Property owners often turn to Airbnb to make some passive income. Many quickly discover that running a short-term rental business is anything but hands-off. Handling bookings, guest communication, and turnover can make it feel like you’re always on call.
That’s not to say earning passive income through Airbnb is impossible. With the right setup, you can minimize your workload while still getting solid returns from your business.
The key is to decide what level of involvement suits you and find the tools and resources to support that.
In this article, we explore the different ways property owners can generate passive income through Airbnb. We discuss key considerations, common pitfalls, and what you need to support each setup.
What do we mean by passive income in the context of Airbnb?
Passive income usually refers to money you earn without much ongoing effort or dedicated hours. People often point to investments, dividend payments, or royalties as examples because they continue to generate returns long after you’ve done the initial work.
Tax authorities take a more rigid view. They tend to define passive income as earnings from activities where the owner doesn’t take part in day-to-day operations. For example, the Internal Revenue Service (IRS) counts revenue as a passive source provided you don’t spend a significant amount of time working for the business or shoulder the majority of the workload.
Airbnb hosting usually falls somewhere in the middle in practice. You can streamline a lot, but operations are still likely to require a lot of your time and effort. Even Airbnb hosts with strong systems in place deal with turnover, questions, and unexpected problems.
That said, you can shift your Airbnb business much closer to a passive model. Strategic outsourcing, automation tools, and remote management reduce your workload and free up time, while still allowing you to earn a consistent income from your property.
How much passive income can you generate through Airbnb?
Airbnb hosts have the potential to generate a significant amount of passive income. According to a survey, they made an average of $14,000 in supplemental income (around $1200 per month) in 2023.
But the exact amount you can expect to earn in passive income through Airbnb depends heavily on your context. Factors like property type and location can raise your earning power or lower your expenses, giving you a better return.
Demand plays the biggest role in making your passive income higher. Airbnb hosts in popular locations don’t have to work as hard to attract people to their vacation home or provide a positive guest experience. They can also charge premium rates without worrying about being undercut by competitors and affecting their occupancy levels.
Different options to make passive income through Airbnb
Here are the main ways to structure your Airbnb business to reduce day-to-day involvement. The best option for you depends on your needs and preferences and what’s possible in your local context.
Property management companies
Property management companies handle all the day-to-day operations of your vacation rental, from guest communication and cleaning to marketing and pricing strategies. They usually charge a percentage of your revenue in exchange for their services, so you’re not out of pocket during slow periods.
Choose this option if you want to be truly hands-off. A property management company has the expertise to handle most issues, so they only reach out when something significant needs your attention. They should still provide you with frequent updates, though, to show you how your property is performing.
Airbnb arbitrage
Airbnb rental arbitrage goes a step further than using a property management company. It involves leasing your property to an individual or company, so you act purely as the landlord while they run the Airbnb business.
Most of these arrangements rely on a fixed-term contract. The Airbnb operators list your property under their account and manage all the operations until the end of the lease. You receive the monthly rent but have basically no involvement in the business, giving you stable and predictable income.
The downside is that you miss out on any profits. Unless you write it into your long-term rental agreement, the tenant always pockets any extra money from the Airbnb business.
Co-hosting
Co-hosting involves sharing the responsibilities of running your business with another person, usually someone local or more experienced. Airbnb lets you add co-hosts directly through the platform.
Most co-hosts take 10 to 20% of the revenue for tasks like turnovers, guest communication, and problem-solving during a stay, though the exact arrangement depends on what you agree to. This business model generally costs less than a full property management company and gives you more flexibility in how you divide tasks.
Reliable co-hosts make this setup work well. But you need someone you can really trust, since their performance affects your guest reviews and reputation. If you find yourself stepping in often, the arrangement may not deliver the passive Airbnb experience you’re looking for.
End-to-end automation
End-to-end automation is an effective way to reduce your responsibilities without losing control or oversight. It involves using Property Management Software (PMS) like Hostfully to streamline operations and coordinate rental management from afar.
If you find the right tools, you can automate many parts of:
- Booking management
- Marketing and outreach
- Listing and channel management
- Guest communications
- Check in and check out
- Cleaning and turnover
For example, Hostfully can automate most of the check-in process. Our unified inbox enables you to create message templates with directions to your property and unique codes for your keyless lock. We notify you when guests arrive via an integration between our platform and the smart device.
Building a tech stack takes some upfront investment but quickly pays off by streamlining processes and cutting operational expenses. However, it still involves a degree of involvement. Automation is really best for Airbnb operators who want to get stuck into business strategy without getting bogged down in routine tasks.
Considerations for Airbnb hosts trying to generate passive income
Building an Airbnb business that earns passive income takes more than choosing the right setup. You make key decisions early on that shape how stable, sustainable, and hands-off your operations become.
As you plan, keep the following considerations in mind:
Financial unpredictability
Avoid relying on your Airbnb when you first start out. Short-term rental income shifts throughout the year and responds quickly to changes in demand. Bookings may stay steady for long stretches, then dip because of new competition, local events, or updated regulations.
Legal and zoning laws
Familiarize yourself with the local regulations before investing in an Airbnb property. Authorities may have strict rules that prevent you from operating your business or making much passive income. For example, some jurisdictions require owners to apply for a short-term rental license, stay on site, and act as the primary contact.
Also, check tax regulations to see whether your revenue counts as passive or active income. Filing incorrectly could lead to a substantial penalty.
Extra ongoing investment
Don’t expect to keep all your passive income. Airbnbs need frequent updates to stay competitive and keep occupancy levels high enough to generate revenue. Aim to hold back a certain percentage of your revenue to invest back into appliances, amenities, and renovations.
Quality control
When you hand over control to a third party, monitor them to ensure they meet your standards. You can request periodic updates and arrange to visit your property between stays. Hostfully enables companies to generate detailed owner reports, so you can check them by simply logging into the system.
Tech setup
Learn how to use automation tools so you can make the most of them. You can understand how to build standardized processes while tailoring them for your unique business setup. For example, Hostfully lets you create a fully customized digital guidebook to send guests with directions, instructions, and recommendations to handle any frequently asked questions.
Tips for maximizing passive income from an Airbnb business
Once you’ve chosen a setup that reduces your day-to-day involvement, the next step is making sure it runs smoothly over time. These practices help strengthen your earnings and keep your operation close to hands-off.
- Screen your partners carefully: Working with the wrong people can create more stress than it solves. Choose partners with strong references or a proven track record to avoid issues.
- Set realistic expectations: Running any kind of business requires effort, so set aside some time each month. Even with outsourcing, you’ll still make occasional decisions and handle unexpected issues from time to time.
- Start small: Refine your approach before you move on to managing multiple properties. Building your systems gradually ensures they stay manageable as you scale.
- Prioritize reliability over low cost: Predictable income relies on dependable support. Paying a little more for consistent, high-quality work often protects your margins better than choosing the lowest cost options.
- Invest in dynamic pricing tools: Finding the optimal nightly rates to boost occupancy and increase your passive income stream can be challenging when conditions can shift suddenly. Use dynamic pricing tools that integrate with your PMS to automatically research the local market, find the optimal pricing, and apply it to properties.
- Encourage repeat bookings: Returning Airbnb guests mean you have to spend less time on marketing, anticipating needs, and providing direct assistance. Try offering discounts to loyal customers to give them that extra incentive to come back.
- Invest in smart devices: Smoke detectors, noise monitoring devices, and energy management let you keep an eye on properties from afar. These systems give you extra control and oversight without forcing you to get more involved than you want to.
Make Airbnb management more hands-off with Hostfully
The reality of running an Airbnb business is that it’s never truly hands-off. But you can take a big step back from daily operations while keeping an eye on what’s happening if you’re willing to embrace the right technology.
Hostfully PMS offers a wide range of features that let you take this step:
- Owner reports to keep track of performance
- Digital guidebooks to answer questions on your behalf
- Keyless locks to support self-check-in processes
- Smart devices to monitor your properties from afar
- Automated messaging to stay responsive to guests
- Task automation to manage cleaning and maintenance teams
Hostfully doesn’t just reduce your workload; it helps you create a sustainable, scalable Airbnb business that works for you.
FAQs about generating passive income through Airbnb
Can Airbnb be a source of true passive income?
Airbnb isn’t automatically a passive source of income because it involves handling bookings, guest communications, and turnover. But you can significantly reduce your workload by outsourcing these tasks to a property management company or co-host.
What’s the easiest way to automate an Airbnb listing?
The easiest way to automate an Airbnb listing is to invest in software like Hostfully. Our consolidated system enables you to streamline workflows for bookings, check-in, guest communications, and turnover in one place.
How much can I earn with Airbnb without being involved daily?
Passive income for Airbnb varies by location and property type. Many hosts report making over $1000 a month in supplemental income, but factors like demand and local laws can lower your earning potential.
What risks should I be aware of in passive Airbnb hosting?
The biggest risks related to passive Airbnb hosting are local regulations, unstable demand, and unreliable partners. Thorough research can help you identify and avoid these pitfalls before you commit to a business strategy.
Can you earn passive Airbnb income without being a homeowner?
Making passive Airbnb income without owning property is tricky but not impossible. In the right location, you may be able to let a spare room in your rental property and arrange for someone else to co-host.
