Personal Finance

Help Pay Your Rent by... Renting out Your Room, Apartment

Airbnb is no longer the only place to make money off your place when you're not using it. ValuePenguin created this post to guide you through the decision-making process of renting out your room or apartment. It starts with choosing a listing provider and extends into optimizing your listing for your needs. Don't start becoming a landlord, even a short-term one, without reading this first.

The math is pretty straightforward. If you pay $1,200 per month for your apartment in a desirable neighborhood, you're essentially paying $40 per night to call it home. Now say you rent it out for $120 the next Friday or Saturday night you are out of town, traveling on business or staying at a friend's place. That's three nights of your rent covered in one fell swoop.

The dollars and cents aren't exactly this simple -- we'll explain below -- but the fact remains: Renting out your room, apartment or even house (when you don't plan on using it) is a great way to make extra money or cover the costs of your own trip abroad.

After familiarizing yourself with your municipality's law and your landlord's rules -- New York State's Multiple Dwelling Law, for example, forbids residents from renting out an apartment if a permanent occupant won't be present during the guest's stay -- consider these steps toward cutting down on your monthly rent.

Create a Listing: Airbnb and Beyond

To get started, choose an online home for your home.

  • Airbnb, the poster child for this sector of the sharing economy, claims to have hosts in 34,000 cities across 190 countries. The most accessible option here, it allows users to list anything from a shared or private room to the entirety of an apartment, house, hut, bungalow and boat.
  • FlipKey, which is owned and buttressed by TripAdvisor, specializes in vacation rentals, touting its 300,000 homes and rooms in 11,000 cities globally.
  • Craigslist, like with every other section of its website, offers free listings but little in the way of security: It puts the onus on you to know who your guests are, whereas a verification process is standard practice on other sites. (FlipKey requires hosts to provide their passports or driver's licenses via webcam.) Furthermore, Craigslist is employed more often for one-time long-term rentals (i.e. leaseholders looking for a roommate), whereas other sites allow the host to create a calendar of available dates.
  • HomeAway, which owns the popular Airbnb competitor VRBO, is meant for larger vacation properties. It's proud of its 1 million listings, half as many as Airbnb, and charges its hosts at least 8% per booking; it also doesn't give hosts the option of renting a single room.

Other options worth checking out include Tripwell, Tripping, homestay and roomorama. If you're looking to host in Europe, GowithOh or 9flats might be your best bet. An abundance of other websites, such as Zillow, ApartmentFinder, Sublet, Zumper and Apartment List, are more suitable for long-term rentals.

Name Your Price: What Would Be Worth Your While?

If it's zero, then stop reading here and head to CouchSurfing. But if you'd actually like to earn money by renting out your room or apartment, consider what goes into pricing it. Airbnb's Smart Pricing tool will keep your listing more than affordable as you host your first guests (and collect their valuable reviews), but you'll desire flexibility once your listing gains standing. With that said, here are important questions to ask, gleaned from the above companies' forums and our own hosting experiences.

  • Competition: What are other hosts on the site charging for comparable rooms or apartments? Does anything about your listing merit a higher nightly rate?
  • Taxes: Beyond your federal obligations, what percent of your rental income will be deducted by your city, state? Will it be as high as 35%?
  • Cleaning: How much should you charge guests, if anything at all, or should you build laundry and cleanup into the nightly rate?
  • Supplies: Is there anything you need to buy (an extra set of linens?) to have on hand for guests?
  • Hosting: Do you need to raise your rate to account for Airbnb's 3% fee?
  • Insurance: Beyond Airbnb's $1 million property damage guarantee, is there an insurance product that would protect you from an out-of-control guest?
  • Time: Aside from the time it takes you to consider the above and to be a good, communicative host, will you offer discounts from your nightly rate for weekend or week long stays?

Too much to do on your own? Startups like Guesty and Properly take over the management of your rental for, guess what, another fee.

So how much money would you actually earn on a $120 rental? Without considering cleaning, supplies or the sheer investment of your time, here is a simple equation: Rate ($120) - Taxes (35%) - Host Fee (3%) = $74.40.

Create a Calendar: Rent It (when You're) Out

The real advantage to this practice -- and, more broadly, the sharing economy as a whole -- is that you are gaining value from something you have at your disposal but aren't currently using. The best rent-out-a-room websites have built-in calendars where you can immediately make your listing available for certain days, certain weeks. The run-of-the-mill reasons to activate your listing: staying at a friend's place nearby, leaving town on business or spending a holiday elsewhere. Consider also getting out of dodge when your city is hosting a big, tourists-centric event that its hotels can't fully support. Something like the NFL's Super Bowl could make your room or apartment an attractive option to out-of-towner that's out of luck on scoring a reasonably-priced hotel room.

Calendar month June 2016

Improve Your Listing: Location, Location and Good Pictures

Unless you buy or rent a property specifically for the reason for renting it out, you can't necessarily control how the location of your listing will affect the interest in it. But make no mistake: Guests are more likely to make reservations with you if you live in or near the cool city, not a half-hour's drive outside of it. Beyond geography, here are some more feasible ways to make your listing more attractive.

  • Keeping your calendar up to date months in advance could result in receiving bookings from guests who like to plan early and often.
  • Offering immediacy and relief for guests who aren't 100% sure of their plans: instant booking and a flexible cancellation policy.
  • Filling out every section of your listing with helpful information gives prospective guests a sense of the apartment, sure, but it could also tell them they would be staying with an organized, intelligent person who won't leave details to chance.
  • Uploading high-quality photos -- take them with daylight in your favor -- is important as most rent-a-place users skim listings and head straight for the gallery of images; speaking of, your initial cover/header photo will be the first thing they see when your listing comes up in search results.
  • Optimizing your listing for the website's search engine will increase its visibility; do this by employing commonly used keywords in the listing's headline and description spaces.
  • Above all else, make your listing accurate. Underselling your room or apartment will cost you reservations, and embellishing it will cost you in the all-important world of reviews, which also affect your standing in search results.

Collect Positive Reviews: Not All Publicity Is Good Publicity

Reviews are the real currency in the sharing economy; on a website like Airbnb, they either enhance or erase your credibility with future customers. Make one guest's day by recommending a nearby restaurant? You'll hear about it. Ruin another's with dirty bed sheets? You'll hear about that too. Because both hosts and guests are prodded to offer public reviews of their experience, how you behave online or in person with the other party is really being witnessed by the entire community. With this in mind, here are some ways to gain five stars and superlatives in your listing's comment section.

  • Set clear expectations for the stay of your prospective guests. If there are no surprises, there are usually only positive reviews to be had.
  • Be communicative with all of the guests who request or make reservations. At the very least, offer guests your phone number should they have any problems during their stay.
  • Follow up with guests after they've checked out to see if everything was to their liking. They may have a piece of feedback (i.e. putting a trash bin in a common area) that will improve the experience of ensuing guests.
  • Respond to negative reviews posted on the listing by offering other users context surrounding previously reported problems.
  • One positive reviews start to come in, change the nightly rate to reflect your heightened status as a host.
Andrew Pentis

Andrew is a former Associate Editor at ValuePenguin. He focused on an array of personal finance topics, from money management to career development.