Ep 57: The 3 Unknown Airbnb Expenses You Need to Plan For (And Can TOTALLY Avoid) With Having an Vacation Rental Property

Are you thinking about bringing a vacation rental into your income portfolio but want to know if there are any pitfalls to avoid in the process?

If so, this episode was created specifically for you! Today, I share 3 unknown expenses I discovered when I was a new Airbnb host.


Ep 57 The 3 Unknown Expenses You Need to Plan for and Can Totally Avoid With Having an Airbnb Rental Property.png


AND… here’s the good news… Once you know these potential expenses are there, you can make plans to avoid them. It’s rather simple once you’re in the know.

Learn from my experience and keep more of your profits in your pocket!

And if you’re curious about how much you could potentially earn with an Airbnb in your area, I can send you a free and pretty powerful tool to help you estimate…

Visit GinnyTownsend.com/rental to claim access to this powerful free tool!

Thanks for joining me, and until next time, continue to be up and to the right.


What’s up Podcast Nation! Ginny Townsend here and I am so excited to talk with you today. Okay, let’s dive right in. This episode is an episode I wish I would have had when I first started out with my first Airbnb property a number of years ago. And it is all about three unknown expenses and that if you plan for you can totally avoid but because there are unknown, I had to learn from experience.

So the first one is really the biggest one but it is nightly minimums. So, setting your nightly minimums, especially if you use the Smart Pricing feature on Airbnb, which will make – if you’re not familiar with that feature, you can allow Airbnb to increase or decrease your rate based on demand for bookings in your area. And so the goal is obviously to help you capture as many bookings as possible capture some upside, you know, if the demand is higher all of that, it’s great.

But you don’t necessarily have to set a minimum to engage with Smart Pricing. And so I encourage you to take a look at your numbers, know your numbers and your expenses, and then also definitely add in what you want to bring in each month and say okay if I need to make X number of a month and I’m averaging 15 or 20 nights a month. Alright, this is my minimum of what I need to bring in each night great.

But then if you add a dynamic of weekly discounts or monthly discounts depending on the audience, you’re serving your own goals, whatever your strategy is, it’ll compound. So here’s what I mean. You can offer discounts as an incentive for people to stay longer which, there are it’s there is some smart business behind it… Obviously, you don’t have the turnover between guests as often. So if you’re managing the property, you don’t have to necessarily book the cleaning team or you know, all of that you need to do that less. So there’s even less work for the revenue that you bring in especially when it’s a monthly stay obviously. And by the way, Airbnb considers 28 days to be a month for these purposes.

That’s the minimum. So if someone books any more than 28 days, they would get whatever your monthly discount is. So when we first started using the Smart Pricing feature, I didn’t have a month a minimum stated and so it went down I mean it wasn’t super drastic, but when someone requested to stay at our place.

It in order as I like to call it a for a month. It was that lower price and we had a 50% discount for a monthly stay. It was that lower price and it was cut in half. So I don’t have those numbers in front of me right now, but it was like, okay, let’s say my goal was to get something like $150 a night and it had gone down a little less than $100, and then it was cut in half. So it was like $50 a night. And thankfully I didn’t have Instant Booking on at the time. But I would I was like, wow, this is far too low. This doesn’t even cover expenses let alone give us a profit. So what I did I actually and you know, here’s what I did I reached back out and I said, I’m sorry. There must have been an error our but this is far too low. We can’t accept this I and then you’re able to give a like a unique offer back to a guest that you’re talking with or a potential guest you’re talking with I said this is really are like the minimum of what we can do and they accepted and so we were able to stay positive. We’re just able to stay profitable meet all our expenses and still have some take-home, but it was a huge eye-opening moment to see…

Instead of like $4,500 which would be our nightly rate as the retail rate, it was it was less than $2,000 so huge, HUGE learning moment for me, but then I just went in all I had to do though was like take a look at my numbers again and just make sure okay even with a monthly discount. We’re still able to cover expenses and bring in some profit at x amount and so it was just as easy as that.

There’s knowing your numbers and setting your minimums. And once you set your minimums, by the way, it’s not something you necessarily need to go back and address over and over again. This is just making sure you again cover your expenses and ensure you have some profit built-in.

Okay, now there is another discount. It’s not as deep but some hosts offer a weekly discount. And by the way, none of these discounts are mandatory obviously Airbnb’s goal is to get bookings. So they encourage discounts to get more bookings. I mean, that’s how they’re paid. That’s how I keep guests happy and coming back to the platform to book and so it just needs to make sense for you as well. Weekly discounts aren’t as deep as a month least a discount might be and when you’re going through and actually setting up your pricing Airbnb will give you a suggested discount for your area, but just think of that as a guide. It’s not a rule and here is how I like to think about it…

Okay, there are obviously seven days in a week, right and so each day is 14% of that week. I like to give a 5 to 10% discount for a week. So it encourages people to not book more time than they need. I so I haven’t actually had this happened but I have heard from other hosts that their weekly discount was so deep some guests were only going to stay for four nights but saw that if they booked for a full week their stay would be even less than if they had just paid for the four nights! So they booked a week.

So that’s taking three days off of their calendar off of the hosts’ calendar and it’s also taking the revenue out of the hosts’ pocket because it was less than just the four days. So I like to keep it like on give a discount people feel really good about getting a good deal, but then don’t also shoot yourself in the foot by taking more days away from your availability and taking revenue from your pocket.

Simple. Is that right?

And then again, once these settings are set, they’re generally good. I mean it can be one of those things that you look at once every six months and make sure you’re still on target to hit your goals, but it is really a one-time thing to actually think about and set up, which I love.

It’s beautiful, right? Okay.

Those are the nightly minimums incredibly important and they will ensure that you have your profit built-in. Okay, so the second unknown expense is utilities. So as an Airbnb host, you cover all of the expenses for the property, right? It’s not like a long-term rental where your guests or you know, your tenant would be for a long-term rental your guests would pay for the rent, but then they cover utilities.

No, you as a host cover everything and so things like Wi-Fi and water and things like that, but they’re generally going to be pretty stable over time. But if you live in an area where there are either harsh winters or harsh summers think about the climate control expenses in your area. So, our first Airbnb I’ll go back to that example was in California and had hot summers very mild fall spring and winters but hot summers so we knew we needed to take a look at how much our utilities we’re going to be for the summer for air conditioning and make sure our summer rates covered that. But one thing that I did not think about and thankfully we were able to cover it and still remain profitable but that house had a hot tub…

And I mean, okay, we had originally lived in this house before we turned it into an Airbnb and when we lived there, we used the hot tub, but we didn’t use it like every night right so we didn’t see this huge increase in our gas bill!

And so it was just it was a shock to see our guests, which I mean in a large part the backyard was what helped us consistently have that place booked out I want to say was like in over a little over three years. It was like eleven nights of vacancy. So it’s like I know this pool in this hot tub really helped us get booked out, but I just didn’t consider how much it would how it was an enormous hot tub by the way… enormous!

How much it would cost to heat that thing up pretty much every night with some guests during the winter. And so it was so interesting. I saw definitely an increase in our utility bills during the winter when it was like prime hot tub season, but the utility company in our area had this weird, honestly, it’s kind of a racket to be completely transparent with you, but they would bill us monthly and then once a year they would go back and say actually you did use more than what we charged you for and here’s an additional bill. I don’t I honestly don’t know how that’s legal, but it happened and so we got an additional $2,000 bill. They were like, “Just kidding! We way undercharged you.”

And that was all hot tub usage and so I was floored called and figured out they’re just like oh, yeah, you know you owe this and so thankfully we had set aside some funds for like if anything needed to be repaired or whatever and like thankfully we were able to cover it with that without actually affecting our monthly take-home. But it completely changed how we did pricing strategies for the winter because we had a hot tub.

I know that’s kind of an extreme example and I don’t want that to scare you away from pursuing an Airbnb because I don’t think most utilities do that. Like I think it’s there’s a lot of weird “isms” in California just so you know, unexpected expenses and kind of things like that. But most utility companies are straightforward and just bill you for what you use and so but the thing is the bottom line here is to think about how your property will be used and then think accordingly like if you can if you if it’s a property you already own take a look back at historical usage on utilities, but then you can also just build a buffer in because again since we had a hot tub in California, obviously for the winter, we knew we could charge a little bit more of a premium and we were able to we consistently were just booked out like six months out in advance.

And so it’s not an issue if you just know to plan for it, right? Okay, so that is the second unknown expense. And then the third is local travel spikes. And so this you may be like wait a minute… That’s not an expense!

Let me explain what that means. So, okay think about local draws as we hopefully get back to normal in the next couple of months when the vaccine gets disseminated and you know, we’re just all a little bit more out and gathering so okay, what could local draws be throughout your year like it could be apple picking it could be festivals. It could be a grand opening. So in our County, there is a Legoland scheduled to be open this summer, so I’m sure all of the bookings in our general County area will probably see some uptick in visits, right?

Or if you’re in a college town, but think football season people will want to come to your area for a football game. So those are all local draws local travel spikes that in normal times people come and it’s very timely so if if you are also if you the weekends get booked up quickly on your property on your the place that you have on Airbnb. You can charge a premium for weekend nights just as an ongoing but thinking about these local travel spikes.

Now, you’re just like “Ginny, why is this an expense?” Well, Airbnb will allow you to edit pricing on specific dates and I consider lost income to really be a hidden expense. It is still money that’s being taken from your pocket. It just never actually reached your pocket.

It so thinking about you can actually just Google it if you’re not familiar with the area like, so if you are having it, you’re launching an Airbnb in an area that you don’t live in just Google events festivals grand openings, whatever seasonal activities in your area. Just Google those and you’ll get a really clear sense of when you can potentially increase your prices on your place so you don’t have to lose.

That potential revenue and it honestly just takes a couple of minutes to think about to Google and to edit all of these things are extremely simple to take care of to plan forward to prevent. Once you know, they’re they’re right. It’s kind of like a have you ever seen someone or actually had this happen to you like you there’s like a glass sliding door between you and outside and some you didn’t know it was closed.

And you just kind of run right into it think of these as someone just opened the door you no longer have to run right into that glass wall that you didn’t see you can enjoy more of the upside with less of the headaches on with your vacation rental or your short-term rental. I hope you found these really powerful hidden expenses. I hope you found it useful and

Let me know what you think and tag me in a post or DM me on Instagram. My handle is @itsGinnyTownsend and I look forward to hearing from you.

So until next time Happy Holidays and continue to be up into the right.

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