Passive Recurring Income (PRR): Money I receive with minimal effort. Meeting jobs, Amazon deliveries, etc. are NOT passive. Stock dividends, long-term rental income, and our new AirBnB property represent the bulk of our PRR right now.
AirBnB is Live!
Last month we moved to our new house and went live with the AirBnB. I expect this short-term rental to be an important contributor to our financial independence.
I want to nurture this business to give it the best chance of being hugely successful. I went promo-heavy, offering a 20% discount for the first 3 bookings, and I kept the nightly rates super low to attract reservations. I did this to generate traffic, which helps in several ways:
- First, most guests want to see reviews before they reserve a vacation rental. I needed to lure in my first guests to generate reviews. In September the home received 4 reviews, and they were all 5 star ratings!
- Second, AirBnB uses an algorithm to decide which listings are prominently displayed in search results. My home is in Largo, FL, adjacent to Clearwater, which I suspect is the city most people use when searching for a home in this area. Keeping it prominent means my Largo home shows up on the map when a guest is looking at Clearwater homes.
- Another benefit (not sure if this is helpful or not) is that, since I generated so many reservations early on, my home is already considered a "Rare Find" on AirBnB.
My business plan for now is to maximize bookings, even if that means the nightly rate is lower than it needs to be. I want to generate more guest reviews, get a good system in place for turning the property over, and stay high on AirBnB's search results. Secondarily, I'm going to keep testing rate increases to determine the true market value of my home. Some of the first bookings were incredible bargains: $38/night for a 3 bedroom, 2 bath house. But I have already begun increasing rates. The latest bookings have been averaging close to $70/night.
September 11th was our "go live" date. From the 11th through the 30th, I blocked 4 days from being available (we were out of town). Every other day was occupied.
Occupancy Rate: 100% (18 of 18 days booked)
Payments Received: $736
Net Loss: $2,336
Like I said, early reservations were at bargain-basement rates. Also, the house was only available for 18 nights. The monthly income from this home will be much higher moving forward. Expenses were very high because I've never been an AirBnB before. We bought multiple sheet sets, pillows, and supplies to stock the home. Expenses will decrease over time. In fact, in October I expect to receive more income than I spend. Profit in the second month? I'll take that!
I plan to do a monthly post about this exciting new income stream. If there is something I have left out that you would like to see, please let me know in the comments.