Your expenses as an Airbnb host are directly tied to how profitable you are. So knowing all those costs can help you make good investing decisions. And tracking those costs will ensure your Airbnb continues to make money.
Kate and I have been running Airbnbs for over three years now, and we are making about $70,000 a year from them.
I’ll show you everywhere we’ve spent money on our Airbnbs over the past three years, and it will be up to you to estimate these costs for your specific situation.
Our List of Airbnb Host Expenses
Here is a list of every expense I’ve ever paid for running an Airbnb. Depending on your situation you may not have to pay all of these. And if you are listing part of your primary residence, then some of these (like your mortgage payment) are expenses you already have.
1. Mortgage payment
The biggest expense we have is our mortgage loan payments. While the mortgage is a big expense, and reduces your cash flow, it’s not all bad. A portion of that payment is adding to your equity in the property.
2. Property insurance
You’re required to pay for property insurance if you get a loan from the bank to purchase your home. If you do run an Airbnb out of it, then you should probably have an insurance policy specifically for short term rental.
We use Proper Insurance. It’s more expensive than regular home insurance, but if a guest causes damage or gets injured on your property you’ll be covered.
Insurance is generally a part of your monthly mortgage payment.
3. Property taxes
Property taxes are unavoidable no matter what. This expense is normally included in your mortgage payment as well. If it’s not, then it’s a once a year expense.
Property taxes, insurance and loan payment are usually wrapped into one monthly payment, and that payment accounts for around 60% of our hosting expenses.
4. Utilities (including internet)
When you run a short term rental you have to pay for the utilities. Water, electric, gas, trash, sewer and internet are all coming out of your Airbnb revenue.
This is our next biggest expense. It usually accounts for about 25% of our total monthly costs.
One way we try to keep our utility costs down is with smart thermostat. We use a Nest which allows us to change the temperature from anywhere with the phone app. If guests have already checked out and the temperature is set too high or low, I can adjust it from my couch.
5. Lawn care
Early on, I drove around to our Airbnb rentals with a push mower and cut the lawn myself. It was a lot of extra work and eventually we found a local guy who is very affordable and cuts all our lawns on the same day.
Obviously this is an optional expense. You may not have a yard and if you do you can cut it yourself.
6. Home maintenance costs
Any property you own will eventually need some maintenance. Our most common maintenance cost BY FAR is plumbing.
We’ve had guests flush tampons and wipes down the toilet and eventually pipes get clogged. We’ve had water heaters and air conditioning go out, too. These kinds of things will happen from time to time.
When you have a maintenance expense, it’s usually big, but they don’t come around all that often. Averaged over time, our maintenance costs are less than 10% of our overall expenses.
7. Cleaning costs
We pay someone to do a lot of our cleaning. We pay a flat rate to our cleaner each time she flips one of our properties.
It’s good to consider the cost of a cleaner when you analyze the viability of an investment property, because chances are one day you won’t want to clean anymore.
8. Cost of furnishing
Furnishing your Airbnb is a one time expense, but I figured I’d put it on this list since it’s easy to forget. You’ll need beds, furniture, TV, cups, dishware, appliances and other staples for your rental.
Your guests will go through toilet paper, soap, breakfast food (if you provide it), coffee, trash bags and a handful of other disposable things.
Overall, keeping our supplies stocked is a relatively small expense, but we’ve got kind of a system in place that allows us to buy everything in bulk to keep costs down.
10. Cost of replacing old stuff
Your non-disposable items will also need to be replaced from time to time. For example, hand towels can be washed and reused for months, potentially years, but eventually they’ll break down or become discolored.
When your towels, sheets or even your furniture reach that point they will need to be replaced. This is a pretty marginal expense. It accounts for less than five percent of our total Airbnb costs.
11. Airbnb fees
Airbnb (and other short term rental sites such as VRBO) take fees from hosts. Different sites do it differently, but Airbnb takes a percentage of every booking.
At the time of this writing the Airbnb host fee is 3%.
Other Potential Expenses
There are a few other expenses you could encounter as an Airbnb host. These don’t currently apply to us, but depending on where you live they may apply to you.
12. HOA fees
In reality, most neighborhoods with a home owner’s association won’t allow short term rentals to begin with. But if you happen to find one that does, you’ll be paying yearly fees to the HOA.
13. Local taxes
Airbnb has become a huge threat to the hotel industry. Because of this many hotels are trying to hurt Airbnb hosts by using local law.
In some cases this would mean short term rentals are straight up illegal. In other cases it will mean there is some sort of registration needed or possibly even taxes paid to the city you are operating in.
14. Registration fees
If your city decides that Airbnb hosts must register their rentals, then you may also incur fees associated with that registration. I think more and more cities will see orders to register all homes listed on rental sites like Airbnb, HomeAway and VRBO.
15. Sanity expense
There are other expenses as an Airbnb host that are not monetary. Inevitably you will have bad guests sometimes. Maybe they are messy or loud or maybe they check in and out at weird times.
Honestly there are all kinds of things that can, and will, go wrong when you host:
- Guests haven’t left by check out time
- Guests can’t get into the house
- Reservations get cancelled at the last minute
- You have to accommodate nit-picky requests
- You find something broken
- Something isn’t working for your guests (no hot water, air conditioner breaks, etc.)
- Guests misuse your appliances
- You come into the strong smell of smoke in a non-smoking house
The list goes on and on. If you host an Airbnb, there’s no way around, you will deal with frustrating situations. And for some, that’s enough to avoid hosting altogether.
After listing all these expenses I’m thinking “how on Earth do we make money from this?” There are more than I realized, but it turns out that even after all these costs you can still take home a very healthy cash flow from your Airbnb.
As an investor, your decisions will depend completely on your ability to identify and estimate expenses before you buy. I hope this list helps you make wiser decisions.