It’s no surprise that Airbnb has given hotels a run for their money. The idea of renting from a person instead of a corporation makes it appealing to travelers, and it offers hosts a creative way to earn some money. Be it supplemental to your day job or a full-time dream, hosting on Airbnb can make a positive impact on your finances.

Hosting on Airbnb has allowed me to earn extra money in addition to my full-time job and freelancing. It’s a way to diversify my income and create an additional side hustle.

We’ve discussed the pros and cons of Airbnb hosting, and if you’ve decided to give it a go, here are some numbers and other factors to consider to make sure it’s worth it.

Determine your minimum nightly rate

If you’re renting out an entire place versus a room, this is easier to compute. Figure out your monthly cost (whether it’s mortgage, rent, etc.) and add your average utilities expenses (electric, gas, water, internet, cable and anything else). Divide that number by 30 (the average number of days in a month) to find your cost out of pocket for each night.

Let’s say your rent is $800 (which includes heat and hot water), you pay $35 a month for electricity,  and $60 for Internet and cable.

$800 + $35 + $60 = $995 ÷ 30 days = $33.16 per night

That’s probably the minimum you want to charge, unless you’re just looking to break even. But once you know your basic costs, you can decide how much you want to make on top of that. Take a look at similar listings in your area and see what they’re charging. This can help you establish a reasonable range to see how much you can expect to charge.

If you’re renting out a single room where you live, it gets a little more complicated. Again, check out similar rentals in your area to compare. Look at amenities, location, and other differentiating characteristics of your listing to see if you can increase or lower your rate.

Here’s a good strategy: If you have a two-bedroom apartment, divide your nightly cost of maintenance by two in order to estimate how much you spend to keep the property. This can give you a good starting point.

Cleaning fees

Once you know what you want to charge per night, think about how much time it takes you to turn over the space for the next guest.

For example, my small apartment can be cleaned in less than three hours. I don’t consider that a lot of time, so I charge a minimal cleaning fee of $30, to cover costs for supplies and my time. Larger rentals might consider hiring cleaning crews and adding that as the cleaning fee.

What’s great about Airbnb is that you can change these settings at any time. If you find that cleaning is taking longer than you initially thought, raise the rate.

Keep in mind that high cleaning fees may deter guests, especially those who only plan to stay one or two nights.

Airbnb offers six types of cancellation policies: flexible, moderate, strict, super strict 30 days, super strict 60 days and long term. Both super strict policies apply to special circumstances, and the long term cancellation policy applies to all reservations that last 28 days or more. The three cancellation policies that hosts have to choose from are the flexible, moderate and strict, outlined below.

Flexible 

A flexible cancellation policy means guests receive a full refund if they cancel at least one full day prior to arrival.

If you don’t have a serious financial need for your Airbnb income, then a flexible cancellation policy may work for you. It makes your rental more desirable to renters, as they will be more likely to book and not have to worry about paying for accommodation that they never use.

Moderate 

The moderate cancellation policy gives guests a five-day buffer time, so if they cancel less than five days in advance, then they are still charged for the first night but are refunded the rest of their money.

For example, I once had a guest cancel four days before a holiday weekend, when accommodations are in high demand. I was bummed about losing the money, but still earning that first night’s income without having to do any of the work was nice. It also opens the door for last-minute reservations (which did end up happening for me), so you could potentially earn money for multiple guests on the same night, when you’re only doing the work for one.

Strict

Strict cancellation policies never give guests a full refund. Guests are given a 50 percent refund if they cancel at least a week in advance, and zero refund for any cancellations after that.

While this offers plenty of security for hosts, and more committed bookings, this can make your rental unattractive—especially to those planning far in advance.

Long-term discounts

Hosts can offer discounts to guests who stay for extended periods of time, on a weekly or monthly basis.

There are a number of benefits to this sort of arrangement. You won’t have to prepare the rental space for new guests as frequently, and it provides security in terms of having your listing booked. You’ll know you have a guest for the next week, or month, or whatever the arrangement may be.

However, convenience and security come with a cost. If you’re in a location where demand is high, you risk losing out on that extra income due to your reduced rates.

Find ways to save money

For entire spaces

If you’re renting out your whole place, and you won’t be staying there, you can’t control too much. However, you can make some small investments to keep extra costs low.

Make sure you seal air leaks in windows or doors, so as to keep outside air outside, and inside air inside. This will help with heating/cooling costs.

Another investment to consider is purchasing a smart thermostat. This way, you can control the heating and air conditioning settings remotely—preventing your guest from setting the A/C down to a brisk 58 degrees when really, 68 degrees will cut it.

No investment needed, but you can also adjust your fridge settings to keep it from running the electric bill too high.

For shared spaces

For hosts who plan to share their living space with guests, it’s much easier to manipulate certain things around the house. If you both have a small load of laundry, why not toss them in the washer together? Same goes for other appliances, such as your oven/stove.

Agree on a comfortable temperature that won’t make your utilities bill spike unnecessarily, and keep windows shut when you’re using the heat or A/C.

Summary

The bottom line: Becoming a host and renting your space out on Airbnb can reap some serious financial benefits. But don’t forget to carefully consider all the numbers to make sure it’s worth it. The best advice? Ease yourself into it, and after some trial and error, you’ll find your hosting groove.

Read more:

  • Look Before You List: Is Being An Airbnb Host Worth It?
  • 40 Easy Ways Anyone Can Make Extra Money On The Side