The best way to start out on Airbnb is with your own home. That’s what I did in The Great Airbnb Experiment. You can learn the ropes, learn how to market your place, and how to give guests an excellent experience. Even if you are only renting your current place, if the lease doesn’t exclude it you are usually good to go. Rent out a spare room, or even move to a cheaper place to let Airbnb guests rent your current pad so you can make a profit. You can sign up to host on Airbnb here*.
But a time will come when you are ready to scale. You will want to buy an Airbnb investment property. And for that you will need a deposit.
Here’s 10 ways to raise money for a deposit for an Airbnb investment property:
1. Refinance Your Mortgage
If you already own your primary residence and are looking to raise money for a deposit for a rental property, you could refinance your current mortgage. Get a better interest rate, extend the term, go interest only – or do all three if you really need to free up some cash. Doing the above could reduce your monthly payments by several hundred a month – so save the rest for your deposit. You’ll have a big lump sum in no time ready to use as a deposit for an Airbnb Investment Property.
2. Equity Release
Like 2 above, but instead of focusing on reducing your monthly payments, you’ll be tapping into the equity you currently have in your property to get a deposit for an Airbnb Investment Property. Equity release is at the heart of the BRRRR method – Buy, Repair, Rent Out, Refinance, Repeat. Mark Ferguson over at InvestFourMore.com discusses the ins and outs of this method and it’s a smart way to go. Personally I think people should start out buying their own property, live in it for a few years, use it as an Airbnb once once they’ve built equity by refinancing for a deposit for your next place and move on to another property – BLARR if you will (Buy, Live, Airbnb, Refinance, Repeat). Its a slower process but easier for beginners and it lowers your risk exposure if the market drops and rent is late. Once you’ve got a bit of experience under your belt, move on to BRRRR.
3. Improve Your Earnings from Your Current Place
The most obvious way here is to raise your nightly rate. But you need to be careful here. Only once you’ve set yourself up as a Superhost, and have rave reviews proving that you provide a guest experience that goes above and beyond should you start charging more than the average Airbnb in your area.
Another way to improve your earnings from your current Airbnb is through up-selling. I’ve written before about ways you can up-sell on Airbnb. If you can increase the profitability of each guest, you can get your deposit for an Airbnb Investment Property that much quicker.
4. Partner Up
Find someone to go in with. That will half the amount of money you need to raise for a deposit for an Airbnb Investment Property immediately. Ideally, partner up with someone who’s skills compliment your own. So if you are handy with DIY and your buddy has a knack with plumbing, you’ve got a match made in heaven. Even if your skills aren’t quite up to this level, I’m sure you will both have something to offer. Airbnb Hosts need to be jacks of all trades, so most people are able to leverage their current skillset in some way.
5. Buy Cheaper
The cheaper the house, the smaller the deposit. But cheaper doesn’t always mean worse – I’m strongly of the opinion that one bedroom properties are usually best for Airbnb to be honest.
There are some really cheap homes out there. You can buy this place for under $100k:
This place is only £40,000, so it shouldn’t be hard to raise money for a deposit for this one:
6. Use a V.A. Loan
This one’s not technically a way to raise money for a deposit, but rather a way to avoid the need for a deposit all together. With a VA loan, eligible members of the US Armed forces are able to purchase a property with a loan backed by Uncle Sam and don’t need any downpayment at all. Nothing. Zero. Zilch.
It’s an incredibly good deal. On top of that, many lenders offer better rates than borrowers could obtain on the open market.
It’s one of the best options out there for most US service members, and is definitely a factor in why I think soldiers are in such a great position to build a property portfolio. You will however need to live in the property before you are able to rent it out.
7. Gifted Deposits
People always talk about using OPM in property – Other People’s Money. I did this on my very first property – by negotiating the sale price to less than the true market value, the seller in effect gave me the deposit. The lender gave the loan on the full amount. This kind of deal is called a Vendor Gifted Deposit in the UK. They were very popular for a while before the last market crash but for obvious reasons most lenders are no longer willing to accept them.
But gifted deposits still exist in other forms – in the UK there is obviously the Help to Buy Scheme – the government will stump up a 20% deposit and you chuck in only 5%.
In the US, the FHA Mortgage Loans require only a 3.5% deposit as the loan is government backed. But, these require the payment of insurance premiums which can add a lot to your monthly payments so be sure to run the numbers.
8. Matched Betting
This one might seem a bit out there, but bear with me as I introduce you to matched betting.
Matched betting is a risk free way of making money from betting promotions.
It’s a bit of a legal grey area in the USA, but if you are in the UK or another country which permits online gambling its an easy surefire way of making some decent cash. I was introduced to it by Sam Priestly’s blog. Sam is a bit of a maths wiz and used to do matched betting professionally so I’ll let him explain how it’s done.
I tried matched betting myself and made about a grand. I could have kept going but to be frank it bored me. I’m not in to professional sports and I don’t like math enough to keep it up. But lots of people make a lot more money than I did. This guy used matched betting to build a deposit for a house in London so again I know it can be done.
Even if matched betting is not for you, check out Sam’s site – it is a treasure trove of information in all sorts of ways. His honest and generous writing coupled with his talent for starting businesses makes sampriestly.com my absolute favourite blog. It inspired me to start this one.
9. Side Hustle
Uber drivers can easily make $100 a night on weekends in most cities. If you give up the parties (and save even more cash) and give Uber rides every Friday and Saturday evening for a year, you would have an extra $10k. That’s a deposit for an Airbnb Investment Property right there.
Not keen on late nights? Try instacart.
No car? Get on your bike. Try deliveroo.
10. Save
Bottom of the list. Because saving is hard and slow. And you’ll be battling against inflation and rising house prices. But you should be saving anyway, so I’ll keep it on the list.
If you have any other suggestions to raise a deposit for an Airbnb Investment Property, share them with me in the comments. If you’ve tried any of the above I’d love to hear your thoughts.
Thanks for reading!