Airbnb rentals - Experiences and the pros and cons
Check out our experiences with Airbnb rentals. Entrepreneurship, successes and challenges as an Airbnb host.
Immodan's diary
3.8.2024
Welcome! In this article, we want to share with you the most honest story possible about how we got into the Airbnb business and what we learned along the way. Along the way, we've accumulated a wealth of experience in Airbnb rentals, and we want to share the lessons and challenges with you. We, Artem Daniliants and my partner Kristian Immonen, are now owners of Immodan, but our career started in the Airbnb business. We want to share our observations, our successes and our failures so that you can avoid the same mistakes and benefit from our best tips.
Our story started off quite interestingly. Kristian and I met when he was contacted by a salesman from Daniliants Ventures, a company I own, trying to sell digital marketing services. Kristian owns a company called Diaper Mat and although he wasn't ready to buy our services, he decided to meet me anyway. That's how we met in June 2023 and soon found that we had common interests and goals.
Both had a diverse background in entrepreneurship, and this certainly helped in starting a business together. Kristian has experience in the Vaippamaatti business, car rental and website design. Artem also has experience in digital marketing, as well as an online shop for leather goods, which were manufactured in Ukraine. It was an interesting business, but unfortunately, as soon as the war started, the business could not be continued. Everything that had been invested in the business disappeared one day. However, the losses are insignificant compared to what Ukrainians have experienced or lost.
It was great to see that even if the meeting did not result in a deal, so to speak, it did result in a friendship and later a partnership. This shared entrepreneurial spirit and experience in different businesses has created a strong basis for a successful partnership.
We were both interested in short-term rentals, so we decided to try the Airbnb business. We set up a limited company and made the decision to split the ownership 50/50. This is not generally recommended, as disagreements can prevent decisions from being made and stop the business from operating. However, we believed that this would force us to discuss and keep on good terms, otherwise disagreements could be the death of the company. We have never regretted the decision.
We started by looking for rental properties that we could legally sublet for short-term use. We wanted to make sure everything was honest and transparent, so we obtained contracts where the landlord approved Airbnb use. We also took out home insurance to cover Airbnb activities.
Our first apartment was in Sato, and we started renting it out on 4 August 2023. We decorated the apartment on a small budget, quickly listed it on Airbnb and waited excitedly for the first bookings. We did our best to make sure our guests would be happy, and soon we received the first positive reviews, but we also quickly faced our first challenges.
The Airbnb business may seem like an attractive way to earn extra income, but it also comes with a number of risks. We would now like to share some tips that we wish we had known when we started out, for anyone thinking about the Airbnb business.
One of the biggest risks is that the income from accommodation does not cover all expenses. This can be due to many reasons, such as high cleaning costs, unexpected damage or low booking prices due to competition. In our experience, we found that although we had many properties, after all expenses, the profits were minimal. One major reason for this was that we outsourced the cleaning to a cleaning company, which significantly increased our expenses and thus ate into our margins. This made it difficult to make the business profitable.
Another major risk relates to legislation. Cities may change regulations that prohibit short-term rentals, such as those through Airbnb and Booking. As it happened to us, one day our contract with Sato was abruptly terminated due to negative publicity about "secret hotels". This shows how quickly and unexpectedly the business environment can change.
Airbnb also carries a risk of damage caused by guests. For example, we had a case where a family child caused significant damage to our apartment and we had to seek compensation from Airbnb.
Although Airbnb offers protection against damage, the process can be time-consuming and stressful. In addition, not all guests can know their true intentions. Some may be hosting a big party and some may be renting an apartment to sell illegal substances. A friend of ours involved in the Airbnb business had this happen - illegal substances were hidden in the cooker hood of the apartment he owned, waiting for the next guest who would apparently buy them.
We also came across a harsh fact: Booking does not provide security for homeowners, nor does it verify information about the tenant. This means that people can invent the most amazing identities for themselves, which you will never know the truth about.
Operational risks, such as cleaning quality and communication challenges, can directly affect customer satisfaction and reviews. We found that outsourced cleaning was at times of poor quality, leading to negative reviews and directly affecting the number of bookings. In addition, ongoing communication with guests can be laborious and resource-intensive. Initially, we cleaned the apartments ourselves, but when the cleaning was outsourced, the quality of cleaning deteriorated and costs increased significantly.
The Airbnb business is also at the mercy of technology. Changes in algorithms can affect visibility and the number of bookings. Poor reviews can quickly erode business and lead to fewer bookings. It is therefore important to understand how the Airbnb algorithm works and how to optimise your visibility on the platform. It is also important to maintain a high level of service quality and ensure that the technical side, such as reservation management systems, are working flawlessly.
Understanding and managing these risks are key to success in the Airbnb business. Make sure you are prepared to face these challenges and have a plan to manage the risks.
Kristian and I quickly realised that cleaning was one of our biggest challenges. At first we cleaned the apartments ourselves, but we soon realised that in the long run it was not profitable. We tried cleaning services, but the quality and cost varied widely. If the cleaning was done badly, we received bad reviews, which directly affected our visibility in the service.
The second lesson was the importance of automation. We used tools like Hospitable and Price Labs to manage bookings and prices.
Hospitable is a platform that facilitates the management and automation of short-term rentals. It brings together Airbnb, Vrbo and Booking.com listings in one place.
With Hospitable and PriceLabs integration, you can conveniently manage rental pricing and minimum occupancy requirements. With this combination you can:
This made our everyday life much easier, but it took a lot of adjustment and learning at first.
We aimed to serve our customers as well as possible throughout our Airbnb business. If there was a human error, such as forgetting toilet paper, we delivered it as soon as possible and tried to bring good cheer in the form of a box of condoms. We stressed that messages would be answered as quickly as possible, and even the smallest things could be communicated. Any additional requests, such as adapters, were dealt with without delay.
While quality customer service was a priority for us, it wasn't always easy. Some guests called in the middle of the night to ask for the Wi-Fi password, even though it was clearly displayed on the table. Others couldn't find their way even though we had sent them video instructions beforehand. This illustrated that customer service can be a challenge, even when you do it really well. Great reviews keep you afloat, but achieving them can be surprisingly challenging.
In Airbnb, the constant stress of reviews and the fear of one bad review contributed significantly to our decision to close. Nightly calls from customers affected our sleep and caused constant disruption. Another major challenge was that the workload did not match the return - constant work day and night with very little financial return. As the ratio of work done to return was very poor, we decided to redirect our business.
After six months, we came to the conclusion that this business was not for us, even though we had learned a lot and done everything we could to succeed. We saw no reason to continue as the returns were minimal compared to the amount of work and money we had invested. We could not even raise our own salaries, so we did not see any potential for the foreseeable future. On top of that, the regulatory risk was always on our minds and we didn't want to be dependent on the platform - the slightest change from Airbnb and the business could have failed. For these reasons, we decided to run down our Airbnb business and focus on providing accommodation services to businesses. However, the Airbnb business provided a lot of valuable experience. We invested around €10 000 in the business (rentals, furniture, software), so the learning curve was not cheap.
If you're considering an Airbnb business, here are our top tips:
The Airbnb business can be lucrative, but it requires hard work, commitment and the right decisions. Our experience taught us a lot, and hopefully these tips will help you succeed.
Thank you for reading our story!
Individuals can list their properties on Airbnb without a business. However, being self-employed can be beneficial for tax purposes, so check with your tax advisor.
Airbnb income is taxable in Finland. As a private individual, rental income is subject to capital income tax. As a company, taxation depends on the type of company: a limited liability company pays income tax, a limited liability company pays corporation tax. Tax rules change frequently, so check with the Tax Administration for up-to-date information.
You can rent either a single room or an entire apartment, depending on your needs and the rules of the destination.
AirCover provides protection against damage and liability. It includes, among other things, comprehensive insurance cover for landlords at no extra cost.
Airbnb usually pays landlords within 24-48 hours of guests checking in. The payment schedule may vary depending on the payment method.
