Whether you need to find somewhere convenient to stay for a business trip or you want to explore a new city like a local, using a home sharing or vacation rental service is a great way to head somewhere new, while still feeling right at home.
Airbnb, VRBO, HomeAway, and other listing sites make it easy for travelers to find spare bedrooms, accessory units, and even entire houses or apartments, all available for a quick stay or for more long-term lodging.
For the accommodating folks who open up their homes to these visitors, becoming a “host” on a platform like Airbnb can be a great way to meet new people, while also potentially turning your current home into a significant source of income.
A 2017 study presented by the Priceonomics Data Studio, for instance, found that the average Airbnb host made an average of $924 off of the platform per month, while the median user made about $440/month. Airbnb’s internal data, meanwhile, suggests that a typical Chicago homeowner renting out one private room for at least 15 nights per month has the capacity to make more than $1000/month, given current daily price forecasts.
Here in Chicagoland, thousands of homeowners have already enrolled on Airbnb and other platforms, and opened their doors to guests from all over the world. Many buyers entering the market even put the potential for home sharing high on their wish lists, looking for properties with private rooms or separate units that can be used as Airbnb listings full time.
Whether you’re interested in turning your current home into a vacation destination or looking to buy a new place with short-term rental potential, it’s important to know what you’re getting into. Here are three big factors to keep in mind as you consider becoming a home sharing host in Chicagoland:
Are You Eligible, Based on Local Rules and Regulations?
As you consider the pros and cons of getting started with home sharing, one of the most important steps you can take early on is to determine if you’re allowed to be a host. From place to place, there are many different ordinances, rules, and standards when it comes to home sharing and vacation rentals. Some areas may require specific licensing or registration, and others may restrict home sharing entirely.
In Chicago, for example, potential hosts need to register all “shared housing units” with the city; this can generally be done through the service, such as Airbnb. The city can deny applications for registration, based on any number of criteria. It’s also key to note that, in Chicago, anyone who owns or operates more than one shared unit must obtain a city license as a “Shared Housing Unit Operator.” Similarly, you must get a license from the city before operating a vacation rental, which the city describes as a dwelling unit that is rented directly to guests without an intermediary platform, or a Bed & Breakfast, defined by the city as an “owner-occupied residential building in which 11 or fewer rooms are rented to guests.”
When it comes to shared housing units and vacation rentals, there are some other key restrictions to keep in mind, as well. For instance, if the dwelling is a single-family home, the owner must be able to prove that it is their primary residence. Similarly, if the property is a multi-unit building, there are restrictions on how many units can be licensed as shared housing units. In buildings with two to four dwelling units, there is typically a cap at one vacation rental or shared housing unit, for example; in multi-family buildings with five or more units, the number is capped at six total dwellings or 25 percent of the units, whichever is less.
Keep in mind, those regulations are just for the city of Chicago, and the ones cited are only intended to provide some broad examples. Suburban and rural communities around Illinois may have different policies altogether. It’s important to do a little research into the regulations for your area. What’s more, keep in mind that home sharing is often subject to terms set by your condo board, co-op, HOA, or tenant group. Even if home sharing is allowed locally, you still may not be eligible to become a host based on rules in your building or community.
Can You Keep Up With the Costs?
Many people see home sharing as an effective way to earn a new source of income. While renting out some or all of your home to travelers can indeed be lucrative, it’s also important to remember that there are going to be plenty of expenses along the way.
For one thing, it’s crucial to remember that intermediary service you use to create and share your listing will take its cut out of every booking you make, which could impact your profit margin and earning potential as a host.
At the same time, hosts are typically responsible for many ongoing expenses that can be easy to overlook, including:
- Hiring a professional cleaning service, or paying for personal cleaning supplies and equipment
- Utility bills
- Marketing costs, such as hiring a professional photographer or staging company
- Home maintenance and repairs
- Restocking toiletries, pantry ingredients, and other household essentials for guests
As you weigh your options, be realistic about setting a budget that accounts for things like cleaning services, everyday necessities, and routine home maintenance costs. Is the value-to-cost ratio high enough to make becoming a host worthwhile for you? Consider, too, how you might be impacted by local market trends, and seasonality. Can you keep up with bills if your listing happens to underperform, or prices in your area go down over time?
Are You Ready to Invest Your Time In Marketing and Management?
Many buyers and current homeowners see home sharing as an easy way to earn a passive income. It’s important to remember, though, that becoming a host can take a significant amount of time and energy.
Depending on where you live, for example, the home sharing market can be competitive, and it may take a good deal of work to help your listing stand out. For hosts, this might mean having to devote time to marketing the listing, which could include devoting yourself to staging or redecorating the unit, and taking impressive photographs to share online — or researching and coordinating with professionals to handle these important jobs. There’s also a lot of “behind the scenes” work, like actively networking on the listing platform by responding to reviews, and performing research to keep up with pricing trends and desired features in your local market.
In other cases, helping your listing stand out may mean carving out time to make those little flourishes that can help impress future guests and earn rave reviews, like creating homemade baked goods or leaving a thoughtful gift basket.
Meanwhile, you may need to think and act like a property manager — and sometimes, like a hotel concierge. As a host, you’re often going to be responsible for not only handling bookings, but messaging and meeting guests, handing over the keys, responding to questions and messages, creating guide books and resources, managing WiFi outages, cleaning up before and after guests check in, and so on. It can be incredibly rewarding to invest your free time and energy into managing your unit and creating a great experience for guests — but are you willing to really put in all of the work it may take?
Want to Talk All Things Real Estate With the Chicagoland Experts?
Looking for a two-flat or home that’s perfect for creating the short-term rental of your dreams? Curious about the ins and outs of Chicagoland’s real estate market? We get you. Whatever your real estate wants and needs may be, one of Baird & Warner’s hyperlocal experts can help you find exactly what you’re looking for.
At Baird & Warner, our mantra is “let’s make this easier” — from the day you start envisioning your next home to the day you’re handed the keys. With mortgage and title services in-house, we’re committed to turning an intricate, complex process into one that is smarter and more seamless at every step of the way.