https://www.airbnb.com/rooms/643721
Another thing to add to the "if you're thinking of doing this" list - don't write a post about it where you and the location can be identified. This is probably against the HOA agreement (short term leases are prohibited).
It also could be a safety issue if you aren't actually living there. Once someone knows the apartment number, someone could see when a particular place isn't going to be occupied and use that to their (ahem) advantage.
Seriously kids - don't do this. You'll probably be breaking a bunch of contracts and a fair number of hotel and zoning laws. Not to mention the insurance and liability issues that aren't even remotely discussed in the post.
Also, there is an echo chamber in the tech community regarding AirBnB as the standard for short term rentals. From my experience, VRBO has been much better and provided significantly more bookings. ymmv and it could be your customer type as a two bedroom condo in Hawaii gets a lot more families and older bookings.
If anyone has any questions about this, my email is in my profile.
As you've pointed out, there are plenty of places where it is perfectly legal to do this. My guess is that it's harder to find a profit opportunity, though, because the more profitable use (legal use as a short term hotel) is already priced into the unit.
I suspect that one reason airbnb is so profitable in areas where it is not legal is that the restrictions on short term rentals suppress the sale price of the unit. So you buy a unit that is cheaper precisely because it is illegal to use it as a hotel, and then you profit by using it as a hotel. So in cities with very strict zoning and tenant protection laws (like SF), I guess they're selling the assumption of risk.
Many dedicated AirBnB locations are supposed to be strictly residential with longer-term leases.
I'm curious if the author looked into this.
This is true in lots of fun cities, primarily because it's so hard to build new housing stock—which is a Bad Thing, as Matthew Yglesias describes in The Rent is Too Damn High. Britain is suffering from a variant of the "no building" problem too: http://www.buzzfeed.com/dlknowles/britains-dysfunctional-pro... : "Construction started on just 107,000 new homes in England last year. Excluding World War II, that’s the lowest figure since the 1920s."
The solution to "gentrification" and what not is "building new dwellings," which we know how to do very effectively (elevators and steel are century-old technologies). The problem is regulatory / political.
If you don't end your contract, your rent is going to stay quite low in Berlin. If you're retired or unemployed and living decently with a rent around 100€ per month, it's not so easy to escape from the apartment. With a new contract, the rent might be ten times more expensive. Or the place is renovated and put into Airbnb.
People in general here in Berlin don't want more hotels. Especially for the residential neighbourhoods which makes all the prices go up even faster. Too bad some of the neighbourhoods are also very 'hip' places to stay...
Berlin has been gentrifying ever since they tore down that wall. You can still buy apartments in East Berlin for under $100K.
In NYC there's an enormous arbitrage. The cheapest hotel room in the city is $300/night. Meanwhile, you can rent a 1BR apt for $2,500 / month.
So you rent an apt for $2,500 / month and book it out on AirBnB for $200 / night ... and you're looking at a monthly arbitrage of $3,500.
The guy I know heard about it from a friend who's already doing this with 6 apartments ... so he was making something like $18K / month (less the cleaning expenses).
Airbnb is clearly forcing a convergence between hotel prices and rents. This doesn't just mean forcing hotel prices down, it also means forcing rents up.
I wish the tech community could stop reflexively defending airbnb and engage with the question of what the costs it is imposing are or might be.
Also, NY specifically worries that it will change the local housing market. If investors buy up enough local properties and turn them into mini hotels, locals may be priced out of these neighbourhoods and those neighbourhoods will in turn suffer.
Plus there are the complaints from the locals. Having a neighbour rent out their place to tourists a couple of times a year is not a big deal, but if it happens every single week it gets annoying. You never know who is coming and going and they aren't always all that worried about noise, garbage, etc.
And just to clarify, I think the state is right to be concerned about these issues. But at the same time I would hate to lose the ability for someone to put their primary residence on a site like Airbnb a couple of times a year. This helps visitors and the residents without significantly hurting anything else in the equation. Things only start to turn sour when enough people create dedicated Airbnb properties as investments.
I don't like this kind of thing as a customer, either. When I look for a place on AirBnB, I expect it to be someone's actual house/apt, which they treat as their own, because they also live there. If that's not the case, it should be made really clear up front.
But the more worrying part is that it drives up prices as more and more do this (not talking 1-2 appartments in a neighbourhood, talking increasing).
Another issue is the housing situation. In many larger cities it's a real issue that there aren't enough places to live as needed.
For hotels it is bad, as it's driving business away.
So, from both sides of the spectrum this is bad. For people looking to get some extra cash (not saying it's bad - as the post also mentions, it's an active investment), and for people looking for a place to rent while on vacation, it is good.
You could probably argue that they are most peeved about not getting the hotel taxes.
Not saying i agree, but that's the main motivation behind of Airbnb regulations, in NY and other places.
At what point does somebody giving me money in return for staying on my property turn my property into a hotel? I'm not talking the legal definition, I'm talking common sense.
The only working definition I can come up with is "when you reach a scale where the government can start taking a cut"
Back in the old days, that was a good-sized establishment. With computers, however, the government can go after anybody -- including lots of folks that earlier slipped through the cracks.
Neither do I. This is not something the State needs to be involved in at all.
Hotels are not obsolete, AirBnB is 'disrupting' the industry by ignoring local laws and regulations. It may be that these regulations exist to protect an obsolete business model but it also might not.
When your path is blocked by a fence before you tear it down, its a good idea to understand why it was put up in the first place.
that gives them or any "DISSSSRUPTIVE!" startup the right to break the law , doesnt it ? as long as it's on the web , anything goes,hey...
Wow, I had no idea things were that good/bad. Here in the UK, I deliberately choose to live in a cheap part of the country and you'd still be talking $120k or so for an equivalent 1 bed flat. This really illustrates to me why efforts to turn various areas in the US into "mini Silicon Valley" areas could actually work.. when you can have a good, secure base for a year's salary, it surely changes your attitude to risk.
I don't think there's anywhere in the UK you could buy a house for under $100K where you wouldn't be getting bricks through your window or dealing with gangs of chavs on a daily basis. I wonder if this goes part of the way to explain why Brits are far more reluctant to take risks in the entrepreneurial sense.. you gotta be on a darn good salary to have a place of your own anywhere on our isles.
- the population density of the UK as a whole is about 7x greater. The US has really got a lot of space that could still be built on.
- there is limited reason to live in Las Vegas unless you work in hospitality (although there has been a recent boom- and bust-cycle).
- housing market tends to be more divergent in the US than in the UK: it's more likely you can find some city that's relatively cheap.
Manchester - £55K+
Leeds - £70K+
Birmingham - £45K+
Hull - 50K
Bristol - 100K
Norwich - 70K
etc.
If you're happy with a small village then I think you can find even cheaper.
Are these places you're likely to be able to rent out to full capacity on AirBNB? That's a different question.
Ugh, I feel sick. And need to move.
Las Vegas is somewhat unique in having low housing prices coupled with a huge tourist market which makes such a setup workable.
But yeah, Cambridge is ridiculously expensive. So, increasingly, though is rural Lincolnshire! I'm looking for a 4 bed house close to town and £250k is about the minimum for something decent. I suspect that would barely buy a nice flat in Cambridge though..!
http://www.hspc.co.uk/details.asp?id=42481
[Brora is also home to my favourite whisky - Clynelish]
$200/month for an unlimited cleaning lady? Those are Thailand/China prices. Crazy.
Downside: more capitally intensive, and requires you to be OK with owning a house.
This is (pre-Airbnb) one of the classic hacks for middle class Americans to start real estate businesses, since you can fairly easily get sufficient cash flow and/or equity after running a duplex for a few years to get a bank to OK you adding other rental properties.
EDIT: Also, is there currently an AirBnb manager market? Similar to the cleaner/manager he has, it would be great for people to invest remotely. Do research, fly in to inspect potential properties, purchase and give the cleaner/manager a nice cut? I know there are property management companies but there seems to be some extra finesse (and possible discretion) needed here that I haven't seen from PM companies before.
Of course, I would start out low ($200/month) then raise and raise the fee when you become indispensible. The absentee owner is essentially just an investor with the capital outlay. And being far away and totally reliant on the cleaner/manager, you can probably squeeze him until he's making only 10% annual return (better than stock market, just to leave some incentive). The owner makes it easy to arbitrage him when he puts his financials in the open.
In your EDIT, I think you are essentially talking about a real-estate investment portfolio manager. You'd take money from investors, fly around and buy up property, then manage the cleaner/managers, take 50% of the profits and give the other 50% to the investors.
Thanks for sharing. I was wondering if you could shed light on your inventory risk, meaning do you find that the market price for your rental and nights reserved is highly dependent on the economy, tourist season and weather conditions or fairly resistant to external circumstances. Furthermore, is your product fairly fungible meaning if you have had to deal with competitive pricing in your locale and/or have had repeat customers.
Also, I'm guessing given the relative low price of your rental income and your buying in cash; real estate fluctuation risk is relatively low. Does your purchase qualify as a first time home-owner tax credit?
For comparison, a $50K investment with 8% market annual return will compound to $68K in 4 years or $92.5K in 8 years. Using cash-flow discount model, assuming that your real estate property value stays the same and annual income the same, you spend $50K to yield $90K ($40K in illiquid property value and $50K in generated cash) in 8 years, making your net present value of your $50K investment to be discounted at $21.8K. Just food for thought.
And she's probably illegal . . . But even if she's not illegal, how can this "property manager" live with himself, taking advantage of people who don't "know" enough (whether of the language or minimum wage laws) to understand that they are being taken advantage of? I was born in Vegas and have seen what that city has become -- if there's one thing in abundance there it's under-the-radar immigrants.
This post represents everything that is wrong with the property management and rental industry:
White man want easy money. White man charge high rents. White man hire nice, busy ladies who no speak English to do hard work cleaning. White man hire nice, fast men who no speak English to do hard work painting and carpet replacing. White man take profit for himself and give teeny bit to people who no speak English because they no understand how hard it is to make easy money.
His cleaning lady is even laundering towels and sheets for $200 per month? How nice of her.
I have about 3 or 4 sets of sheets and towels. This way the cleaner doesn’t need to wash everything in the 3 hours between guest check in and check out. They can simply take all the dirty sheets and towels home, wash them, then next time they swing by the apartment have a clean set of everything ready to drop off.
How about doing a real analysis on this?
The screenshot had $90 a night with 13 nights highlighted. Assume $100 so I can do math late, and 16 nights rented a month. Assume blocks of stays, say 3 days average each (it's Vegas) and that means you get 4-5 'stays' by visitors a month. That's a one bedroom apartment, free of personal clutter - it would probably take 2 hours tops to travel to and clean it up with one person. Do that 4 times a month and that's ~8 hours of work for someone a month. Washing sheets at home is easy - takes me 30 minutes of my time to do a load of laundry and fold it.
200/9 hours = $22 an hour. This 3 times minimum wage in Nevada.
I understand 'it's just business' and I personally don't have an ethical 'beef' with what he's done... but he really is getting a great deal on the cleaning service and his margin was already pretty amazing on the property. I think he could afford to spend $300 on cleaning/managing and he would probably still break even from the fees. This is a microcosm of the inherent problem with 'trickle-down' economic principles... the person with capital will not spend more than is necessary.
You made so many assumptions about this guy.. Don't try and assume...
Edit: I don't think I communicated my meaning well here. Bottom line is, Hilton doesn't charge me to clean the room--it's a cost of doing business and is rolled into the cost of the room. The practice of adding on a 'cleaning fee' reeks of profit grabbing... similar to an airline charging for checked bags, except that this is a fee that is a requisite for staying in the room.
In other words, yawn.
Maybe you're being sarcastic, though, since _The Jungle_ was published in 1906.
Worst case you spend a few months evicting them and then spend a couple grand fixing it up after the house is completely trashed from piles of trash and holes in the walls and urine and feces in the floors. Then the next family moves in and the cycle repeats.
I don't suppose you've had the County come after you for occupancy tax yet have you? While in general there are a lot of hotel rooms in Vegas (something like over 140,000) the hotels are a pretty strong political block and have been a thorn in the side of some folks who went the VRBO route.
https://lockitron.com/help/mobile#smsaccess
EDIT: Included more detail about needing a working mobile phone with service, due to ahlatimer.
Airbnb prices are so steep in buenos aires, how does it make sense for tourists? Even Zonaprops has way cheaper places for weeks and such.
In argentina Airbnb is not going to get regulation issues ever..
Would you mind if i gave you my email? Plus we might know each other already.
I'm wondering about the amount of work it would take to clean up the room after each guest, and whether that would outweigh the profit.
It seems like a lot of these new startups are the same old business model but skirt costly taxes and regulation (Uber for taxis, Airbnb for hotels, Bitcoin for money transfers)
I'm not arguing for or against the laws, but I think it's clear why many residents of such a city would decide to use legal force to prevent that.
If the apartment next door turned into a hotel, there would be random people coming and going and I wouldn't be able to count on any of this. I would expect more problems, but even worse, rotating problems, where someone comes and goes and then another person comes. At least if it's one person you can talk to them and work things out, but if it's a new person every 2 days, it's all over again from the beginning each time, and they may not even care, because they aren't invested in living here.
1. It's hard to imagine that there's a ton of democratic oversight over hotel regulation. Prior to AirBnB, did anyone EVER, in your life, suggest to you that you should be concerned about the specifics of hotel regulation in your town?
2. These are local laws. Smaller government components, like city, county, and state, are probably more vulnerable to being captured by medium or large businesses than the federal government is, due to less sophistication and professionalism of the politicians (especially) and bureaucrats (less so).
3. A big hotel has a lot of incentive to try to corrupt local regulation to quash competitors and shore up their business. It directly affects their bottom line.
4. These regulations have accreted over time, leading to complex regulations that have lots of loopholes and potentially anachronistic components to them.
Just do a textual search for "insurance" in the article. Zero results found. Yep, it's "disruption" all right! Full speed ahead!
There isn't really any ding to my premiums for it being a rental. I lived in the rental before it was a rental. The full insurance premium (when I lived there) was about twice as much as it is now as a just rental.
Average monthly revenue: $1,634
Rough monthly profit: $1,134 (after cleaning, bills and other expenses)
HOA fees, utilities, cable, and everything else is only $104 per month? Something doesn't add up here. (But I'm a botanist, not an accountant, so I may not understand something)
Assuming a $300 for utilities + HOA fees sounds believable
Smart idea though. I've heard of some people who do this in NYC on a larger scale and all of them have reported raking in the cash and even hiring managers so their income is pretty much entirely passive (they just deal with the manager(s)). Seems like a pretty sweet gig if you have the capital.
Strictly speaking it uses "exposure fusion" which isn't true HDR but the end result is similar to a tone-mapped HDR image and is generally more realistic with fewer artifacts.
FWIW it's written in Go and hosted on Google App Engine.
Handling them poorly could quickly result in bad reviews.
On the other hand, those kind of profits are really just short term until the market catches up. People are not stupid to not take easy profit and / or governments will crack down with regulation and taxes.
Beyond that, all that really matters is the "Covenants, Conditions, and Restrictions" (CCRs) document that is recorded in the land records when the condo was created and any other local and state regs governing renting of rooms.
The Rules and Regulations statement about short term leases is easily overcome. Just create an operating company that you lease the condo to under a long-term lease - run all the money through the operating company, pay the rent to the owner, and distribute net income. The only "lease" will be the long-term lease to the operating company. Again, there may be local regs about this (or the state's Landlord-Tenant statute: https://www.leg.state.nv.us/NRS/NRS-118A.html#NRS118ASec180), but the "prohibition" under the Rules and Regs is easy to deal with. Again, what matters are the CCRs that are recorded in the land records. If they allow it, my bet would be that this guy's scheme is fine.
Plus, I'd also bet that he talked with an attorney about this. If he didn't, he's a damned fool.
I wonder when is someone going to come up with an idea how to fix this. As far as I can tell there's not a lot a supplier on airbnb/ebay/etc can do about them. It's all too consumer centric... My subjective opinion is that most bad reviews are unwarranted, left by customers that have unrealistic demands.
Of course if this place was bought cash, you could have done the same thing in reverse. Take that money and loan it to an individual to buy a house. The only difference is there's no extra profit to be made but also no added risk of not finding clients, repairs, etc. (unless someone wrecks the place and it becomes worthless)
http://nos.nl/op3/artikel/562868-airbnb-mag-alleen-nog-met-t...
I have several customers who are AirBnB hosts who use my service, Ringo [1], which lets their guests into the units via the apartment buzzer. That combined with Lockitron, and you never need to worry about key transfer again. You can effectively live on a different continent than your AirBnB property.
And I would have little sympathy in compelling the local authorities to enforce any and all laws and regulations that would put a stop to the resulting disruption.
I see far too many instances, today, of people thinking of and acting on "me, me, me", while ignoring those around them whom they are screwing over.
Yeah, I know, reputation system, rare chance, but rare chances is the kind of thing you often don't want happening to 60K investment!
I scraped AirBnB last year to compare it to local prices with the same intent last year to automate. Totally do-able and profitable. Local tenant & housing laws are the most important thing to keep track of IMO. You can outsource the Q/A with guests.
Guy: 'I run a Valvoline' Douche: 'OH! So you BUY UP all the mechanics and then CHARGE PEOPLE to access them?!' Guy: 'Uh, yes. This makes me, the customers and the mechanics better off, dipshit.'
I would think there are two dangers:
1) It can take a lot of time, and time is money. If you make 200K/year, your time is worth ~100/hour. Spending 100 hours on this takes away a 10K profit.
2) You are the on the hook for big surprises: Theft, something breaks, etc.
But again, great for the OP!
Stuff like this doesn't make much sense if you're salaried. People like to break down salaries by the hour, but it's just not true. You can put in all the overtime you want and not see an extra penny of profit, at least not directly. You'll only benefit from it if you actually get a promotion or raise as a direct result of the extra work.
If you're contracting, though, and actually charge by the hour, then this calculation makes sense.
Also, this is tangential, but $200k is hardly an even remotely typical salary for a developer in the US.
One thing he doesn't say is what percentage of the time the room was rented; he only says that it wasn't always making him money because he and his friends occasionally stayed there.
I'd freak out if someone were to start fiddling with my electronics, perusing my Laserdisc collection, etc.
1) Your apartment gets trashed. They break your walls, pour cement down your drain, break the furniture, etc?
2) Tenants refuse to move out. I'm sure there are all kinds of laws protecting them, and it's very hard to kick them out even if they aren't paying.
3) Somebody gets injured on your property (slips in the bathroom and breaks an arm), and sues you for a shitload of money.
Also, you forgot amortization in your calculations. Things will wear and tear.