Infrastructure Needed To Scale Your Airbnb Business

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Most people get started in Airbnb because they have an extra home or somehow have access to a secondary property that they think will be a successful vacation rental. This is a great way to get started because taking your first step in business and real estate investing is the most important. However if you plan on growing your business to 10+ properties and doing this professionally then you're going to need to be more methodical about how you run your business from the very beginning. 

Many people who get into Airbnb want to scale their business but they don't set up the infrastructure, systems and processes needed to sustain the growth they're looking for. Best case scenario they learn and adapt. Worst case scenario they make a big mistake, things get out of hand and the business collapses along with their finances. 

Here are some important tips you can use when first starting out in Airbnb to set up your business the right way:

Legal Entity

If you just want to do this as a hobby which is just fine if you do then you probably don't need to form a legal entity. Even though I'd probably do it anyways. However if you want to do this professionally then you must set up some type of legal entity when you get started. Not only is this going to help you in terms of liability protection but it's also going to help you grow your business. When dealing with property owners, property managers and other acquisition sources you will look much more credible if you have an actual business. Some property management companies require that you sign a corporate lease in order to sublease and use Airbnb. You will have access to different forms of financing, credit, insurance, etc. all of which will support your growth. 

The legal entity I choose again and again is the Limited Liability Company (LLC) because of it's ease of formation, ease of use and favorable tax options. However if you plan on raising capital or doing business internationally you may want a Limited Partnership or a Corporation. All have their own benefits and drawbacks so you will need to do some research on which one supports you the best.

Business Team

You do not want to navigate the business and real estate world alone especially if you're new to all of this. There are many pitfalls that you must watch out for and your business team can help you navigate around them. Once you start to scale your business past 3 properties your business team can become quite complex depending on what you're trying to do. But at the very least your business team should consist of a corporate attorney or real estate attorney and an accountant who specializes in tax strategy and real estate. These two team members are going to be worth the price and are not something that you want to overlook. Make sure that when interviews potential firms that they understand exactly what you're going to be doing. Try to find someone who has experience in the vacation rental space.

Book Keeping 

Again you want to run your business like a professional with the idea of scaling in mind. Something a lot of first time business owners fail to monitor is their monthly book keeping. Not all of the money you make is your money. You've got taxes, future expenses, capital reserves, etc. You want to know exactly how much revenue you're making, where it's going, how you're going to use it, what your expenses are, etc. You can get a way with using book keeping software in the beginning such as Quickbooks. But once you get to 3+ properties I advice people to hire a professional book keeper. You may be able to this through your accounting firm and it's usually pretty cheap.

Standard Operating Procedures

Scaling your business is impossible without smooth day to day business operations and this doesn't occur if you and your team don't know what to do and when to do it. From the very beginning you must start creating a manual for how you want to run your business. What works, what doesn't, what to do if, etc. If you do this from day one by the time you scale out to 3 properties you will know exactly how to successfully run a small Airbnb business. Then at that point you can start hiring on staff and co-hosts to help manage the day to day operations. You will be able to pass on your standard operating procedures manual and iron out any confusion that it creates. At this point you can simple put all your focus on acquiring properties, growing your business and implementing additional techniques for automation. 

This should be enough to get your head in the right place if you're thinking about starting an Airbnb business. Remember there's a lot more that goes into this. It's actually not that hard but knowing what to do is most important part. You don't want to learn business lessons the hard way if you don't have to... trust me.