Airbnb Millionaires: How They’re Making Their Money
Start Growing your
BNB Business Today!
Get inside access to our professional courses, hosting community, and much more!Get Started for FREE
People all over the world are making additional side income using Airbnb. Many are also earning a full-time income from Airbnb. In this video I break down exactly how they’re doing it! Subscribe to learn more about making money on Airbnb!
Here are all of the resources I mentioned throughout the video:
Free training on how to become a top performing host.
Free training on how to earn a full-time income managing Airbnb properties for other people.
In this video I talk about 3 of the easiest ways to get started making money off of Airbnb without needing any prior experience or technical skills.
#1: Renting out your own place on Airbnb: This can be anything from a pullout couch in your living room to a spare bedroom or even a whole home. I’ll show you how I was able to live completely rent-free for several years in a major city by “rental-hacking” with Airbnb. We’ll also talk about how to get started on Airbnb if you have your own property.
#2: Rental arbitrage: This is where you rent a property for a fixed monthly rate, furnish it, and then flip the property onto Airbnb and profit the difference. I’m going to talk about the logistics of doing rental arbitrage on Airbnb and some of the pros and cons.
#3: Airbnb Management: This is sometimes referred to as the percentage management fee model or the co-hosting model. This is where you manage a property on Airbnb for the owner in exchange for a percentage of the overall revenue (typically 20-30%). I’m going to talk about what makes this model so attractive and so scaleable and also why someone would want you to manage their property (spoiler, this is IMO the best way for someone to get started making money on Airbnb).
Hey there, my name is James.
I'm an Airbnb expert and the author of Airbnb for Dummies.
In this video, I'm going to talk to you about a few of the different ways that people are making millions of dollars all around the world on Airbnb.
Now, one of the really cool things about Airbnb is that it's created this multibillion dollar economy all over the world, between actual hosting on Airbnb, Airbnb software companies that have come into play. There's Airbnb cleaning companies, there's laundry companies, there's all these different auxiliary services, key delivery services, everything you can imagine, all focused and revolving around Airbnb.
And so over the last sort of 10 years here since Airbnb has taken this massive growth curve, and you know, now has more rooms than all five of the top major hotel companies in the entire world all put together.
Obviously, there's a huge economy that's been sparked by that, and in this video, I want to talk specifically about three of the main ways that people are making millions of dollars all over the world using Airbnb.
Now in these three methods, we're not going to talk about anything that requires any specialized skill or any kind of expertise background, like, for example, starting a software company in this space.
Though, obviously, lots of people are making great money and have very successful businesses built all around that we're going to focus on three of the simplest and most common ways that people all over the world are becoming very successful using Airbnb and leveraging that platform.
Now, the three ways that we're going to talk about today are number one, hosting your own place on Airbnb, whether that's anything from a pull out couch or a blow up mattress in your living room, through to a spare bedroom or maybe an entire property that you have, whether that's real estate investment property or a vacation rental property.
We're going to talk about that is strategy number one using your own space and renting out on Airbnb. The second method we're going to talk about is something called rental arbitrage.
This is where you will rent properties for a fixed monthly rate, and then flip them onto Airbnb and earn additional income above and beyond what they're paying in rent. And that difference is going to be their profit after some different expenses.
And the last method we're going to talk about is going to be one called co hosting or the management fee model. Now, spoiler alert, this is one of the best methods in my opinion for anyone who's just starting out and looking to get started with hosting.
The other two options are really great if you already have a property, or if you have some money, typically about five to $7,000, to invent, invest into renting a property, furnishing it, setting it all up.
But if you have no money to invest, or you don't want to invest money, and you want to get started with Airbnb, without any risk and really maximizing your opportunity, coasting is a really great option in my opinion.
Now, I personally have done all three different models. co hosting, by the way is when you're managing a property for someone else in exchange for a percentage of the overall revenue. So you know doing this means that you don't have to invest into renting the place furnishing it, etc. And you're gonna make it on average about 20 to 30% as a management fee in exchange for taking care of the daily operations of renting the property.
So, we're going to talk about these three different methods. And my goal for this video is that by the end of it, you're going to come out really understanding each one of these three different methods and understanding whether one of them is a good fit for you if you're looking to earn some additional income, whether that's just a couple hundred or a couple thousand dollars extra each month, or if you want to build this into a full time income.
And I'm going to talk to you a little bit about each one of these methods. And hopefully by the end of this video, you'll have a really clear idea of which one is right for you. And if overall you want to get started earning some money on Airbnb.
At the end of this video and throat I'm also going to link I'm going to mention some tools I'm going to be linking to in the description below.
So throughout, I'm going to be offering up some different free tools and resources that will help you to get started depending on which one of the three methods you choose, and everything's gonna be linked down in the description below.
So, without further ado, let's just jump right into it. And let's get started talking about method number one which is hosting your own space on Airbnb. Now when you're hosting your own space on Airbnb, this is one of the really cool ways to get started on Airbnb if you do have the luxury of having a spare space.
And the nice thing is that that can be anything from like I said, as little as just a blow up air mattress in your living room through to maybe it's a pull out, couch, maybe you have a spare bedroom in your space, maybe you're going out of town for a weekend or for a couple weeks for a holiday and you want to rent out your space on Airbnb, or maybe you have a vacation property, or you have a real estate investment property and you want to put that property on Airbnb and earn a better return on it than you typically would elsewhere.
Now, this is a really awesome method because you can earn a lot of additional income and you can earn a lot more typically on short term rental than you can on long term rental. Now most people tend to think that this only applies in places where it's a hot vacation rental market. You know, it's a popular tourist destination a big city, but the reality is that you know, you're gonna you're gonna have lower housing costs and lower long term rent costs in a place like Boise, Idaho than you would in New York City.
And so you Although you won't be able to earn as good of return total on an Airbnb in Boise, Idaho as you would in New York City, relative to the rental costs and relative to the cost of owning that property, you're actually still going to be able to earn a really good amount of money and oftentimes the smaller cities with lower rent costs and lower mortgage costs or lower property expenses, they're actually going to yield the best returns I'm going to link in the description below here to an article you can check out that shows some of the top cities for Airbnb ease in terms of the the arbitrage the difference between the actual cost of owning that property and what it can bring in in profit on Airbnb.
Now, one of the other cool applications of this strategy of posting your own property on Airbnb is that you can use it to do what I call rental hacking. House hacking and do something that I did in downtown Toronto for a number of years, which is effectively be able to live completely rent free.
So the way that you do this, it'll depend on the market that you rent just how much money you can earn. But typically, you'll be able to completely offset the cost of your rent, sometimes even earn a couple hundred or even up to 1000 or $2,000 a month in additional profit just from posting the spare bedrooms in place that you rent.
Now for me in Toronto, I've done this with a few different properties throughout the years. And what I started out doing was just renting out my pullout couch.
So I had pillow couch that I rent on Airbnb and make some extra money. And I actually ended up moving into a place that had one spare bedroom so it's a two bedroom plus a big living room with a pull out couch. And by renting out just that spare bedroom and the pull out couch.
Obviously with the landlord's approval, I was able to completely offset the cost of I rent. I later actually moved into a three bedroom property and did the same exact thing with two spare bedrooms.
I didn't do the pull out couch this time but Because I had to actual bedrooms, they were able to bring in more money overall than a one bedroom and a pull out couch in the living room. And so with that property, I was actually able to profit a couple hundred dollars a month on top of completely covering my expenses, my rent.
So living in a city like Toronto, where rent is obviously very expensive for a one bedroom, you're typically gonna be running anywhere from about $1800 to $2000 a month. Now I was able to completely cover that cost of rent, and I was able to put a couple hundred dollars of profit back in my pocket each month.
Now what this entails is pretty simple. You just take the space, you put it up on Airbnb, and all I'm really doing to make that additional income is I'm going to be missing a couple guests.
I'm going to be setting my pricing which something I go in and I'll adjust maybe once a week, and then I'm going to be going and just turning over the unit turning over that bedroom, you know, changing the sheets doing a cleanup every time a guest checks out before a new guest checks in.
So it's pretty simple. It really only takes a couple hours a week to implement this and to be making, you know, a couple thousand dollars And completely offsetting the cost of my rent. Because the majority of the income isn't coming from my time it's coming from me leveraging this asset which is a property or a bedroom in downtown Toronto that I now control by having rented it.
Now, one of the trickiest things about this method as the same with rental arbitrage, which is the next up on our list is going to be getting the landlord's approval to actually put the place on Airbnb.
Now a lot of you're probably thinking, well, it's gonna be pretty hard, if not impossible to get a landlord to actually allow you to run an Airbnb. And so what are you supposed to do it illegally?
Are you supposed to do it without your landlord's permission?
Now, I definitely don't recommend that. And though it can be challenging to get your landlord to say yes to letting you rent the property on Airbnb, it's definitely far from impossible. In my experience, typically about one to three landlords are going to say yes to letting you put the place on Airbnb.
So not everyone is going to say yes, it does require a little bit more, a little bit more legwork in the initial stages of finding that property and the ones that best fit. And so if you already have a property on Airbnb, or you already have a property that you rent, and you're looking to put it on Airbnb, obviously, you only have one shot at asking that landlord for permission.
So we can go over a couple tips as to how to do that and why a landlord might say yes, but ultimately, this strategy is going to be a lot easier to implement.
If you have the luxury of being at a place where right now you're looking for a new place to rent, and you can look at a couple different properties and make sure ahead of time that your landlord is actually okay with it.
Now, kind of going into strategy number two, and this is where we'll talk about as well why landlord might say yes, this strategy number two is similar, but it's basically coming called rental arbitrage.
So rather than living in a property, and renting out a spare bedroom or pull up couch, this is a strategy that involves you actually going to a property and property owner who's looking to rent the place long term, you would furnish it, you'd rent it from them, furnish it pay the security deposit, so typically, you're looking at an out of pocket expense, about five to $7,000 that you're investing into this property to get set up and get started.
And then you're going To put it on Airbnb, and the hope is that if you're renting it for, let's say, $2,000 a month that you can ideally bring in 2500 $3,000 a month maybe on Airbnb, and that $502,000 of additional income, that's your profit.
Now over the course of the year, that's going to pay off your your first and last month's rent, you're going to get your cost of furniture covered, and you're going to be profitable over the course of the year. That's at least the goal.
Now, again, with this, you need to get the landlord's permission, you can't just sign a traditional lease, tell the property owner that you're moving in there and then all of a sudden flip it onto Airbnb. Most leases most lease agreements you enter into are going to have a clause in them that doesn't allow subletting.
So you have to make an addendum to that lease, you have to alter it, and obviously do that with your landlord's permission because they're going to be signing on the lease as well to make sure that you're actually allowed to put the property up on Airbnb. Now, there's a couple different reasons why landlord might want to do this.
One reason is that they're going to get a relatively stable tenant, as long as you're earning a profit every month, there's no reason that you would want to move out of the property after a year or whatever, however long there's no risk of you getting married. And, you know, or having kids or deciding you want to live in a different part of town, it's a business.
And so it can be a lot more stable for that property owner, they can potentially have a tenant that they're going to have there for several years, you know, 2, 3, 4 or 5 years, as opposed to having to find a new tenant every single year, every time the person changes their mind and wants to move out.
So it can be a little bit more stability for them. And real estate investors tend to really like stability. Another thing that's nice for them is that sometimes you can offer them additional rent.
If you know you're gonna make a set amount of profit, you might be able to throw in an extra 50 or $100 a month in rent payments, which can be really desirable for some landlords. Another thing that's really nice is that they can get optics on the property.
They can actually see the property on Airbnb, see the reviews coming in on it. They know it's not being trashed, they know it's being well taken care of.
They know that it's being turned over and then a clean team is going in there and then all regular maintenance being taken care of, you know every couple of days.
So, again, the property is going to be really well taken care of, which is again, a plus for a lot of property owners and people that are looking to rent their property long term.
Now obviously, with this method, you do have to put the property up, you have to furnish it, you've got to get it already.
So like I said, there is going to be an out of pocket expense of typically on the low end five to about $7,000 a month, or sorry, five to $7,000 total, for getting the property just set up, and then you're gonna have your monthly rent payments.
So the monthly part is that obviously, if you don't crack that nut each month, if you don't actually earn additional to what you're paying in rent, you can actually lose money.
Now, this is pretty rare. If you know what you're doing and you know how to select the right property. There's a couple tools that I'll link to down below that will help you to do that help you to analyze the profitability of different properties in your area.
But you have to know what you're doing because obviously with this model, because you're on the hook for a monthly rent payment, you have to make sure that you're actually going to make more than that on Airbnb.
For example, here in Toronto, where I'm located, I've done rental arbitrage with a number of different properties and had a lot of the months in the summer, it's very, very easy to make $1,000 a month in profit in the summertime.
But in the wintertime when no one's traveling to Toronto, or relatively few people are coming to Toronto, you're mostly catering to the odd occasional person who's coming in for family, or people that are coming for business because Toronto is not a very desirable place to be in the winter time.
So in January and February, you have to be careful because in some months, you might actually lose a little bit of money, or you might break even. And so you just have to make sure that you're prepared for that from a cash flow perspective.
Now, the third model, the one that I recommend most highly for anyone who's just getting started out who wants to make some additional income, or for anyone who doesn't have a landlord that is going to allow them to rent their property on Airbnb, and they want to still offset the cost of their rent.
The third method is something called co hosting called the management fee model. And this is a really great model where people are again, earning millions of dollars all over the world. It's really great because you can do it from Any location, because you can do it completely remotely.
And like I said, you're going to have the ability to actually do this while managing for other people, rather than taking it and renting it and then flipping it onto Airbnb. So there's no lease addendum, something like that.
Basically, the way this works is that co hosting is, you know, taking all the aspects of the day to day management of an Airbnb, and you're taking that off of someone's plate for them.
So anytime that you look at an industry or a business model where people are making a lot of money, one of the questions I really like to ask myself is, what is the problem that's being solved?
Because in any business, if you're not actually solving a valuable problem for people, then you're not going to have a very sustainable business model. And there's probably something that's a little bit unethical about what you're doing.
You know, ultimately, people are going to pay money to have their problems solved. And so you want to make sure that your business is actually solving a problem.
Now, the co-hosting model is taking a very common problem in the world of Airbnb hosting, which is that if you think about an average property owner Joe, you know, Joe has it property, and he's used to renting it on long term rental.
He's a real estate investor. He's got, let's say, a one bedroom apartment. And he's always had it for that last number of years, just leased out to people on 12 month lease.
Suddenly, his friend tells him one day, well, you know, Joe, you can put this property on Airbnb. And if you just pay to furnish it, get it set up, you put it on Airbnb, you're actually going to earn a lot more money than what you're earning right now leasing out to people on 12 month lease.
And so Joe considers it Joe decides he's gonna put his property up on Airbnb, and he does it and he's able to earn some additional income.
But he realizes two things pretty quickly. And this is the problem that we're going to be solving with CO hosting model is that Joe realizes that this is actually taking up a lot more time than he used to.
Yeah, he's making additional income share the returns are better, but it's also taking up a lot of his time.
Real Estate Investing isn't what he does, does full time and something he does on the side. And so Joe doesn't want to keep on managing this thing and responding to all the guests messages or asking questions about the property, asking how to To connect to the Wi Fi, those sorts of things, he doesn't really know what he's doing when it comes to pricing optimization.
So he knows that he's leaving some money on the table with that.
And he doesn't want to spend time on things like messaging the cleaners to make sure they go there on time they do a good job that place is prepared for the next guest is about to check in all that sort of stuff. And so as a co host, you're basically taking that in, you're going to Joe, and you're saying,
Hey, Joe, I'll take care of managing all of that. I'll take care of everything so that you can just sit back and relax like you used to do with your 12 month tenants. And I'm going to take a 10 or 20 or 30% management fee, average is better 20% management fee in exchange for doing all that.
Now in most markets and most properties all over the world. Even after that 20% Joe is still going to be earning more than what he would be earning on long term rental to be still earning more money.
And Joe doesn't have to do anything anymore. Now in a lot of cases because a property owner isn't actually able to optimize the property themselves and doesn't really know Know what it takes to make that property perform exceptionally well and really optimize the pricing and performance of that listing.
If you know a couple of good tricks and you know the right strategy, and you know how to make the property perform really well, you can, in most cases actually help Joe to earn more money than they were even managing the property themselves on Airbnb. Imagine a property that Joe is managing, and he's earning $4,000 a month managing that property on Airbnb himself.
Well, if someone like myself can come in, and I can go to Joe and I can help him to improve the performance, optimize the listing, make a few tweaks, they're going to help that property to earn $5,000 a month on Airbnb, and I take a 20% cut, then Joe is still walking away with $4,000 every month he's making is exactly as much as he was when he was doing all the legwork himself.
Now I'm doing it. I'm helping the property perform better, and I'm walking away with $1,000 a month that I'm earning in profit. Now the other thing is that obviously some properties around you Wherever you're located might not be earning numbers like four or $5,000 a month.
And if you bring in closer to 25 or 30 $500 a month depending on the property, typically, you'll want to be managing properties that I might, in my opinion, are going to be managing for earning at least 30 $500 a month. So you're not earning any less than $600 a month from managing that property.
But the nice thing about co hosting is, like I said, you can manage properties anywhere in the world, they don't have to be local to you right in your city. So it's really easy to be able to pick up properties, or you were in a hot market where it is gonna be earning good money and make a lot of great money as a co-host.
So typically, we're earning properties, we're managing properties that are earning anywhere from 700 to 1200. dollars a month in management fees. And so to offset the cost of your rent, you're probably going to only have to, you know, manage about one or two different properties around wherever you want to manage them. The other thing is that this is very scalable because you're not investing money constantly into managing more properties into expanding your business. Now, with the rental arbitrage model you have to invest five to $7,000.
Like I said, Every time that you want to pick up a new property. And so that can be quite costly, because obviously, you're going to be scaling the business and every time you start to make profit from the business, if you want to grow, you have to put that profit back into the business. And so you're not actually able to really spin off profit for yourself to live off of to, you know, do whatever you want to do with your money. So that can be challenging. And then obviously, the risk factor with CO hosting, you can grow the business a lot more quickly.
Because it doesn't require thousands of dollars to pick up a new property, you can pick up a new property for nothing, you can typically earn a bit of money when you pick up a new property charger property, our onboarding fee for some of the things you're going to initially do to get the property set up. And then that allows you to scale a lot more quickly.
And obviously there's no risk involved with managing on percentage management fee, because even if worst case scenario, the property made zero dollars in a month. 20% of zero is still zero, so you're not actually going to lose money. You just make less money if the property doesn't perform well. So, hopefully it's been really helpful. If you want to check out, you know, a couple of these different models, I'm going to link to a couple different resources in the description below.
So specifically for model number one, if you want to host your own space on Airbnb, and you want to earn some additional income doing that, then I'm linking to a free training that I've put together that basically just walks through the step by step on how to do that, obviously, in this 10, 15, 20 minute YouTube video, I'm only able to go into so much detail around it.
So if you really want to, you know, become a better host and learn what it takes to actually start hosting successfully on Airbnb, then I'm gonna link to that you can also check out my book, like I mentioned Airbnb for dummies, which is gonna just cover all those basics as well. So that's a cool resource to check out.
And then for model number two, if you're interested in rental arbitrage, you're still going to need a lot of those same resources, you'll want to check out the the tool that I linked to that will help you to analyze the profitability of different properties.
So you can see you know what properties are going to be the best fit in your area. analyze how they'll perform. And then like I said, I linked before as well in the description to a tool that's going to help you see some of the properties where that arbitrage is the greatest between what a property what you rent it for long term and what you can actually bring on Airbnb because that's obviously important, that's going to be your profit.
And then lastly, if you are interested in managing other people's properties and using that co hosting that management fee model, then I've linked in the description to another free training that I've got put together that goes into more detail on specifically how to do that the step by step for again, all this is free, they're just available for you in the resources section in the description down below.
So go ahead and check those out. And hopefully this has been a good idea giving you a good insight into those three different models and help you to understand how you can potentially earn a couple hundred a couple thousand or even a full time income from managing properties on Airbnb, whether that's your own or someone else's.
So I hope you've enjoyed this video and check out my channel for some more videos on all kinds of Airbnb related content.
I'm sure you're releasing new videos weekly that dive into some of the more specifics and some bigger just topics around Airbnb because it's an area that I'm experienced in and that I'm really passionate about.
So I hope to see you on some future videos. And I hope that you found this one extremely helpful.