you would have someone go over there and unclog the toilet. If there's a leaky pipe, you would take care of having someone go over there and fix it, he would then build the property owner for any of your time involved in getting that done.

You'd also build a property owner for the maintenance expense related to having that plumber go by or whatnot. And the beauty is that typically, if you have things set up the right way, the way that we recommend having things set up is that all the money flows into our bank accounts for the business. And then we issue a monthly payout to the property owner.

So there's no chasing a property owner around for their money, because we just deduct any expenses from the monthly payout that we pay out to them. So that's a real big advantage there. And then that's basically going to be your maintenance expense. Now again, the nice thing there is that property owners are going to be you're used to that they're used to paying for maintenance at their own property. There's nothing weird about that there's nothing different about that.

A lot of people I find question that and I think most property owners are really going to be okay with paying for maintenance. They paid for maintenance on their property for as long as they have owned the property, they're always going to be paying for maintenance on the property as long as they continue to own it, it's not going to be a surprise to them there.

So that's again, something the property owner is going to be the one actually footing the bill for but it's important to just be aware of moving into your business. So hopefully this is giving you a really good overall picture of the breakdown of different expenses involved in managing properties for other people on Airbnb, how the income looks, how the expenses Look how it all breaks down, how it all shakes.

So if you like this video, if you got value from it, then just drop a like on it. I really do appreciate it helps you out tremendously with YouTube's algorithm. If you want more videos like this, just hit subscribe. I post videos like this twice every single week breaking down Airbnb, Airbnb management, basically all things in the world of Airbnb.

So if you're interested in staying up to date with all my latest videos, that I post twice a week Then just click subscribe there and subscribe to the channel. Otherwise I will see you next video again just drop a like if you appreciate it if you got value from it if you're on YouTube right now, and you have questions for me if you have other topics you want to dress in another video then let me know in the comment section down below there. Otherwise, I will see you in the next video.

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