If you’ve been thinking about Airbnb as a side hustle, don’t want to tie up your own money to get started, & are wondering how to start an Airbnb with no money at all, know that there are many strategies that make it TOTALLY possible to do with little or no money f your own!
Airbnb is a super fun and creative way to earn extra money, and there are so many ways to go about it. Whether you’ve got an extra room in your home, you’re thinking about buying an investment property, or you’re wanting to try the increasingly popular rental arbitrage method, it is 100% possible to get started with almost none of your own money.
I have used a combination of these strategies not only to get started on Airbnb, but also when I decided to scale and jump in to replacing my income and doing it full time. I now own and/or manage 12 Airbnb listings- all without using any of my own money.
In this post you will learn about creative ways to start an Airbnb business with little to no money, whether you’re looking to purchase an investment property or whether you want to do it without owning property.
How much money do you need to start an airbnb?
I believe you can start an Airbnb with $0 of your own money, but this also depends on what method you’re choosing to try and whether you are purchasing a property,using one you already live at, or whether you’ll rent the space. Read on former on those strategies and to decide which one is best for you.
To answer that question a little more specifically, here are the exact expenses when starting an Airbnb. Again, each of these examples applies to a different strategy, so read on for more info on each one!
- Down payment (3.5% Purchase Price) & Closing Costs (If using the FHA Loan Purchase Method)
- Real-Life Example:
- ~$2600 on a $287,000 4 unit multi family home after negotiating 6% Seller Concessions (For reference, this was is 2018 in upstate New York)
- Real-Life Example:
- Purchase Price, Closing & Rehab Costs (If using the BRRRR Method)
- Example:
- ~$0 using other people’s money to fund the purchase price and rehab costs (for example, $110,000 in a private loan, refinanced and paid back after rehab)
- Example:
- First Month’s Rent and Security Deposit (If using Rental Arbitrage Method)
- Example:
- ~$0 by negotiating the 1st month free, plus paying the security deposit with a 0% credit card and letting your reservations pay it off
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- Furnishing Costs: This includes furniture, linens, towels, decor, kitchen supplies, and all the little extras you’ll need. While it will totally depend on the size & quality of the STR you’re running, I can tell you that I have been able to keep this cost to 3,500-4,500 for studios and one bedroom apartments. These are very basic apartments in a metropolitan area and doing this is as absolutely low-cost as I can. For each additional bedroom, I’d add around 1,500 (which is what I normally spend per bedroom), plus extra furnishing costs if you’re furnishing a larger place.
- Example:
- ~$0 by using a 0% credit card and letting your reservations pay this off the first year.
- Example:
How to Buy Airbnb Property with No Money
BRRRR Method
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat.
This method involves purchasing a distressed home that you can rehab and add value to, bringing it up to market level value. Once you do this, you can rent out the home on Airbnb, start getting cash flow, and then refinance to get around 70-80% of the value of the home back in a loan. If done correctly, you should be able to get all your upfront investment back, plus more from the refinance.
In order to use zero of your own money, you can use a private loan, hard money, borrow money from a friend or family member, or a combination of these strategies to cover that initial purchase price and rehab costs. This gets you into a deal for absolutely no money of your own!
BRRRR Strategy Example:
If all that sounds confusing, here is an example. Let’s say you buy a house for $50,000 cash, borrowed from a private lender. You put another $60,000 to do a full rehab, so you’re all in for $110,000. In its new and improved condition, the home now has a market value of $160,000.
Now, you go to the bank to refinance, and the bank you go to offers a 75% Loan-to-Value, which means they give you 75% of the $160,000 that your home is worth, so you get a loan for $120,000. This pays off your $110,000 investment with $10,000 to spare, some of which will go toward interest if you borrowed your purchase and rehab cost, and if you’re lucky, you get to pocket the rent or use it toward another investment!
TIP:
If you’re intimidated about finding a private loan, don’t be! Finding money is easier than you think. There are a lot of people out there who have money that are looking for a good investment. It’s an easy pitch to a friend or family member who has money sitting in the bank if you can offer them
Use an FHA Loan to House Hack into Your First Airbnb Deal
According to Rocket Mortgage, an FHA loan is a loan you can get on a property you plan to live in that has an incredibly low down payment (3.5%) if you have a credit score of 580 or higher.
You can use this loan to buy a multifamily property (4 units or under), in which you can live in one unit and rent out the other(s). Airbnb is a great way to maximize cash flow at your rental property because in most cases you can just about double or triple your monthly income by using it as a short-term rental.
Now if you don’t have that kind of cash ready to go or you want to get your up front investment even lower, there are ways to get this number down. First, when you offer on a house, you can negotiate for what’s called Seller Concessions, which is where the seller agrees to pay for closing costs. This comes out of their profit from the sale of the home, so you might consider that in your offer price.
When my husband and I purchased our 4 unit multifamily with an FHA loan back in 2018 for $287,000, we negotiated for seller concessions. At the end of the day, after everything was said and done and we were credited all the credits (don’t ask me exactly how this works!), we were shocked to find out we only needed to bring $2600 to closing! $2600 for a 4 unit cash flowing rental property with a purchase price of $287,000!
How to start an Airbnb without owning property:
Co-hosting
Finding an opportunity to co-host on Airbnb is a great way to get started with no money of your own. As a co-host you take on part or all of the responsibility of managing the Airbnb listing for the owner. You might be responsible for anything from communicating with guests on the Airbnb platform to fully operating the listing.
The tricky part here is finding the opportunity. Network and join local real estate investor groups both in person and online and find investors who are either already investing or are interested in using one of their existing investment properties as an Airbnb.
Pitch to them hiring you as a co-host for a percentage of the monthly revenue (standard is around 20% if you are fully managing the listing, but you might want to start by charging less when just getting started). Many investors are in the game for passive income, which Airbnb hosting is not. Pitch to them that with you as co-host, you’ll earn them more cash flow without the headache of dealing with guests, cleaners, etc.
You’ll need to do a lot of homework on how the platform works, industry standards, how to price the listing, etc. but this is something you can definitely do on a learn-as-you-go basis.
Transform Your Current Living Situation and Rent a space on Airbnb
If you are the free-and-easy type willing to get creative and do what it takes to get started, consider renting out a room or space in your home, or rent your entire place on weekends or for a period of time while you travel or visit family.
Not only can this give you a chunk of extra cash, it gives you a good experience using the Airbnb platform to see if it’s something you’d like to continue doing. It can also help give you credibility if you’re planning on trying another strategy in the future.
Rental Arbitrage
The rental arbitrage method involves renting an apartment or house from a traditional landlord with the agreement for you to furnish the place and sublet it via Airbnb. The pitch to the landlord is that you’re going to take care of any tenant-related issues and maintenance items and have the place cleaned regularly, keeping it in top-notch condition. You also may mention that it is your plan to rent from them for several years, which may be attractive to them since filling a vacancy is a headache for most landlords.
To get in with no money, what you can do is negotiate with the landlord to get the first month’s rent free while you set up, or at least a few weeks to get in early and start furnishing. This will save you a ton of money, because the last thing you want is to be paying rent on a month where you can’t make that back in reservations because you’re not set up yet.
The remaining costs will be your security deposit and furnishing costs, which you can easily use a credit card for (use one with a 0 percent offer), and let the Airbnb guests pay this off during the first year.
Conclusion
There are so many ways to get started with Airbnb without using your own money. If you’re looking for more resources as you get started, check out these articles as well:
9 Best Tips for New Airbnb Hosts to have a Successful Short Term Rental
The Ultimate Airbnb Cleaning Checklist Template Your Cleaners Will Live By w/ FREE Editable Template
The Complete Host’s Guide: How to Decorate Airbnb on a Budget in 9 Easy Steps
New Airbnb Hosts: Click here to setup your host account for the first time!
This post was all about how to start an Airbnb with no money.
