Passive Income: How To Make Money With Airbnb

In this post, I answer 7 questions that cover everything you need to know to start making money with Airbnb.

Previously, in the Passive Income: 4 Real Estate Investing Options post, I wrote about some of the many ways one can invest in real estate. And one of the methods mentioned there was buying a property and putting it up for rent.

Renting a property gives you a steady passive income source. However, some of the downsides to this was 1. you may end up with tenants who don’t pay and 2. the amount of money involved to actually buy a property.

But what if you can rent a spare room in the house you already live in and with a guaranteed payment?

Recently, I came across an ad for Airbnb, and I didn’t actually know much about the service other than that it’s one that provides houses for tourists and such.

I also didn’t know that the service was available in Egypt, which it is!


Jump to:


1. What is Airbnb?

This is an American company that facilitates tourists’ stay in a country by providing them with an online service to rent apartments, rooms, and hostel beds, etc, for the short period of their stay.

The apartments and rooms available for rent is provided by the locals of that country. They put their available properties up for rent on the Airbnb website, and they get contacted once a tourist is interested in renting their place.

The website provides customizable search options for the guest to find the exact type of property with all the amenities they need. And it gives the host the option to set house rules for the guests to know and agree on before booking.

What you can provide as a host:

1. Place

You can list any kind of property. It can be a shared room, a private room, or an entire house.

The place needs to be clean, secure, and have essential amenities like a pillow and a towel for each guest. You can read more about the basic requirements for hosting here.

2. Experience

Airbnb Experiences are activities designed by locals. They go beyond typical tours or classes by immersing guests in a special kind of activity that they wouldn’t be able to experience on their own.

It’s an opportunity for anyone to share their hobbies, skills, or expertise without needing an extra room. Read more about experience hosting here.

2. Why do tourists use Airbnb instead of hotels?

For the tourists who are looking to spend a short time in your country, most of them want to get the most out of their stay with the least amount of money possible. Airbnb provides them with this option when they put properties or rooms for rent at quite low prices compared to any hotel room in that same area.

It also gives the tourist the ability to live like locals in the country which maximizes their experience.

Besides, many Airbnb hosts provide their guests with more than just a stay, but they help them make the most out of their stay by advising them of places to visit that only a local in that area would know.

That is of course beside the ability to actually book an experience; something that you can only have when touring with a local.

People don’t use Airbnb overtly to trust people more. They use it because they want to get a better sense of the culture and to save money. A by-product was that they live in someone else’s shoes.

Brian Chesky

3. How is Airbnb different from traditional renting?

There are huge advantages to renting through Airbnb instead of the traditional renting, but there can also be some disadvantages.

Advantages:

Guaranteed Payment

As opposed to renting your house the traditional way where you can face an issue like a non-paying tenant, when you rent through Airbnb, you will never have to deal with this kind of hassle because they handle all payments for you. And the guest makes the full payment through the website in advance.

Host Guarantee

Airbnb have insurance programs which secures you and your house in the rare case of any incident occurring that causes damage or injury.

Whenever a guest makes a reservation and stays at your place, you’re automatically covered by their Host Guarantee. You can read more about the terms and conditions of benefiting from this here.

Home Insurance

Host Protection Insurance program provides primary liability coverage of up to $1 million USD per occurrence. The program protects against liability claims that happen in a listing, or on an Airbnb property, during a stay.

You can read more about what is covered by this program here.

Experience Insurance

Experience protection insurance provides experience hosts with free liability insurance of up to $1 million USD to protect against personal injury or property damage claims.

You can read more about what is covered by this insurance here.

Disadvantages

Not a stable source of income

Unlike renting a house to a resident who is going to live there for at least a year and possibly more, renting to tourists will not provide you with that monthly stable income.

Some people can have guests booking their place every month but that is not necessarily the case with every host.

How often you would get a booking would mostly depend on the location of your place (how close it is from sightseeing areas that tourists would be interested in) and how appealing it is (the reviews you get).

Possible damage

There is still the possibility that you might encounter damage that is not covered by the Airbnb Insurance.

4. Is Airbnb safe?

This was an obvious concern when I first learned about the service. If you have a spare room that you want to put up for rent, is it really safe for you to invite complete strangers into your house? Or if you are the one looking for a place to stay, would you feel safe staying with a complete stranger in a foreign country?

“On any given night, 2 million people stay in homes on Airbnb in 81,000 cities all over the world. There are nearly 5 million listings in 191 countries to choose from —that’s more than the top five hotel chains combined.”

So how did this service actually manage to get so popular and have millions of users around the world, whether hosts or tourists? How do all these people trust this kind of service and feel safe using it?

Here are some of the measures taken to provide safety for the host:

They run hosts and guests against regulatory, terrorist, and sanctions watchlists. And for hosts and guests in the United States, they also conduct background checks.

Every guest is asked to provide their full name, date of birth, photo, phone number, email address, and payment information to Airbnb before booking. Home hosts also have the option to require guests to provide Airbnb with a government ID before booking their listing.

Reading reviews from previous bookings from that guest and what other hosts had to say about their stay with them can also be helpful. These reviews can only be added after the reservation is complete; so they are based on actual experience.

Every Airbnb reservation is scored for risk before it’s confirmed. They use predictive analytics and machine learning to instantly evaluate hundreds of signals that help flag and investigate suspicious activity before it happens.

And their customer service is available 24/7 in 11 languages.

You can read more about the Airbnb terms of safety and protection for both hosts and guests here.

Airbnb has proven that hospitality, generosity, and the simple act of trust between strangers can go a long way.

Joe Gebbia

5. Is Airbnb legal?

The service is legal to use in Egypt, so far. However, Airbnb services has been banned by a number of cities and countries due to housing and rental shortage and pricing issues.

So you will need to check whether or not it is legal to use this service in your city before you list your property for rental.

6. How do you become an Airbnb host?

All you need to do is visit their website to sign up and list your property for free.

When listing your property you will be asked to specify all the available amenities and facilities provided, and of course the exact address of the property.

You will then need to provide photos of the place and a short description for the guest to know what to expect.

After that you will have the option to set the price you want, the timing and duration this place is available for rent, any requirements you look for in the guests you will host, and any house rules you want them to follow during their stay.

You are also asked to provide your personal details, such as your full name, your phone number and your ID for verification.

There is a very good article I read by someone who has been an Airbnb host for a few years, advising on how to be a great host, you can read it here.

7. How do you get paid with Airbnb?

First, Airbnb takes a commission fee of 3% from the payment you receive as the host (and between 6%-12% from the guest booking).

As mentioned earlier, guests make the full payment for their stay through the Airbnb website in advance. This payment is held for 24 hours after their check-in, which is the time the guest has to report to the company if there’s anything wrong with the booking or if they couldn’t reach you, the host, in which case the money will be refunded to the guest.

However, in the normal case where you are there for the guest or provided the key for them, following whatever scenario you’ve both agreed on beforehand, you will have your money transferred to you after the 24 hours.

There are several payment options provided. You can have the payment sent to your Paypal or Payoneer accounts, or you can have it directly deposited into your bank account, or it can be mailed to you as a check. The time of the transfer will vary based on the method you choose.

Conclusion

This is a service that can certainly make a difference to your income with little to no effort on your part. It can also be fun for you, if you like to meet new people from different countries and make connections.

And while using this service can come with a potential risk, especially if you will be sharing the place you live in; however, you still have control over the guests you accept and you can ask for all the information you need about them before confirming their booking.

It will be less risky if you will rent a spare property, as long as you make sure you keep any personal or valuable belongings in a safe place (preferably not in the same house).

For me, I think this can be a really good source to increase my income and I do love meeting people of different nationalities. So I plan on trying this myself soon and will be sharing my experience in a later post once I have had my first guest.

Till next week, happy days!

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Passive Income: 4 Real Estate Investing Options

This post introduces the meaning of passive income, the different sources where you can achieve it, and 4 ways through which you can invest in real estate as a passive income option.

First, What Is Passive Income?

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.
Some of them, however, would require quite the effort in the beginning, just to give it the required push to start off, and then it starts giving you that regular income later on.

What Are Some Passive Income Sources?

After lots of research and comparisons, I was able to come up with the below list. I would say most of them are safe methods, ones that has the least amount of risk and don’t really require a crazy amount of money to start. This is not everything out there, but those are the ones I found so far which seemed possible to start with. I will be adding more along the way.

Here are the risk-free ones (in no particular order):

  • Real estate investments
  • Google AdSense/Affiliates
  • Online business
  • Retirement accounts

And then there are the methods which can be a little bit risky, but not so much if you know what you’re doing:

  • Real estate investments
  • Stock market
  • Index funds

Ho Do You Choose The One To Start With?

When it comes to making a choice, you would mostly just need to check which of these options you can afford or which of them you have the access to try and invest in. Also, if you already have some sort of knowledge or know someone who can help you get started.

For me, I decided to start with the real estate investment option. And I have listed the real estate option in both the safe category and the not-so-safe one, this is because investing in real estate has multiple methods, some of which can be risky and costly, but others not so much. I will briefly explain the details of each one below.

The 4 Real Estate Investing Options

1. Buying Property

This is the typical type of real estate investment where you would need to have a sum of money that is enough to buy a property (residential, industrial, or commercial) and you would then decide to either rent it and have a fixed monthly income or renovate and sell it with a higher price.
You can check out this video on how to buy at a lower cost so you can make a profit in reselling.

Usually the trick in this one is that it could take a long time to find a buyer for a property; and if you rent, you may end up with tenants who do not pay. So, it’s got a bit of risk to it if you’re not experienced in that field I guess.

2. Real Estate Funds

And there are three types of funds: there is the Exchange Traded Funds (ETF), the Real Estate Mutual Funds, and the Real Estate Investment Trusts (REITs).

ETF and Mutual Funds are somewhat similar in many aspects. However, deciding on which fund to invest in would typically rely on the cost vs the profit you will get, and also the flexibility of the trading and how long you plan to hold your shares. If you’re interested in the topic, you can find a more in-depth comparison between the two here

A REIT, however, is a company that owns, develops, and manages real estate properties that produce income. The benefits of investing in REITs include their lower investment entry costs;  and that they are highly flexible, allowing investors to invest in a range of real estate from commercial properties to shopping malls. Check out this article for a comparison between REITs and Mutual Funds including their pros and cons.

Interestingly, I found out that real estate funds were only introduced last year in Egypt (where I live) and apparently there are only two launched at the moment one of them is Naeem Holding fund which provides an annual profit of 26%; and they accept both local and foreign investors with minimum share price of LE 50K. And it looks like there will be more launching soon too. (I am so excited!) More on this here.

3. Online Real Estate Investment

I came across this gem of an option, but sadly I couldn’t find one that accepts funds from where I live (and I will be saying this sentence frequently along the way).

Basically these are online websites where you can buy shares with whatever amount you want, starting with as little as $100 for some websites, and they search for properties to buy and sell and you get an annual profit.

For example, I found this website called Fundrise where you can start investing with $500 and it is not required to be a professional like other websites. This one is limited to investments from U.S. residents only, though. I couldn’t try it, but I have read a lot about it and they were mostly good reviews. There are plenty of other similar websites listed here.

4. Home Construction Companies

This would be investing in a company that builds houses. You can find homebuilder companies in your city or online. And this is the real estate investment option I started with. 

I myself am not a realtor and I cannot afford something like buying a property to rent or renovate and sell, for example. (And I only found out about the Egyptian real estate funds when I was writing this post, so it was a bit too late..)

However, luckily, I found another way to get involved in real estate investments which is through a local construction company where I can buy shares and they use the money I pay along with many other investors to build properties and then sell them; and the investors get a fixed amount of yearly profit.

It was easy for me to choose this one also because I already knew a realtor in that company. I started with the least amount of money to buy only one share for LE 50K (that is about $2800) which is all the money I had on me, literally. And I could have waited until I had some extra money, but I thought the earlier I start, the earlier I will be getting a revenue, and so I just did it.

It is hassle-free and almost risk-free, so it is a good start for me to have some kind of investment to generate a passive income. My plan is that throughout this coming year, I would try and save up money so by the next year I would be able to buy a second share.

(Side note: I would not recommend spending all you have on a single investment option unless you are certain that it is a safe and trusted investment. I did that because 1. I know the people involved and know people who are long-term investors with them, and 2. I knew if I’d kept that money it would have been spent on meaningless stuff especially since it’s SALES season!)

The best time to plant a tree was 20 years ago. The second best time to plant a tree is today.

Chinese Proverb

One of the other passive income options mentioned in the lists above which I also find interesting is the index funds. Index funding is a type of mutual fund with a portfolio constructed to match or track the components of a market index. It is said to provide broad market exposure, low operating expenses, and low portfolio turnover.

I’m planning on trying this as a next step. I’m currently still searching for the best index fund to invest in in Egypt. But the good thing is there are options to invest in international index funds even if you are not a resident of the country. Although, it seems to have a more complicated procedure, but it is possible. So, I will be doing more research on the matter and will be sharing my findings in a later post.

The other passive income option which I found possible and somewhat easy to start is the online business. Online business however is an umbrella term for a huge number of businesses that you can try. In my next post,  I will be sharing all the online businesses that most people sort of have agreed to have been the most helpful and which ones I myself have tried so far.

Till then, happy days!