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Does It Make Sense to Enter the Airbnb Business?

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Does It Make Sense to Enter the Airbnb Business?

Co-founder of Affari Miei

7 March 2024

Maybe it has crossed your mind too to try to enter the short-term rental businessperhaps driven by the ideas or testimonials of friends and relatives who have assured you of obtaining interesting returns through this business.

This sector is changing the way people travel and find temporary accommodation: in recent years, short-term rentals have become increasingly popular, thanks to the growth of platforms such as Airbnb.

I myself, I confess, think of entering the real estate market using this method when I go to the Amalfi Coast and when I go to Sanremo to participate in Casa Sanremo Invest, taken by the atmosphere of tourism and holidays.

But is it really a profitable business?

Let’s see together if convenient or not think about an investment of this type!

This article talks about:

A few numbers: revenue and costs

I thought that, to make gods reasoning regarding this investment, the best solution was to think on the basis of concrete numbers, therefore having numbers and costs available to think about.

(The example I’m about to give you is thanks to a friend of mine who manages this business in Maiori and who kindly gave me the information).

In this example we have, how come in:

€135, which is the net cost already “clean” of the commissions due to Airbnb or Booking; 180, is the estimated number of nights sold; 3 days is the average length of stay; 60, is the number of stays (180/3).

We get a turnover of €24,300 (given by 135×180).

Now we obviously have to consider the other side of the coin, that is costs that you will have to bear. Let’s estimate these numbers:

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€1,200 for cleaning; €600 for linen; €900 for energy; €1,000 condominium fee; €1,238 for maintenance; €300 for telephone, internet, etc.; €1,000 for the accountant; €500 IMU; €300 for local taxes.

The sum of these operating costs is €7,038.

At this point we can do the simple operation to get thegross profit: 24.300-7.038= 17.263€.

This is obviously a gross profitability, so we must also estimate the taxes:

INPS: €2,527; IRPEF: €1,079.

The total comes to €3,606.

We can therefore now estimate theNet income, which will be €13,656 (gross profit – taxes).

To give you an idea of ​​your earnings I took the net profit and divided it by 12 months, so you can have an idea of ​​how much you would earn per month, therefore to have a sort of “monthly salary”, which is equal to 1.138€.

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Is this figure a lot or a little?

To understand whether the amount is a lot or a little, you need to estimate the value of the property. Again these are estimates, so don’t take everything as fixed and above all take my calculations as estimates.

Come value of the property I estimated that, if the apartment is 45 m2 and the price per m2 amounts to €5,500, then we have a value that amounts to €247,500.

At this point we can calculate the gross profitability, as gross profit/value of the property. It will be equal to 6.97% (I gave you the gross because perhaps the tax calculation is different for you).

I also give you the value of net profitabilitywhich is 5.52% (net profit/property value).

This is an ideal situation because we assume that the property is already ours, therefore our property and therefore we do not have any mortgage to take out to buy the property itself.

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Other things to consider

In addition to all these calculations, however, there are also things to consider to get a truly complete picture: I’m talking about the value of work, the return and the return on capital.

Work obviously refers to the work that needs to be done to maintain the accommodation, i.e. it refers to cleaning, general maintenance and everything connected to the arrangement of the property in order to then rent it in the best possible way.

Il value of work I calculated it as an hourly earnings (€20) and then I multiplied it by 3 hours a day in which you manage everything and the 180 days in which you work: 20x3x180= €10,800

This is the value of your time.

Now we also have to calculate the return on capital, which is calculated as net profit – the value of work, and is €2,856. We basically calculate what we take in and subtract the value of our work.

If we also do the return on capital/value of labor= 1,15% which is the return on capital.

From this number we can and must make some reflections: you could also think about reducing costs, perhaps by doing the cleaning yourself and not paying anyone, or by reducing the cost of linen… but the numbers wouldn’t change that much.

If instead the apartment were larger, then the numbers would become more interesting.

If you want a more in-depth overview and another simulation with different possibilities, and above all you want to see the spreadsheet To better understand the numbers, you can watch the video!

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Conclusions

As we have seen, there are various possibilities for obtaining profitability and therefore for earning with short-term rentals: the simulation tried to range between various possibilities of costs and returns, using properties of various sizes.

On average you could get a capital return of 3-4%, but by working!

If you go on financial marketsI can tell you that you could even obtain a profitability of 6-7%, especially without working and without doing anything concrete, even with little maintenance of the portfolio itself.

These are the arguments that you could and should make: obviously you could still find an excellent opportunity with an interesting property that can guarantee you a very valid income.

However, you must understand and know that dealing with short-term rentals is still a job, which requires time and energy and above all which you must also enjoy! However, managing a public business requires perseverance and time and if you have never done it, it could be difficult to consider and complete.

They are all considerations which are up to you alone, I have given you some ideas to help you think about it.

Before saying goodbye, I would also like to leave you with some guides that you may find useful to begin your investment journey in the financial markets and to begin approaching this world:

Enjoy the reading!

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