It is possible to build property riches starting from a small base. This couple shows you how they did it. They’ve also launched a business that makes it easier to rent your property on Airbnb.
Although Brigid Prinsloo is a dyed-in-the-wool Capetonian who absolutely loves the city, she isn’t spending a whole lot of time there right now. Like many young people, she’s pulled up stakes and hit the road, determined to see the world. When Entrepreneur spoke to her via Skype, she was busy exploring Vietnam with her Fiancée.
But, unlike many people who finance their travels by selling their homes and possessions, Prinsloo hasn’t liquidated her assets. Instead, she has done the opposite – she has invested in a couple of properties that she lists on Airbnb. The income from these rentals is significant enough to not only cover their respective bonds, but to bankroll her travels as well.
How has she managed it? And, more importantly, is it something that others can accomplish as well? Entrepreneur asked her to reveal the secrets to making a killing on Airbnb.
1Getting Started: Listing Your First Property on Airbnb
How did you start listing on Airbnb?
I used Airbnb during a trip to London and Dublin, and the experience was a very positive one. When I got home, I decided to try being a host. My fiancé and I had a spare room in our flat, which had morphed into a dishevelled storage room. Almost on a whim, we decided to try and rent it out on Airbnb. We had a very ‘Lean Start-up’ approach to the whole exercise. Our small room acted as a minimum viable product (MVP), we listed it simply as a way of gauging interest.
Well, within an hour of listing the room, we received our first inquiry. Within the first day, we had our first booking. We weren’t prepared. We ended up moving our own comfy bed into the room, just to ensure our guest could enjoy a decent night’s sleep, and slept on a spare bed ourselves.
By the end of that first month, we had earned close to R10 000 by renting out the room. The rent for our entire two-bedroom flat was R10 500 per month. We realised that we could earn a tidy sum by renting out an entire flat.
My fiancée and I purchased a property that we now rent out, and I also purchased a second property with my dad and my sister, which we’ve also listed on Airbnb.
Resource: New Ways SMEs Can Find Funding
2Return on Investment: Making Money on Airbnb
How much income can you expect to earn on your Airbnb property per month?
There are obviously loads of different kinds of listings on Airbnb – everything from cheap spare rooms to lavish mansions. Based on the investment we’ve made, though, I’m very happy with the return we’ve seen.
If you take the entire amount that my fiancée and I have earned from renting our flat out through Airbnb and divide that by the number of months that it’s been listed, the average monthly earning is about R23 000. And this is a property that had been rented out to a long-term tenant for about R6 000 by a previous owner. And what’s great about this sort of investment, of course, is that the income generated is fairly passive, which is why I can afford be in Vietnam while everything ticks over at home.
3Birth of Superhost: An Airbnb Management Company
Is there an easy way to manage multiple Airbnb properties?
If you’re renting out one room – or even one flat – managing your rental is fairly easy. However, once you start listing a couple of properties, managing them can become quite a task. For example, someone needs to welcome guests and hand over the keys, ensure that the flat is clean, and even take care of all the admin that goes with managing a listing on Airbnb.
We started a service called Superhost SA, which assists Airbnb hosts in managing their listings. As the popularity of Airbnb has grown, companies focusing on offer management services have popped up in lots of major cities. For around 17% of the revenue earned, a company like Superhost will assist with the nitty gritty of renting out a space on Airbnb.
Resource: 10 Businesses You Can Start Part-Time
4Location, Location, Location? Which is Best for Airbnb Property Owners
How important is location when it comes to listing a property on Airbnb?
Location is important, there is no doubt about it. A lot of travellers will judge a listing by what is within walking distance of the space. So it is worth trying to get hold of a property in a decent location, even if it means you might have to go for something a tad smaller.
That said, however, you’ll find that the listings on Airbnb in Cape Town are surprisingly spread out. Services such as Uber have made it easier for people to travel in foreign cities. So location is important, but you certainly don’t need to be situated in the very heart of town.
5How to Build An Airbnb Property Empire
Can you build real wealth through Airbnb listed properties?
Some people are using Airbnb to build empires, there’s no doubt about it. You find that some people in large cities like New York have massive Airbnb portfolios with 200 listings. Airbnb is providing an interesting alternative to the traditional strategy of buying properties and renting them out to long-term tenants to pay them off. You can make far more money from Airbnb.
That said, Airbnb isn’t going to turn you into a multi-millionaire overnight. Building up a portfolio will take time. We might be able to pay off the bond on our flat in four years instead of 20 thanks to Airbnb, for example, but it’s not a get-rich-quick scheme. It will still take time.
Another interesting way to potentially make money through Airbnb is to rent a property and list it on Airbnb. But you don’t want to do it illegally. Airbnb has had to deal with some backlash overseas because of tenants who were illegally subletting their flats. You need to be honest with the landlord and make sure that he or she is okay with it.
6How to Make Your Listing Stand Out
How do you achieve and maintain a high occupancy on Airbnb?
A lot of people are noticing the income potential of being an Airbnb host. In fact, Cape Town alone now boasts close to 10 000 listings on the website. So how do you make your listing stand out? Here’s Brigid Prinsloo’s suggestions:
1. Create a pretty listing
Hide the laundry, flush the toilet and make the bed before you upload an image of your flat on Airbnb. Not only should the flat you’re listing look clean, modern and inviting, but you should also make sure that you post excellent pictures of it online. It’s even worth making use of a professional photographer.
2. Undercut the competition
You might not be better, but you can certainly be cheaper. Undercutting the competition is a worthwhile strategy. The more people have visited you, rated your place and commented on your service, the higher your listing will be placed on the website. This means that new hosts can find themselves languishing at the bottom of search results, far from the eyes of potential guests. Prinsloo suggests listing your space just below the market standard (5 – 10% below).
“Most people filter search results by price, so being slightly cheaper than the competition will help you get noticed,” she says.
3. Connectivity is important
Around 70% of South African Airbnb guests are from overseas. While these people won’t be travelling thousands of kilometres to sit in a room and watch TV, they’ll probably still want access to DStv. Wi-Fi is another must-have for those looking to share their ‘African experience’ on social media. And it better be fast and uncapped.
4. Be friendly and helpful
As mentioned, reviews are important on Airbnb. And if you want to receive a good review you need to provide a great experience.
“A lot of people are looking for that personal peer-to-peer experience. They don’t want to feel as if they’re living in someone else’s room with their clothes in the cupboard and toiletries in the bathroom, but they do appreciate that personal. Being friendly and helpful goes a long way. If someone is from out of town, it’s a good idea to provide them with hints on where to go and what to do in the city,” says Prinsloo.
5. Add personal touches
You’re not a hotel, but you can still try to make your space as cosy and inviting as well. A good way of doing this: Provide those nice-to-haves like soap, shampoo and great coffee. Prinsloo always provides a couple of bottles of local wine as well.
Related: 10 Tips for Finding Seed Funding
7The Risks of Listing a Property on Airbnb
What are the risks associated with listing a property on Airbnb?
Whenever you hand over the keys to your house and possessions to complete strangers, there is an element of risk involved. However, Airbnb tries to mitigate this risk by allowing hosts to vet guests (and vice versa) to an impressive degree. Guests and hosts verify their IDs by connecting to their social networks and scanning their official ID document. Although there are some horror stories out there, listing needn’t be terribly risky. You just need to try and make sure who you’re dealing with.
What happens when a guest breaks a leg while descending your stairs, chops off a finger with your kitchen knife or shocks himself with your electric fence (foreigners aren’t as familiar with electric fencing as we are). We live in an increasingly litigious society, and should something go wrong, you could find yourself being threatened with a lawsuit. Because of this, it’s a good idea to ask guests to sign a waiver that absolves your from any culpability.
It’s great when guests arrive, but what happens when they won’t leave? Airbnb rental falls into a murky category of property rental that could see you deal with the same legal hassles as someone trying to get rid of squatting long-term tenants. Squatter’s rights can make this very difficult. It is a good idea to consult a lawyer to help draft a contract that will offer some form of recourse in the event of squatting guests.
Some body corporates and home-owners’ associations will be less than impressed with the prospect of total strangers coming and going from your property at all hours. You need to ensure that other home owners don’t have problem with the listing of your property on Airbnb. The last thing you want is for them to take their frustrations out on your guests.