"How To Decrease Up Front Costs In Your Airbnb Business"

[Account Closed]

After posting about Airbnb arbitrage for a bit I've noticed the same objections again and again about start up costs. 

In this post I'll explain some of the was one can decrease the start up costs associated with an Airbnb/vacation rental business.

Furniture Costs

If you've ever furnished an entire home you know just how expensive this can be. The last thing you want to do is spend several thousand dollars furnishing your new Airbnb rental. Here's how you can do that...

Acquire Furnished Properties

When you are in the property search phase and you are using the various platforms and software to find your next deal. First start off by filtering your search with the "furnished" keyword. There will be less options when you narrow your search down in this manner but you may be able to find exactly what you're looking for. If you can find a home in the sub market you're looking for that's already furnished you're going to save yourself a lot of time and effort getting set up. 

If you use Zillow, HotPads, Apartments.com, etc. then you can just use the keyword filter to do this as shown below:

Acquire Cheap... or Free Furniture

Most people who start hosting on Airbnb end up over doing it when it comes to decor and furnishings and under perform on running their business property. I think it was Michael Gerber who said that "most people major in minor things." When it comes to furniture you should get quality looking product but that doesn't mean you have to spend a ton of money on it. Here are some ways to find cheap or free furniture.

The Good Will

The Good Will has all kinds of merchandise you can use to furnish and decorate your home for extremely low prices. Sometimes you have to shop around a bit if you're looking for something specific but in the process you're guaranteed to find some other great stuff too. Now if you think that the things you can buy are not good enough quality I assure you that no one will ever know. And if going to The Good Will is beneath you then you have a lot to learn about business and life. 

Heres a snapshot of a local Good Will store:

Craigslist

To some people Craigslist is a shady place where people go to get robbed. Though I'm sure this happens I've never heard of it from anyone I know. I've used Craigslist for all kinds of things and it's almost always a pleasant experience. So on the craigslist webpage there's an option for "free stuff". 

In this section you can search for what ever you are looking for and you may find it listed for free. You can also search for garage sales and estate sales which usually have a ton of furniture to choose from for extremely low prices. This will also give you an opportunity to practice your negotiation skills.

And after you exhaust the free options you can do a regular search for furniture, appliances, etc. and you will find plenty of affordable listings. My advice is to start off with a 50% offer and say you can come pick it up that day. Usually people just want to get rid of whatever they are selling and will take low offers.

Rental Costs

Rental arbitrage is advantageous for many reasons one being that you don't need to buy any property. However you obviously still have some costs associated with securing the property. Now if you have some capital saved up and you just throw your money at the problem it will go away but this is not a good habit. You should look for ways to mitigate your upfront costs as much as you can including securing the property itself.

Bulk Purchases

If you're renting from a property management company or a landlord with several properties that fit the profile and are in the right location then you can offer to do a bulk acquisition and to waive the security deposits and other costs. One of the benefits to having multiple apartments in one complex is that you can manage them much more easily. Everything is under one roof so it's easier to clean and operate. 

Profit Sharing

Some landlords will be willing to waive or lessen upfront costs if you are willing to give them a piece of the pie. Remember that after debt service most landlords on a SFH might be making a couple hundred bucks every month. So offering them a percentage of your revenue while you do all the work may sound like a dream come true.

Success Fee Basis (compensation)

Some landlords may be willing to postpone the first month's rent and other associated costs if you offer them more money on what's called a success fee basis. They way you work this deal is you offer to pay nothing at first and if you're successful you'll pay them for example 150% of rent and costs after the first month or so. This way you can effectively get in with no money and use your future revenue to pay the landlord. After that everything you make over expenses is yours to keep. You can also combine this with a profit sharing model that may make the deal more attractive to the landlord. 

These are just a few ways you can decrease your upfront costs when starting your Airbnb business. There are plenty more that I may right about later on. If you have any questions don't hesitate to PM me and I'll try to help you the best I can. 

Btw... I used to think that the pro's just threw their money at everything but I've found through mentors and my own success that resourcefulness is what successful entrepreneurs and investors use to become successful. 

Good luck!

[Benjamin Vail]

@Account Closed good post! There are a few other strategies for lowering start up costs that you did not mention. 

RENTAL FURNITURE! 

I mean if your business already does rental arbitrage with landlords properties, why not do it with a big companies furniture also? My company runs 32 Units in Airbnb. Some of the houses we started them off by renting an entire house of furniture for about $300/month. We did buy dishes and towels ($500), but rented most everything else. Our profit went from $1500/month down to $1200/month on most of the units we rent furniture at, but so much less $$ up front, so that the ROI is WAY better!

Then over a period of the next couple months, if the unit is doing well, we start to buy pieces that will go well in that house. After about 3 months, we pick a couple days, and block the calendar. We call the rental company to come and return the rental furniture, and fill it will purchased item. 

You can get much better stuff at better deals when you spread out the purchasing period over 3 months. Also, you can just save your profits from the first couple months, and use that cash for the furniture. 

We like to get some guest feedback from each house, and use that information to determine a theme, and inform the design process as we further develop the space. If we get a lot of negative feedback, then maybe we would consider not further developing that peticular space, and just ride out the current lease before moving on. 

That was a free one, but just one of the many strategies we use in our STR business. Good Luck!