Do you want to pay off your mortgage early? A full 15 or even 20 years early?

Of course you do!

And there’s only ONE way to do it—you have to put EXTRA payments towards the principle that you owe. The more you do that, the faster your mortgage gets paid off.

Simple enough, right?

But where should you find that extra money?

I’ll tell you, but please read this:

Before you go further, this is not a post about how to make a TON of money on Airbnb or how to grow your Airbnb empire.  This is about how to pay off your mortgage early with home sharing on Airbnb and other booking platforms.

Lastly, this is a two part series.  The Four Step ‘How-To’ Process is part one and a video case study at the bottom of this post is part two.

Now let’s get started.

Traditional advice to pay off your mortgage early

If you look at all the advice out there about HOW to generate that extra money for paying off your mortgage early, they all fall into one of three categories:

  1. Cutting back on OTHER living expenses and put your savings into your mortgage,
  2. Getting an extra income source and put your income towards your mortgage,
  3. Or doing both.

Yes, I agree…doing any of those will help you pay off your mortgage earlier, but do you really want to work three jobs and live like a pauper in order to do that?

cut back expenses

Those old techniques could help some people that have smaller mortgages AND if they are able to sustain their efforts over several years.

But what if your mortgage is more like $500K? $1MM+?

Then how many lattes will you have to cut to make up the difference?  A LOT!

Or would you need to work 20+ hours a day, 7 days a week?

I don’t know about you, but I don’t want to work three jobs or cut back on my lattes.

There IS a better and less painful way to pay off your mortgage early…let me tell you about it.

Put Your New House to Work to Pay Itself Off

When you’re buying a new house, you’re actually buying a piece of real estate that has the potential to generate income through rent. Rent that could all go towards paying off your new mortgage early.

There are two main types of rental income that your new home could potentially generate:

  • One-off cases—renting it out on a case-by-case basis for things like photo shoots, movie shoots, or even shoots for the adult industry (hey, they pay really well).
  • Consistent and recurring—renting it out to a long term tenant or on a short term basis via home share listing sites like Airbnb.

We’re going to stick to the consistent and recurring options here because:

  1. You have the option to be hands off with the entire operation if you follow our recommendations below, and
  2. Consistent income allows you more peace of mind than worrying about where to find the next one-off gig

Here’s how you do it.


Paying Off Your Mortgage Early with Short Term Rentals

Step 1: Identify the Airbnb Hot Zones

profitable airbnb markets

Even in the same zip code, the difference between the income potential of identical homes in an Airbnb Hot Zone versus one outside of it could be 2 to 3x.

If a dedicated rental unit from one home could achieve a traditional lease of $1000/mo in rents, that same home in an Airbnb Hot Zone could possibly achieve $3000+/mo.

So how do you find the Airbnb Hot Zones?

OPTION 1: You could do it on your own by doing a little homework.

  1. Choose a few neighborhoods you’re interested in.
  2. Find the asking long-term rental rates for 1-bed or studio units in that market by going to a site like Rent.comApartments.com or Zillow.com. In major cities, you’ll find plenty of listings.
  3. Next, go on Airbnb.com, find comparable listings in those same neighborhoods, and gather their average weeknight and weekend rates.
  4. Finally, compare the two figures on an annualized basis.

Yes, this takes time and the more accurate you want to be, the more work it’ll take.

Some markets might be very seasonal so you’ll need to gather data for each month for each listing just so you can get a clear picture.

Or you do it the EASY way:

OPTION 2: Utilize AirDNA for market reports.

AirDNA will take care of all the Airbnb market rental data like nightly rents, occupancy rates, and seasonality.  To be able to compare long- vs. short-term rents, you will still need to go on a site like Zillow to get the asking long-term rents.

All the information you need to make the most informed decision about where to buy your next dream house

Step 2: Find a Home Well Suited for Airbnb Hosting

Once you’ve identified the Airbnb Hot Zones in the city you want to buy your house, you want to identify homes that are well suited to homes haring.

It’s no use being in a hot zone and not being able to actually list on Airbnb.

For a home to be well-suited for Airbnb hosting, here is what you look for:

Have a dedicated guest unit (or the ability to ‘easily’ create one with some light remodeling).

  • Some homes will already have a guest house, others will have a room that easily lends itself to becoming a private guest unit.

Have, or could easily have, a private entrance.

  • You may be fine with hosting your guests and seeing them in your private residence, but you should keep the option of being able to hand off the operations if/when you need to. Having a private entrance is a MUST. Besides, you don’t want to have to keep your house neat and clean like a hotel at all times!

Adequate and easy parking.

  • Try to avoid tandem parking situations (e.g. all parking on single long driveway) because that would mean more work for you when guests are there. If there isn’t enough parking on the property, make sure there is adequate and easy to access street or lot parking.

Having these three boxes checked will effectively make the home a 2-unit dwelling—one for you to live in and one for you to rent out to pay off your mortgage early.

This also ensures that you do NOT need to give up your privacy with strangers coming in and out of your main residence.

Here’s an insight that people who have NEVER hosted before may not realize: Having a dedicated guest unit with private entrance means you have the option to outsource the management of your listing.

This means that for a small percentage of the rents, you can hire a company like Pillow Homes to do all the work for you instead.

Airbnb Pro Insight: Because you’re living in your home and not renting out the entire house, your home won’t considered a vacation home.  Vacation homes (aka 2nd homes that you DO NOT PRIMARILY live in) are what cause many of the technical legal hang ups for single unit hosts (not all the issues, but most).  There may be other limitations like the number of days you can have home sharing guests on your property, so check with your city clerk and fully understand your local laws.  You can also find info about Airbnb regulations here.

When you live on the property, you are truly sharing a portion of your home…aka home sharing!

Airbnb Mortgage Help

Step 3: Find a Home Well Suited for YOU

This is the most personal step of the process.

Yes, being able to pay off your mortgage early is a great thing, but you want to make sure it’s for a house you LOVE.

So, the third step here is to make sure it’s actually a house you want to OWN and LIVE in.

Ask yourself questions like:

  • Is it in a school district you want your future kids to go to?
  • What are the amenities you MUST have in your dream home?

Yes, finding a home that fits both of the requirements will make the search harder and longer, we all know that.

Taking the time to find a home that meets both of these standards could result in you saving tens or even hundreds of thousands of dollars in interest payments over the life of your mortgage.

Think of it this way: Does an extra two weeks of research and searching for the ‘right home’ seem worth it to be mortgage free a full 15 years early?

If you’re serious about this, then the answer is yes.

Let’s move on.

Step 4: Create and Maintain a Profitable Airbnb Listing

All the work in the previous steps only determines the POTENTIAL income your guest unit could generate to pay off your mortgage early.

How much of that potential income you actually REALIZE on Airbnb will be determined mainly by two factors:

  1. The service you provide to your guests…this is the hospitality business and you will be working with the public, and
  2. How effective your listing profile is at turning potential guests into PAYING guests. This is your chance to sell yourself!  Your listing is kind of your ‘product’ so make sure to keep it well-maintained.

If you’re completely new to Airbnb hosting, take a look at our Ultimate Airbnb Beginner’s Guide.  To find how how best to stock up your listing, check out our posts on Airbnb product recommendations.

If you’re an experienced host, well then you already know what to do. You’re one step ahead!

Video Case Study

Pay Off Your Mortgage Early with Airbnb

Below is a deep dive case study using REAL home listings and REAL Airbnb market research to show you exactly how to buy a new home in Los Angeles and then use it to pay off the mortgage a full 15 years early.

Download the spreadsheet for paying off your mortgage early with Airbnb Hosting.

(This article was originally published at LearnAirbnb.com.)

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