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It is important to understand the fundamental systems of classification when it comes to accounting in the Airbnb and short-term rental industry. In this article, we provide a high-level overview of the most prominent Airbnb business models for the purpose of helping you decide which one most closely fits your scenario. We also provide links to each particular template to learn more.
Airbnb Investment Property
In this case, you own the property being rented on Airbnb. This is a business model where an operator purchases one or more properties and offers them on Airbnb for the purpose of capturing higher positive cash flow or building equity much faster than a traditional rental business. In this case, Airbnb pays the operator for hosting a guest and the operator pays the mortgage for the property.
To learn more about accounting for Airbnb investment properties, click below...
In this case, you are renting the property on a master lease from a third-party owner and you are subleasing the property to guests from Airbnb. This is a business model where renting properties is preferred over purchasing because it allows the operator to obtain more properties for the purpose of capturing the profit margin between a long-term lease market and a short-term guest market. In this case, Airbnb pays the operator for hosting a guest and the operator pays rent to a third-party owner for the master lease.
To learn more about accounting for Airbnb arbitrage, click below...
In this case, you are acting as an assistant to a third-party property owner and you are not managing any of the funds sent from Airbnb. Rather, the owner receives the funds from Airbnb and you are invoicing the owner to pay you at a later date. In other words, an Airbnb Co-Host operates one or more Airbnb listings on behalf of an owner without a formal property management arrangement, leaving the owner to manage and account for all the funds.
To learn more about accounting for Airbnb Co-Hosting, click below...
Airbnb Property Management WITHOUT Trust Accounting
For short-term rentals, many jurisdictions do not require licensing or strict trust accounting rules for managing short-term stays on behalf of owners. This accounting method is for those Airbnb property managers who would rather avoid the complexity of trust accounting.
In this case, rather than using a trust account, all funds are directly sent to you, the Airbnb property manager, where 100% is declared as income to the property management company, and then a portion is paid out to a third-party owner as a cost.
To learn more about Airbnb Property Management without Trust Accounting, click below...
Airbnb Property Management WITH Trust Accounting
In this case, you are a formal property manager acting on behalf of an owner. You receive all the money from Airbnb and are managing the money through a trust accounting system. This is the most comprehensive method of accounting that offers the most transparency in reporting for both the owners and the property manager. At the end of each month, you are providing the owner with an owner statement which details exactly what's been received and spent via your property management operations.
In this role, you are a formal custodian of another person's wealth and are acting with fiduciary responsibility to account for all the funds through a comprehensive trust accounting methodology. The core of trust accounting is in its conspicuous accounting method, where any funds that you handle on behalf of an owner are rendered through a three-way trust reconciliation standard.
This is the most complicated form of accounting, but it is also the most transparent. You would chose to use trust accounting either because you are requried under local or state regulations to do so, or because you believe the benefits of transparancy trust accounting provides outweighs the disadvantage of its complexity.
To learn more about Trust Accounting for Airbnb Property Managers, click below...
There's more. The business models summarized in this article are not the only business models that exist in this industry. There are indeed other business models that are considered to be hybrids of the ones listed above, each with thier own set of nuances. In any case, be sure to check with your accountant about your specific business model and confirm your accounting setup.
Building an Airbnb and short-term rental business can be incredibly rewarding and lucrative, but getting your numbers precise is more important than ever before. To learn more about Airbnb accounting in general, check the following article:
This concludes our summary to Airbnb business models and accounting templates. Refer back to your onboarding checklist for next steps.
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