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!
- What is Airbnb?
- Why do tourists use Airbnb instead of hotels?
- How is Airbnb different from traditional renting?
- Is Airbnb safe?
- Is Airbnb legal?
- How do you become an Airbnb host?
- How do you get paid?
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:
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.
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.
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.
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.
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 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.
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).
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.
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!