Avoid These 3 Common Airbnb Mistakes

Got an Airbnb business that's performing poorly? There are several ways to solve the problem. Let's talk about those here.

learn more about Jorge Contreras

By Jorge Contreras

Opinions expressed by Entrepreneur contributors are their own.

Like any venture, hosting an Airbnb can be challenging, especially if you're a newbie trying to navigate your way around. Some new hosts who dive head-first into the business without knowing the 'dos and don'ts' of the business can make costly mistakes.

If you're an Airbnb newbie, here are 3 of the most common mistakes you must avoid to ensure your business runs as smoothly as possible. And if you've already launched your Airbnb but it's doing poorly, read along, so you know what to change to achieve your desired results. Let's get right into it, shall we? Here are the top 3 mistakes to avoid in the a

Related: 5 Ways to Adapt to Change and Build a More Resilient Business Model

1. Not knowing if the location is right

One of the biggest mistakes new Airbnb entrepreneurs make is not knowing if an area is suitable for hosting. Not all locations allow short-term rentals and not all of them are ideal for business. So how do you know which ones to pick?

First, you need to determine the short-term rental regulations of the city or state where you want to do business. Some places don't allow Airbnbs, and some cities will ask you to acquire special permits. The best way to know for sure is to go on Google and search for: "short-term rental ordinances in" and add the name of your potential city.

The search results will show that city's building department's phone number. Call this number and ask them about their short-term rental regulations, and they will tell you if they allow Airbnb and whether or not you need a permit to operate.

Aside from this, you also need to know if your property location is ideal for hosting. Now, we split the real estate into A, B, C and D categories, where A is your super high-end property, and D is the opposite. It is recommended that Airbnb listings stay away from C minus and D areas because they're not safe for guests.

However, some fail to recognize the difference and invest in places unsuitable for hosting. They end up shutting down because they're not making profits due to complaints.

Related: 4 Powerful Tips To Create A Successful Airbnb Business

2. Not following the data

Another top mistake new Airbnb entrepreneurs make is not consulting hard data. Most people who want to start an Airbnb business visit sites like Zillow to find a property to buy or sublease. Then they immediately begin preparing to launch, hoping the business will be profitable.

But this method is hit-or-miss. There is no assurance when you start a business by trusting luck alone. Instead, you can use software like Mashvisor and AirDNA to look at Airbnb's existing or projected revenue in any chosen area.

Sure, there can be margins of error while using these predictions. But it's a solid method to know if you'll make a profit instead of going in blind and just winging it. So before you decide on a property, look into the data to determine if you're doing it right.

3. Not understanding the contract well

Mistake number three has everything to do with not understanding the legal verbiage on your contracts. If you're subleasing a space — renting a property to use it as an Airbnb rental, you need to have an agreement with its original owner.

And there are two things you need to check when you sign into an agreement:

  1. It must say that you have permission to use the property as a short-term rental.
  2. It must state that you have permission to change the locks.

These clauses would ensure that your landlord is aware of your business and you have control over the property during your stay.

Related: 5 Lessons You Learn From Your Business Mistakes

Other factors that may affect your business

Got an Airbnb business that's performing poorly? Well, there are several ways to solve the problem. Let's talk about those here. Now as per my experience, three main factors can affect your business' profitability:

  1. Location
  2. Amenities
  3. Pricing

As discussed earlier, being in the right location is vital for your business. So if you've already chosen your property and launched your listing in an unpleasant part of town, unfortunately, you won't be able to take it back.

But if you think your area isn't that bad yet you're still not getting profits, you can add amenities to make your place more attractive. If you have the budget, you can add high-ticket items like pools, jacuzzis or even a spa. But if you're looking for more affordable options to enhance your guests' experience, you can purchase items like a foosball table, board games like Monopoly or an oversized Jenga that you can put in your backyard

As for the pricing, here's a useful tip: if you notice that your bookings are coming in way too slowly, it's likely that your prices are too high. On the other hand, if you're getting bookings way too fast, you're probably also losing out on profits. So how do you find the balance?

Now every location and property will be different. Still, you can snatch how I price my rent with a formula I call the 10-20-30 Rule: If my rent or mortgage for a property is 3,000/month, my goal is to break even at ten nights, double the amount within 20 nights, and triple it within 30 nights. This means that I'm going to charge 300/night in rent. It's a simple formula, but it's very effective.

Related: How to Earn Passive Income With Airbnb

The final verdict

Creating a profitable Airbnb can be a challenge for newbies and experienced entrepreneurs alike. But if you're worried you might make a mistake while running your business, don't. Just keep these tips in mind, and you're good to go. Now go ahead and launch that Airbnb business. You got this!

Jorge Contreras

Entrepreneur Leadership Network Contributor

CEO of The R.E.A.L. System

Jorge Contreras is a real estate investor and coach. After launching an Airbnb business five years ago, Jorge decided to share his Airbnb knowledge. Jorge has helped over 3000+ people reach their goals with Airbnb and achieve financial, time, and location freedom.

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