The Hidden Blueprint to Owning a Lucrative Airbnb Rental

Are you thinking about investing in an Airbnb property? The idea of owning a holiday rental home, especially in popular tourist spots like Goa, sounds exciting. You imagine travelers from all over the world staying at your place, and you earning a steady income. But wait! Before you invest in the property, there are important things you need to know.

This guide will help you understand the steps and considerations before investing in an Airbnb property in India. Let’s walk through everything step by step.

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Is Airbnb a Good Business to Start?

From a Traveler’s Point of View

Imagine you’re traveling with your family to a popular tourist spot like Manali. Hotels can be expensive, especially during peak seasons, and they might not offer the cozy, home-like feel you’re looking for. That’s where Airbnb comes in. Many families prefer staying in an Airbnb because:

• Cost-Effective: Airbnbs can be cheaper than hotels, especially for larger groups.
• Privacy: You get the entire place to yourself.
• Convenience: Having a kitchen is great for families, especially if you have kids or specific dietary needs.

For example, in Manali, an average hotel room might cost around ₹8,000 per night during the peak season. But you can find a comfortable Airbnb for about ₹5,500 per night with more space and facilities.

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From a Business Point of View

Now, let’s look at it from the perspective of someone who wants to earn money with Airbnb.

• Higher Earnings: Short-term rentals like Airbnb can earn you more than traditional long-term rentals.
• Better Rental Yield: Rental yield is the income you make from rent compared to the property’s price. Airbnb often offers a higher rental yield.

For instance, if you own a property in a city like Jaipur for Rs. 1 Crore, you might earn about ₹6 lakh per year in rent, which is around 6% rental yield. 

But with Airbnb in a tourist spot like Manali, you could earn much more.

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How Much Money Can You Practically Make?

Let’s do some simple calculations to see how much you can earn.

• Example Property: A 3-bedroom cottage in Manali costing ₹1 Crore.
• Average Nightly Rate: About ₹5,000 per night.
• Occupied Days: On average, an Airbnb is rented out for 250 days in a year.

Total Yearly Income: 250 days x ₹5,000 per night = ₹ 12,50,000

Rental Yield: (₹ 12,50,000/ ₹ 1,00,00,000) x 100 = 12.5%

So, you could earn about a 12.5% rental yield per year, which is much better than many long-term rentals. Plus, if the property’s value increases over time, you gain even more.

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How to Start an Airbnb Business with Little or No Money?

You might be thinking, “I don’t have ₹1 Crore to invest!” Don’t worry; there are ways to start an Airbnb business without buying property.

Model 1: Manage for Others

• What It Is: You find property owners who have homes they’re not using and offer to manage their property as an Airbnb.
• How It Works: You handle everything from listing to guest communication, and you earn a percentage of the income.
• Benefits: Requires minimal investment.
• Skills Needed: Strong management skills and hospitality experience.

Model 2: Partner with Investors

• What It Is: You partner with someone who has the money to buy a property, and you bring in the expertise to run it as an Airbnb.
• How It Works: Profits are shared between you and the investor.
• Benefits: Allows you to get started without your own capital.
• Skills Needed: Ability to find good deals and manage the property efficiently.

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Taxes on Airbnb Rental Business in India

If you’re an Airbnb host in India, your GST obligations depend on how much money you make from renting out your space.

Hosts Earning Up to INR 20 Lakhs (or INR 10 Lakhs in Special States)

• No GST Registration Needed: If your annual earnings are INR 20 lakhs or less (or INR 10 lakhs or less in certain special states), you don’t need to register for GST.
• Airbnb Handles GST: Airbnb will collect the GST from guests and pay it directly to the government on your behalf.

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Hosts Earning Over INR 20 Lakhs (or INR 10 Lakhs in Special States)

• GST Registration Required: If your annual earnings are more than INR 20 lakhs (or INR 10 lakhs in special states), you must register for GST and get a GST number (GSTIN).
• Your Responsibility: You need to pay the GST collected from guests to the government. Airbnb will deposit a portion of the tax (Tax Collected at Source or TCS) against your GSTIN.

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Current GST Rates

The GST rate you or your guests pay depends on the nightly price of your listing.

• If the price is up to INR 7,500 per night: The GST rate is 12%.
• If the price is INR 7,501 or more per night: The GST rate is 18%.

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Special Category States

The following states have a lower threshold of INR 10 lakhs for GST registration:

• Arunachal Pradesh
• Assam
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Sikkim
• Tripura
• Himachal Pradesh
• Uttarakhand

For more detailed information of taxation policy on business income from AirBnB, read this.

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Expenses You Need to Manage as an Airbnb Host

Starting an Airbnb can be exciting, but it’s important to know about the costs involved. Here are the main expenses you’ll need to take care of as an Airbnb host:

Expense Category	Description	Details
Mortgage or Rent	Monthly payments for owning or renting the property.	Ensure your lease allows short-term rentals if renting. Include mortgage or rent in your expenses.
Property Taxes	Taxes based on the property’s assessed value.	Check with your local government to determine the amount owed.
Insurance	Protection against property damage and liability claims.	Obtain homeowners and liability insurance to cover potential risks.
Utilities	Essential services for guest comfort.	Includes electricity, water, internet, cable, and gas for heating or cooking.
Maintenance and Repairs	Costs for regular upkeep and unexpected fixes.	Budget for fixing leaks, broken appliances, and other sudden repairs.
Cleaning Services	Ensuring the property is clean after each stay.	Hire professional cleaners and purchase cleaning supplies like detergents and disinfectants.
Furnishing and Decorating	Items to make the property comfortable and appealing.	Invest in furniture like beds and sofas, decor such as paintings and rugs, and plan for replacements over time.
Consumables	Supplies provided for guest use.	Stock up on toiletries (shampoo, soap) and kitchen supplies (paper towels, dish soap).
Airbnb Fees	Fees charged by the platform for using their services.	Account for Airbnb’s commission and any additional service fees per booking.
Supplies	Linens and towels for guests.	Provide fresh sheets, pillowcases, and towels, and factor in washing and replacement costs.
Licensing and Permits	Compliance with local regulations for short-term rentals.	Obtain necessary permits or licenses, and include any associated fees.
Replacement Costs	Costs to replace damaged or worn items.	Plan for replacing items due to guest damage or regular wear and tear.
Security	Measures to protect the property.	Install secure locks, provide keys, and consider outdoor security cameras for monitoring.

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Conclusion

Buying a property as an investment is a big step. Getting a home loan can be hard, but we make it easy. Choosing Credit Dharma for your home loan simplifies this process. We offer expert advice and personalized assistance to make everything hassle-free. You’ll receive timely updates on your loan application and disbursement progress.

From the initial application to the final disbursement, we provide comprehensive support. Enjoy clear and honest communication at every stage, with no hidden surprises.

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Frequently Asked Questions