How to start an Airbnb business: Step-by-Step guide for hosts

Published Friday 17 October 2025

Table of contents

• What is an Airbnb?
• How Airbnb works for hosts
• Alternative Airbnb business models
• 13 steps to starting a successful Airbnb business
• Manage your Airbnb business finances with confidence
• FAQs on starting an Airbnb business

Key takeaways

• Research local zoning laws, permits, and tax requirements before starting your Airbnb business to ensure legal compliance and avoid costly violations that could shut down your operation.

• Conduct thorough market research to understand seasonality, local tourism patterns, and competitor pricing in your area to set competitive rates and maximize occupancy.

• Choose between different business models based on your resources—own property for maximum control, use rental arbitrage to start with less capital, or begin with co-hosting to gain experience without financial investment.

• Invest in essential guest amenities like keyless entry, quality linens, basic toiletries, and reliable Wi-Fi while creating a detailed cleaning plan to maintain high standards and positive reviews.

What is an Airbnb?

Airbnb is an online marketplace that connects property owners with travelers seeking short-term accommodation. Property owners (called hosts) earn money by renting out spaces ranging from single rooms to entire homes.

You can use the Airbnb business model in different ways, depending on your goals:

• Rent out spare rooms or your home when traveling
• Manage multiple properties as your primary income source
• Monetize unconventional spaces like treehouses, yurts, or RVs

An Airbnb property doesn't have to be a house or an apartment. Unique stays include treehouses, yurts, barns, sheep wagons, boats, and RVs.

If you live in a desirable tourist location or an area with few hotels, a unique vacation rental can help you stand out to Airbnb guests.

How Airbnb works for hosts

Airbnb hosting requirements include providing at least 30 days of availability per year and maintaining basic hospitality standards.

You can choose from several payment options, depending on your preference for speed or cost:

• Get fast payments through Payoneer or Fast Pay, which deliver funds in 30 minutes (with service fees)
• Use standard bank transfers, which take two to three days (no additional fees)
• Note that a 3% host service fee applies to all bookings, regardless of payment method

To meet Airbnb's standards, you need to follow these essential hosting requirements:

Property standards:

• Basic amenities: Provide toiletries, bed linens, and towels
• Safety compliance: Ensure no mold, blocked exits, or hazardous materials

Guest communication:

• Response time: Reply to inquiries within 24 hours
• Booking acceptance: Accept legitimate reservations promptly

Cancellation policy:

• Avoid cancellations: Only cancel for emergencies (broken utilities, safety issues)
• Policy violations: You can cancel if guests plan to break house rules

Some jurisdictions have a 120-night limit for short-term reservations per calendar year. Once you reach the limit, Airbnb will stop accepting bookings. You may be able to apply for extended home-sharing. Contact your local authorities to find out if this is an option.

If you go above and beyond for your guests, you can qualify as a Superhost. This means you receive excellent reviews, respond quickly to guest needs, and avoid canceling bookings.

Superhosts get a special badge on their listing, priority support, and extra property promotion. You also receive a $100 Airbnb coupon each year. Airbnb reviews Superhost eligibility four times per year.

Alternative Airbnb business models

These approaches let you enter the short-term rental market by using other people's properties.

Rental arbitrage

With rental arbitrage, you sign a long-term lease on a property and then list it on Airbnb for short-term stays. The goal is to earn more from guest bookings than you pay in rent and expenses. This model requires your landlord's permission. It can be a lower-cost way to build a portfolio of listings.

Co-hosting

A co-host helps a property owner manage their listing and guests. You might handle guest communication, bookings, cleaning, and maintenance. In return, you earn a percentage of the booking revenue, usually between 10% and 20%. This is a good way to gain experience without any financial investment.

Property management

Property management is similar to co-hosting but involves overseeing all aspects of an Airbnb rental for an owner. This is often a more comprehensive service. You might manage multiple properties, set pricing strategies, and handle all operational tasks. Property managers usually charge a higher fee, often 20% to 30% of the rental income.

13 steps to starting a successful Airbnb business

Becoming an Airbnb host is straightforward when you know the steps. Here’s a step-by-step guide to help you get started.

1. Check if it's permitted in your area

Check your local zoning laws to see if you can use your property as a short-term rental. Every state and most cities have different zoning regulations and restrictions. Also check the hotel ordinances in your city and state, as these local laws can apply to Airbnb businesses. If you want to buy a rental property and list it on Airbnb, make sure you can legally use the property that way before buying it.

You may also need permission from your landlord, co-op board, or homeowners association. Check your lease to see if you can sublet or if there are restrictions on short-term rentals.

If you own the property and have a mortgage, check with your lender before you get started. Make sure you can get insurance on the property.

2. For new properties, choose your business structure

If you are buying a new property, decide if you want to form an entity to own and operate it. The most common business structure for a new Airbnb is a limited liability company (LLC). Review your financing and insurance options before creating an LLC. Consider how many properties you will have and which structure suits your needs best.

Many people choose an LLC because it provides limited liability protection. For a rental property, an LLC also offers flexibility in management. You can have one or more owners. For federal income tax, the IRS classifies a domestic LLC with at least two members as a partnership by default.

Note that limited liability protection is not complete, and owners can still be held liable in some cases. LLCs are based on state statutes, not federal law, so check your local government or state requirements.

Some Airbnb rentals have a single owner or joint ownership without forming an LLC. In these cases, you report income and expenses directly on your tax return. There is no liability protection, so your personal assets may be at risk.

3. Do your market research

Market research helps you understand your Airbnb's profit potential and competitive position. It lets you set competitive prices, target the right guests, and maximize occupancy rates.

Key research areas include:

• Seasonality: What are the peak and off-peak seasons in your area? How can they be optimized? Should nightly pricing change based on time of year?
• Tourism: Consider the tourist attractions nearby and events in the area. What are the top local attractions? What is your proximity to tourism spots locally and in the wider area?
• Airbnb occupancy rate: Research the occupancy rate for the location. Check comparable properties in your area and other competitors if possible, including hotels and bed and breakfasts.
• Amenities: Consider amusement, dining, and recreation spots in the area. Guests want this information, so you should know it and include it in your marketing and listing.
• Target market: What type of people are likely to be attracted to your area? Check your city or state tourism website. Does the area attract business travelers, families, older couples, college students, or young professionals?

4. Plan your taxes

You need to understand and pay the taxes that apply in your area. This may include a 3.8% tax on net investment income, depending on your income level.

Common tax types:

• Occupancy taxes: Often collected automatically by Airbnb (verify in your listing settings)
• Income taxes: When it comes to income taxes, you must report rental income on your tax return, though the IRS provides a special rule for those who rent their property for fewer than 15 days per year, which exempts that income from being reported.
• Property taxes: Property taxes are required if you own the property (renters typically don't pay directly), and according to the IRS, if you paid $600 or more of mortgage interest on your rental, you should receive a Form 1098 to help with your deductions.

Check the 'Manage Your Space' section to see which taxes Airbnb collects and which you need to pay yourself.

Ask your accountant for up-to-date tax advice for your state. If you need a new accountant, use the Xero advisor directory to find one.

5. Plan out your finances

A business plan helps you understand startup costs, predict cash flow, and set realistic profit expectations. You only need a simple one-page business plan for most Airbnb businesses.

Essential planning elements:

• Executive summary: Describe your Airbnb business opportunity
• Company overview: Briefly describe your company and its structure
• Industry analysis: Provide a brief overview of the Airbnb industry, regulations, and potential risks
• Competitor analysis: Outline who your key competitors are (other Airbnb businesses and short-term rentals)
• Financial plan: Your financial plan, which should ideally project for three years, needs to account for how you will finance your business and startup, and should also include tracking deductible expenses like business-related driving, for which the IRS set the 2024 standard mileage rate at 67 cents a mile.
• Your team: Who will work in your business? Include vendors, such as cleaning services if you plan to use one.
• Timeline: Set out your planned milestones and key targets
• Insurance plan: Figure out what insurance you will need

6. Get the necessary permits and licenses

You need permits and licenses to operate your Airbnb legally and avoid costly violations. Requirements vary by location, so research your area thoroughly.

Common permit types:

• : Required in some states for rental properties
• Short-term rental permit: Specific authorization to rent your home
• Tax registration: Occasionally needed for hotel tax collection (usually handled by Airbnb)

Application requirements typically include:

• Business name and location
• Ownership structure details
• Management information

Some places require a special permit to rent out your home or rooms. Check with your local authorities to find out if you need one.

7. Get insurance

Airbnb provides host liability insurance up to $1 million if a guest sues you for injury or stolen property. Staff, such as cleaners, are also covered by this policy.

Insurance requirements vary by state. Here are some common types of insurance you may need:

• Short-term rental insurance: Protects against theft, property damage, digital theft, and loss of income during repairs
• Landlord insurance: Covers property damage, liability, and lost income if you are not staying at the property

8. Set your prices

Your pricing strategy affects your bookings and revenue. Set competitive rates by looking at your costs, local demand, and Airbnb's fee structure.

Key pricing considerations:

• Competitor analysis: Research similar properties in your area
• Seasonal demand: Adjust rates for peak and off-peak periods
• Target market: Price according to your ideal guest's budget
• Total cost display: Airbnb shows guests your rate plus fees upfront (affects search ranking)

Factor in Airbnb's 3% host service fee when calculating your profit margins.

On Airbnb, you can see current metrics to compare your prices to other listings in the area. Monitor these metrics regularly to spot surges in demand or popular days of the week. Airbnb also offers pricing tools to help you set a competitive price. You can set minimum stay limits and offer extra services, such as being pet-friendly or providing tours.

When you set up your Airbnb account, you choose how to receive your money. Guests pay Airbnb before they arrive. Airbnb processes your payment 24 hours after guests check in. Guests can pay with PayPal, debit cards, Visa, Mastercard, American Express, Google Pay, or Apple Pay.

Several factors that can affect your pricing include:

• Discounts: For example, weekly or monthly discounts. Typically, hosts will provide discounts to guests booking longer reservations.
• Proximity: This goes for local attractions that have a rush of potential guests in a particular season, like a property near a college football stadium.
• Seasonal pricing: Holidays, weekends, and special events often attract higher prices, but off-peak could be cheaper.
• Guest facilities: If you are providing extras, such as air conditioning, a family room, or kitchen facilities, your price can be higher.

9. Preparing your Airbnb for guests

Preparing your property shapes the guest experience and helps you get positive reviews and repeat bookings. Budget for essential amenities and extras that make your listing stand out.

Essential investments:

• To simplify guest check-in, install a keyless lock.
• Consider the furnishings needed for your target market. If that's families, consider some bunk beds. Provide some extras, such as a coffee maker or tea kettle, and a microwave oven for guests who stay longer.
• With many people working remotely, you might want to consider offering things they are likely to need, such as a desk, powerful wi-fi, good lighting, office supplies, and ergonomic desk chairs. Some larger Airbnb properties also offer dedicated workplaces on their properties.
• Buy a supply of good quality sheets and towels. You'll need several sets for each room.
• Stock the bathrooms with toilet paper and toiletries.
• Consider the rooms you plan to use. Do they need to be closed off, repaired, or painted to make them suitable for guests?
• Ensure that any property maintenance gets done. Dripping taps, frayed carpets, and faulty lights all need to be repaired. Smoke alarms and carbon monoxide detectors should be installed too.
• Write up guest check-in instructions and rules and make them available on arrival.

10. Create a cleaning plan

Your cleaning standards affect guest satisfaction and reviews. Choose between cleaning the property yourself or hiring professionals, depending on your time, budget, and quality expectations.

Self-cleaning benefits:

• Lower costs: Eliminates service fees
• Full control: Maintain your exact standards
• Immediate availability: Clean on your schedule

Professional cleaning benefits:

• Hospitality standards: Consistent, thorough cleaning
• Time savings: Focus on other business tasks
• Reliability: Backup staff and established processes

Include cleaning fees in your pricing, but keep them reasonable to avoid encouraging guests to leave bigger messes.

Property maintenance can need to happen at any time of the day or night. Having a list of available contractors will make your life easier. As a regular client, you may be able to negotiate cheaper prices. Some contractors to include:

• electrician
• repair handyperson
• plumber
• landscaper/gardener

11. Create your Airbnb listing

Spend time optimizing your Airbnb listing to attract more guests and grow your business.

When you create your listing, keep these tips in mind:

• Write a descriptive title for your Airbnb listing, such as Cozy Creekside Cabin or Hidden Cottage
• Use professional, high-quality photos and highlight special features, such as a fireplace
• List the amenities and explain how they improve the guest's stay
• Describe your property and the area clearly and honestly
• State the number of guests allowed and if you accept extra guests
• List what is included, such as wi-fi
• Set a competitive price for your area

Starting an Airbnb business takes effort, but it can be very rewarding. Use this list to make the process easier.

Manage your Airbnb business finances with confidence

With Xero, you can see your cash flow in real time, automate bookkeeping tasks, and make informed decisions as your business grows.

You can focus on creating five-star experiences for your guests, not on doing the books. Try Xero for free and see how easy it is to manage your new business.

FAQs on starting an Airbnb business

Here are some common questions and answers on how to start an airbnb business.

How much does it cost to start an Airbnb business?

Startup costs vary widely based on your business model. If you own the property, costs include furniture, repairs, photography, and supplies, which can range from a few thousand to tens of thousands of dollars. For rental arbitrage, you'll need to cover the security deposit, first month's rent, and furnishings.

Do I need an LLC to start an Airbnb?

While not strictly required, forming a Limited Liability Company (LLC) is a popular choice. It can protect your personal assets from business debts and lawsuits. It's a good idea to consult with a legal or financial advisor to decide on the best structure for your situation.

What is the 80/20 rule for Airbnb?

The 80/20 rule, or Pareto Principle, suggests that about 80% of your revenue will come from 20% of your efforts. For Airbnb hosts, this could mean that 20% of your peak season days generate 80% of your income, or that 20% of your guests provide 80% of your positive reviews. It highlights the importance of identifying and focusing on your most impactful activities.

How long does it take to get your first booking?

This depends on your location, listing quality, and pricing. A well-photographed, competitively priced listing in a popular area can get booked within days. In other cases, it might take a few weeks. Using Airbnb's new host promotions can help you get noticed faster.

Can you make money with Airbnb in 2025?

Yes, you can still run a profitable Airbnb business. Success depends on market research, providing excellent guest experiences, and smart financial management. While some markets are competitive, there are always opportunities for unique properties and dedicated hosts to do well.