Was there anything specific when applying for insurance? Did you need to disclose it was being rented out or anything (I'm assuming if you had to this would affect premiums)?
You must be kidding! This is "disruption" we're talking about, after all. That means all precautions, regulations, contingencies, licensing, and everything else are out the window, full stop. What are you, some kind of last-century luddite who hates progress? What do you want, for the bad old pre-startup ways to contaminate things and spoil the party? "Insurance" is for non-entrepreneurial losers, and no one cases about them, because they're not really people anyway!
Just do a textual search for "insurance" in the article. Zero results found. Yep, it's "disruption" all right! Full speed ahead!
>The only way to buy insurance would be to lie and commit fraud.
I'm sure that's what's happening, probably unintentionally. And you're okay, until a crime is committed, someone is hurt, damages are done or the place burns down. Then the insurance company says, "Oh, you were renting it out? Good luck!"
I own two houses. I live in one and rent out the other (traditional, long-term lease style... not AirBnB style). My insurance company doesn't care that one is a rental. That is to say, I don't have to lie to them... they know one is a rental and accept it like any other property. The only real difference in my two policies is that the one for the rental is for structure only (possibly some liability too since I am the property owner... I don't recall) while my home has additional coverage for the contents of the house. The renters are advised to get renter's insurance to cover their stuff in my house... but that is completely optional to them.
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.
Thanks for this, I wondered what the details might be like.
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.
It’s possible to find a nice apartment in a major city for less than $50,000. The place I found was in Las Vegas and it cost $40,000.
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.
No, I live in the middle of Lincolnshire. Cambridge is a relatively easy 2 hour drive though and GitHub only let me choose from a limited number of UK cities (at least at the time I set up my profile).
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..!
Yes, I think the OP is rather mis-informed. There are plenty of places in the UK where you can get a one bed apartment for between £50-70k and not get a 'brick through the window'.
Are these places you're likely to be able to rent out to full capacity on AirBNB? That's a different question.
I said "a house for under $100K" not a one bed flat. The one bed flat comparison was in my first paragraph.
Where in the UK are you going to pick up a (small) house in a non-rough area of a city for ~£61k? Let alone the equivalent of Las Vegas.. (don't say Blackpool!)
As someone who owns property in the UK, has lived in numerous areas of it, and is actively looking for somewhere new to live, I hope I'm not too misinformed in this area, but standards do vary. I'd contend you'd find nothing as attractive as the Las Vegas pad in the UK at such prices though.
You're talking in terms of pounds, $100k is approximately £63k. I'm inclined to agree with the parent here, good luck finding a place in a decent area in Manchester for less than £100k.
Blame the governments of both Labor and Tory persuasion that decided that it should be incredibly difficult to build new housing virtually anywhere in the country. In particular the pernicious greenbelt rules and the grotesque planning permission process. Also worthy of special condemnation are London's protected views.
as far as i'm concerned, though, is that other than zappos... there really isn't that much of a tech scene there. tony hsieh has been trying to develop one, and has put a lot of his own money behind it, but honestly i doubt it's going to work.
Lehman Bros collapsed because their computer models excluded the possibility of a major decline in real estate prices. Investor confidence is a contrary indicator.
I wouldn't say Brora is that remote - it's about an hour from Inverness by car, is on the main A9 road and is on the Far North Line.
Somewhere like Arnisdale or, even better, Inverie in Knoydart are far more remote (the latter is probably the only village on Great Britain that has no road access).
I also find this incredible. Particularly when you can spend $50k just renting a place in Vegas for three months. I realise there are slums in Vegas but the place actually looks quite nice for the money.
$200/month for an unlimited cleaning lady? Those are Thailand/China prices. Crazy.
Does Lockitron work for someone who happens to not have mobile phone service where the rental is? As convenient as it is, it seems like short-duration travelers to a country don't always bother with having a working mobile phone where they're going. If so, I'd hope it's obvious in the listing.
You did not. The OP was asking if you had a phone in the equivalent of "airplane mode" or just no service where you are, would Lockitron work? You have a mobile phone, which meets your criteria, but Lockitron would not work with SMS access, since you can't send an SMS. Would it work for smart phones? I have no idea. The page you linked to didn't say one way or the other (or if it did, I didn't see it).
More specifically: What if they completely trash the place? How remote is he, and could he travel to do the repairs on sudden notice? Could legal wrangling over the damage make it no longer worthwhile? What about future guests who are displaced by a damaged and unlivable apartment? What would you do if your neighbor became fed up with unruly guests and tried to do something about it (legal or otherwise)?
That's roughly a 25% annual return. nice. We're renting out our place in Buenos Aires. We're clearing 10% return and I use it when I go back there to meet with the team. Stays about 80% -90% full, great location. Guests love it. My wife (who doesn't work full time) manages it remotely. It's been a very positive experience and my takeaways are similar to the writer's. It's not passive income, but it's steady...
also significant labor invested and ongoing to make $13,608 per year (not passive, as you note), transaction costs if you want to sell it, not risk free (although not necessarily much riskier than say the S&P) .
Sure my email is in my profile... it's $110 US/night but 4 can stay. Cheaper than a hotel and separate bedrooms. So compared to a hotel, way cheaper. Also, safer than zonaprop or BYT where you have to show up w/$700 cash for a week PLUS $700 deposit. Then they argue w/you about the deposit, etc...
very interesting post, it's always great to read about other sources of income. I wonder if renting on airbnb is more lucrative than renting in general.
Depends on how quickly you can re-rent. If you sign a long lease, the landlord typically offers something lower than "market rate" in exchange for lower risk and less time un-rented.
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.
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.
If enough people do this it will be the end of Airbnb. This is one of the patterns the state of NY is using against Airbnb while Airbnb is arguing that the service is intended for people occasionally renting out their primary residence. If the state is able to prove a significant number of people used this model Airbnb is done in NY and I fear other states will follow.
Illegal hotels aka slums. There is a reason hotels are fairly highly regulated. My first (and only) stay at an Airbnb rental resulted in me getting bedbugs.
the likelihood of you getting bedbugs in a hotel room is smaller than from a random room in all of NYC. Granted , the rooms up on airbnb for the moment probably don't represent a uniform cut of NYC, but considering the type of people who would start running unlicensed hotels, I'd imagine it being more likely.
It is unrealistic to expect any dwelling, whether it be hotel or hostel, to be free of bed bugs, especially if you're in a region with lots of international travelers. There is no effective insecticide for them, they can be impossible to see, and they don't need to eat for months.
Now, any decent hotel will be doing periodic checks for bedbugs around the box spring and headboard, and any other wooden furniture. But there will always exist a small chance that the last person to be in the room brought a couple and you will get them.
Good news is they don't transmit any disease, and if they bite you, it just itches for a few days and goes away.
In nearly all US jurisdictions, hotels are required to maintain units free of vermin, including bedbugs. Private residences are not. Thus, if a hotel fails to keep the room free of bedbugs, they are generally (1) obligated to refund your room charges and (2) pay to replace any luggage or clothing rendered unusable by the pest infestation.
??? If there's no effective insecticide, how do you think we're killing them? The various -methrin-based compounds are generally pretty effective, though occasionally resistant subpopulations crop up.
What NY is mainly worried about (and has the strongest public support for them worrying about) is AirBnB being used as a way of de facto running unlicensed hotels. People don't like discovering that the room down the hall from where they live has essentially been converted into a hotel room, with customers coming and going regularly, no hotel tax paid, and none of the usual health/safety regulations applied (industrial-strength fabric cleaning, etc.). By comparison, someone renting out a spare room now and then is not as likely to produce social or health problems, and most of the public probably views it as benign, even if also technically a violation of your lease.
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.
I'm not intimately familiar with the legal landscape, but in short I think its because a) the myriad laws governing personal property are much different than those governing commercial property b) significant part of AirBNB's model ignores consumer protection laws.
There are a number of reasons. Most states have laws regarding how temporary rental properties (otherwise known as hotels) are zoned. You can't suddenly turn a building zoned for residential use into a hotel without getting it re-zoned.
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.
The first modern zoning was in 1916 in New York for height related reasons. Great Britain didn't start zoning until 1947.
EDIT: I was sort of surprised that was the first zoning, when I just looked it up. I always mentally associated zoning with 1920s progressive social engineering.
But really, the whole idea that AirBNB should be able to ignore established zoning is another example of why I consider the "sharing" economy to be the "taking" economy.
Sharing space peacefully is exactly what zoning is aimed at.
Zoning is still a contested topic, it has been blamed for enabling much of the NIMBYism in America for example. Another one is creating huge traffic and commuting situations that don't need to be there by putting business in one zone, housing in another and forcing people to move between the two every day. It makes such things as shopkeeper residences where the shop is on the first floor and the family who manages it lives on the second or third floors significantly more work.
My bustling city (one of those "top US cities to move to that isn't the Bay Area or NYC") has tons of first-floor commercial, second floor residential developments, including a fair number of "row houses" zoned commercial first floor residential second and third floors where both the commercial space and residential areas are owned by the same owner. There's a huge push to build high density in this city that was formerly pretty much all low-density ten years ago.
Not true. Paris had zoning laws (including building height restrictions and business location restrictions) since before Haussman, in the early 1800s[0].
New York passed the first US laws, as far as I can tell from a quick search (although I do see vague references to San Francisco using zoning laws against the Chinese in the 1880s, and a lot of people, including Wikipedia, quoting a more limited achievement of 'the first comprehensive/city-wide zoning laws' for New York), but Europe definitely predated them. I believe Germany and some other countries also had them, besides France.
The general "sad" for me is that HN has so many strong libertarian types who start from an assumption that government regulation is practically always wrong and done for corrupt purposes. Learning that this is not the case is a lesson one could easily pick up much earlier in life, so it's sad that they made it this far without understanding that.
I put it down to the poor state of our mathematical education. The naive understanding of economic systems libertarians display is actually fairly similar to what you see in introductory dynamical-systems courses. You can, with great care, construct some "well-behaved" systems where you present a set of rules, and the expected thing happens: you push lever X and Y happens. Raise the minimum wage and unemployment rises!
But of course, most systems are not so well-behaved, so that is only a lead-in to the real examples, where you change the setup slightly and suddenly analysis grows more complex. Now what happens when you push lever X depends on what region of the state-space you're in! And sometimes pushing lever X can change the region of the state-space you're in, too! There is feedback and internal dynamics. I see very little libertarian economics that displays even a 101-level understanding of any of that.
If you keep treating your intellectual opponents like this, you're going to get trounced the next time you run into a smart one.
To be very brief, you seem to think that libertarians believe, roughly,
(1) "the world is simple, so we should have simple rules."
Instead, you suggest:
(2) "the world is complicated, so we should have complicated rules."
But this claim is entirely unresponsive to:
(3) "the world is complicated, so we should have simple rules."
which is what most libertarians I know actually think. If you respond to (1) when your opponents are arguing for (3), you will not have productive conversations.
Our attitude towards any law really should be a presumption of doubt, especially laws that interfere with consensual activities. Laws are blunt objects that come with their own enforcement costs and unintended consequences. We should be especially wary about regulations whose benefits are sharply concentrated among a small group (say, hotel owners), and whose drawbacks (say, slightly higher hotel costs for everyone else) are widely dispersed. That's standard public choice theory. That doesn't mean that no regulations are ever justifiable (far from it!), but it does suggest that we not favor regulation for the sake of regulation.
I don't like to psychologize people, but I wonder whether this attitude is a sort of mental heuristic on the left, which often finds itself fighting with folks on the right who seem to believe, roughly, that regulation is intrinsically bad, and should be abolished. This has encouraged the counter-formation of the view that regulation is intrinsically good, and should be preserved. I guess that's a little easier to remember than the subtler view that regulation is intrinsically bad, but should sometimes be preserved when it can still improve outcomes over the status quo.
It's almost as though you have to examine things case by case and decide whether a dangerous tool should be applied, instead of just forming a mental affiliation with it.
I think your missing a huge one. Taxes, hotels in major city's often send 10+$ a day to the local government. And before people complain about this that money often pays for things like museums and convention centers which is why many people are going to the city in the first place.
So if NYC just made airbnb charge the 5.875% tax, most of their complaints would go away? And by increasing the hotel supply, hotel prices would go down to better match actual long term renting? Then it would create a more liquid housing market enabled by computerized markets? It would still allow casual renting of people's houses that way.
No, their complaints aren't strictly about the missing tax revenue. There are other regulations that would need to be addressed (health, safety, etc...). Hotels are a heavily regulated industry with good reason. Regulations are a protection mechanism to protect the city/neighborhood and the consumer.
I think that there is a clear difference between renting out a room or occasionally renting your entire place, versus keeping a separate apartment strictly for renting out on AirBnB.
In general, tenant / landlord relationships are heavily regulated - legal objections to AirBnB style rentals (pretty reasonably, in my opinion) claim that anyone who has a unit that is primarily a rental for tenants is a landlord, and should be subjected to all the regulations typically defined in that relationship - a different situation than someone who is going to be away for a few weeks renting out their own personal residence during that temporary time.
NY wants to protect the classic hotel business. Hotels and building owners need to take care of all kind of legal and administrative procedures, including security considerations for their users. Airbnb apartment owners are now competing for free with those business.
Not saying i agree, but that's the main motivation behind of Airbnb regulations, in NY and other places.
Not really - it's the rights of the neighbours, who didn't sign up to live in a hotel with people coming and going at all hours, partying, damage/wear and tear, etc.
An interesting bit of evidence that resident concerns are a common motivation: in upscale buildings, which have the funds to pay for it, the crackdown on AirBnB is in even more full swing, through "free-market policing". Some condo associations actually have employees regularly scouring AirBnB ads in their area and looking at the photos to find rentals that look like units in their building (it's often not hard to spot, if you know a building well). Then the owner is identified and sent a "stop doing that" letter, and/or sued for violating their contract.
Because many of those who are renting out apartments in this manner are doing so without a "hotel license", charging the appropriate hotel taxes or otherwise abiding by laws put in place to preserve the rights of neighbors.
You could probably argue that they are most peeved about not getting the hotel taxes.
If you lived in a high-rise condo and paid go money to do so, and the two places on either side of you started being rented out to random people who were there one week and gone the next, how would you feel?
As others have pointed out, residential zoning laws aren't generally the product of corporate malfeasance. Usually they are there to help combat it. That's what NIMBYism is all about.
> If you lived in a high-rise condo and paid go money to do so, and the two places on either side of you started being rented out to random people who were there one week and gone the next, how would you feel?
I probably wouldn't care because there would be no way to detect if it was happening, without me standing outside my door all night like a sentry.
Sure, I'd be annoyed if some of the guests came and went at all hours of the night and that was waking me up regularly, but that could happen just as easily with more permanent neighbors, and I'd be able to do just as little about that.
If I read your comment correct (why is it bad for NY to be against airbnb scenarios like this) then no, it's not a bad trend.
To elaborate, many places (not just the US, and not just New York) has rent-control laws. By and large not everywhere, and not all parts of the cities/counties who has. But for those that do, this is in clear violation of at least that, but also - possibly - sublet laws. That is a far fetched example though.
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.
I would imagine Airbnb could at some point cap the number of nights you could let a place out, right? Certainly not ideal from their standpoint, of course, but manageable?
A consequence of this could be that people who rent places out also use AirBnB's competitors. So this could perhaps help AirBnB politically, but wouldn't fully stop the problem.
It also prevents a legal and valid use-case -- renting out your couch every night of the the year. So long as you still live in the place yourself full-time, this isn't illegal under most municipal codes.
This was the case at a place I stayed at in Boston - the place was a 3 bedroom apartment, 2 bedrooms were occupied by long term tenants, while the room I was in was exclusively for AirBNB.
I think rooms get far less than a full apt, even if you get the same space. Just having to deal with another person there means you can't totally relax in most places. (Like walk naked from the shower to the room.)
When I was visiting Berlin last winter, I stayed at Airbnb flats and it seemed like a lot of the owners were doing exactly this. In fact, to your point, the city was, IIRC, about to forbid vacation rentals in certain neighborhoods. Berlin is rapidly gentrifying, there's a R.E. bubble going on, poorer people are being pushed out of the city, and this kind of thing intensifies that trend. I've no idea if cities in the US would be willing to step in and intervene if this became common here.
Berlin is rapidly gentrifying, there's a R.E. bubble going on, poorer people are being pushed out of the city
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.
It's not quite that simple. Building up can ruin the character of the neighborhood, which is often a big part of the allure.
I do think we're chronically underbuilding in a lot of places (SF being an extreme example), but the existence of steel and elevators is not a panacea for the "gentrification problem".
And this is inherently wrong, why? People (of whatever their net worth) vote, speak at meetings, and talk to their representatives to try and pursue outcomes that they prefer. One of those outcomes may be maintaining a particular character for a neighborhood. It's complicated. Greater good for the larger city or whatever and all that. But I don't see anything devious about residents having a say in what their community looks like.
Because the world does not exist for the benefit of the rich and privileged; not simply the "rolling in Maserati" rich but those in a position to enact those gentrifying policies--who are overwhelmingly upper-income and capable of exerting more time to get what they want, have more money to apply to their causes, and generally are better-educated and able to execute.
The "selfish vote" amongst the privileged is indeed a problem. A lack of social responsibility and a refusal to understand that those unlike you must too be able to live are moral failings. They are wrong, and situations that increase the effectiveness and value of the selfish vote amongst people with privilege are undesirable.
> Because the world does not exist for the benefit of the rich and privileged
No? Does it exist for the benefit of the poor then? -They sure keep voting for more wealth transfers and taxes on the rich, and they keep getting them too!
Note that I'm just an ordinary middle-class white person. I just wanted to point out that the world does not exist for any group's benefit. We're all just people, all just individuals here.
No. But we have ample historical evidence that huge wealth and privilege disparity does not lead to societal stability. The selfish vote of those rich and privileged seeks to increase this disparity. The selfish vote of the poor does not.
It's sort of a Bavarian themed down-town and city in Washington state. Its allure and attraction to tourists depends on its theme.
I say I don't know if it's a great example because I have no direct evidence about prices, but I assume the reasonable volume of tourists and business must raise prices compared to other cities.
I put my parents up in an AirBnB apt in Paris when they were visiting me. The renter had an agreement with a handful of friends that they would crash at their friend's apt when their apt was being AirBnB'd out. She said a lot of the students do it to earn extra cash. Same was true in most other cities we AirBnB'd in.
Berlin has been gentrifying ever since they tore down that wall. You can still buy apartments in East Berlin for under $100K.
In Mitte, there are some buildings where most of the apartments are Airbnb rentals or similar. There are few local residents left who are not so happy about living in a 24/7 party hostel.
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...
Some tourists would prefer to support the town they're visiting by directly paying shop owners, etc, instead of having "hotel taxes" of indeterminate destination tacked onto their expenses.
(But you're right, using "kickback" was needlessly offensive.)
I'd prefer the opposite. I wish tourists didn't cover any costs of running my city. Then it would be optimized for those of us that actually live here.
If there's one thing I've learned in my old age, it's that I love buying things for people. Because then the power dynamic is in my favor: this is my city, enjoy your visit but leave no trace.
Perhaps in some (or even many) jurisdictions but isn't this just plain ole "Bed & Breakfast" (you know, the BnB in AirBnB) which has been around since forever?
this is definitely happening in NYC. A friend of mine just told me how he was considering getting in on it.
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).
Good, concise write up with real numbers which is nice. But the woman who is doing all that cleaning and contact work for $200/month is the one making this possible (so it seems) and that could quickly eat up profits (though the ROI is great enough that there's lots of room there).
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.
Indeed. Seems like the place to be is AirBnB property manager. Have 6-12 properties to manage and you have a full-time income and perhaps part-time work.
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.
In a couple of the Airbnb places I stayed at, which had remote owners who I never saw, the manager was really just a minimum-wage sort of person who met me, oriented me, and periodically came in to do some light cleaning (I was a long-term (months) tenant). In Berlin, one of the guys had the gig as a "mini-job", and seemed quite unhappy when I tried to do any of the housekeeping myself - it was taking EUR out of his pocket by cutting his hours. I would think that it would be very easy, and cheap, to find assistants like this in the States who were not licensed PMs but were just plain folks.
To answer your question, there's at least one company that believes there's money to be made out of this: https://urbanbellhop.com/. I read about them on Springwise a while ago, and they handle all the check-in/check-out process for Airbnb and VRBO hosts. They don't provide cleaners, but it would make sense for them or another company to do so. I think there could definitely be a market for that kind of all-around vacation rental management services, at least in cities like SF and NYC.
Edit: Airenvy mentioned somewhere in this thread seems to do just that.
That stood out to me as well. She's cleaning his place probably > 4x per month plus doing miscellaneous point-of-contact duties, all for $200 a month? That's insane. It's hard to imagine that if she doubled her prices, the blogger would be better-served to find a new manager.
I love these design/idea. I wonder if you could setup micro-condo living or "ski bum" living by buy a few of these and small parts of land. I could also see something like this being ideal for a small beach house getaway as you won't be out $XXX,XXX or even MM if it gets taken by a hurricane or storm.
When the HOA finds out he's breaking the terms that he agreed to when purchasing the condo, they'll fine him per offense. Then get a lean on the apartment.
Condo associations usually allow only a certain percentage of apartments to be rented. If too many units are rented, a buyer won't be able to get a mortgage. And most prohibit short term leasing.
There was also an old version of the Lockitron. My understanding is that the old one was a deadbolt replacement while the new one goes over an existing deadbolt lock. They still sell the Lockitron Access (https://lockitron.com/store/buzzer) which works with electronic locks. It is possible that he has one of those.
I really like the mention of Lockitron, the whole 'keyless entry' idea really is going to be the future of AirBnB rentals.
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.
She probably signed away her right to stop working for him, and is now stuck working $2 per hour! It can't be that she's a free person able to choose to work for a given rate. She must be a victim!
Not really. It doesn't take much effort to manage properties like this. Most guests on Airbnb don't want negative feedback as the author mentions, so they make an effort to leave the place as they found it. The person managing the property is probably not the same one cleaning it. She sources her own cleaning team most likely, and very may well have 60 or so properties under her wing. @ 80 properties & 200 bucks per month, after paying the cleaning team, she is pulling 12000 without lifting a finger. Also, I would be willing to bet she does not report all that income.
Getting the cleaner to manage 'guest relations' for this cheap is probably a great deal not easy to replicate.
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.
I don't want to come across as being facetious, but why? At least in my building, there's a large percentage of neighbors who I don't know at all - whether they were renting via Airbnb or owners of their condo, it doesn't make a huge difference to me.
He's breaking the contract with the owners association that he agreed to on purchase. It lowers everybody else's property values and prevents them from selling their unit.
Because those people, even if you don't know them, are part of the community of the building, and for the most part people will respect the building they live in (obviously there are those people who don't as well). When you have strangers coming and going constantly, you lose some security in who is around you and when - and while it might be that the largest percentage of AirBNBers will treat the property with respect (and not just the apartment, but the building), it still increases the overall risk (either directly form bad short-term tenants, or even not properly closing the lobby door, or letting people in behind them that should not be in the building).
Because people don't behave in a hotel as they do at home - they're on holiday after all, so they might come back late drunk, they might want to party, they might make a mess in the hallway. Different people, every night. An unlike an owner, they could be anyone, or bring anyone with them. Basically, you are externalizing all the downside onto your neighbours, while pocketing the upside. It is no surprise that AirBnB started in America.
Upvoted to counter the downvote. US citizen (who went to college in Europe) here and I agree that it's no surprise that AirBnB started in America. I've seen ruthless business practices all over Europe, but there is always a level of social responsibiltiy that is more generally lacking in the US.
Edited to add: Americans almost always say "vacation" instead of "holiday" but you could be a long term expat who is picking up the local language.
It sounds like travelers to Vegas, the hotel capitol of the US, are savvy enough to check airbnb. And VRBO it seems as well. This is a big pain for searchers. Hipmunk shows each of these, but not very well as they only have a handful of the 1000s of listings from Airbnb. We've tried to help with this at http://AllTheRooms.com by aggregating everything we can find.
This has to be illegal, right? I can understand renting out your vacation home or apartment when you're not using it, but buying a home/apartment to run essentially a mini hotel has to run afoul of zoning/licensing/regulations in most places
He is quite likely violating the COA of the condo development in which he purchased the room. He's also probably violating the building code for short term rental units, which could mean very heft fines. Depending on where the property is located in Vegas, he could also be violating local zoning and use restrictions.
We're building a service called Airenvy (airenvy.com) that caters to short term renting on services like airbnb. We could have been tremendously helpful to the author had we been in the Vegas area. We are growing rapidly in SF and our property owners love all the money we're making them! On average we increase income by 30%!
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.
TripAdvisor and others came up with a good solution a while ago - they let the property owner write a reply to a bad review, and post the reply right underneath the bad review.
Being able to post a reply is a solution to a one-off or occasional bad review having an unfairly negative impact. If a large percentage of the reviews are bad, the best solution is probably to solve whatever problems are causing the bad reviews.
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[ 3.3 ms ] story [ 291 ms ] threadJust do a textual search for "insurance" in the article. Zero results found. Yep, it's "disruption" all right! Full speed ahead!
I'm sure that's what's happening, probably unintentionally. And you're okay, until a crime is committed, someone is hurt, damages are done or the place burns down. Then the insurance company says, "Oh, you were renting it out? Good luck!"
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.
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.
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.
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..!
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.
Where in the UK are you going to pick up a (small) house in a non-rough area of a city for ~£61k? Let alone the equivalent of Las Vegas.. (don't say Blackpool!)
As someone who owns property in the UK, has lived in numerous areas of it, and is actively looking for somewhere new to live, I hope I'm not too misinformed in this area, but standards do vary. I'd contend you'd find nothing as attractive as the Las Vegas pad in the UK at such prices though.
Are you referring to the glut of available real estate, or the tourist attraction? Or is there some other thing that makes Las Vegas special?
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.
So yes, I think the capital is overheating.
http://www.hspc.co.uk/details.asp?id=42481
[Brora is also home to my favourite whisky - Clynelish]
Somewhere like Arnisdale or, even better, Inverie in Knoydart are far more remote (the latter is probably the only village on Great Britain that has no road access).
- 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.
$200/month for an unlimited cleaning lady? Those are Thailand/China prices. Crazy.
https://lockitron.com/help/mobile#smsaccess
EDIT: Included more detail about needing a working mobile phone with service, due to ahlatimer.
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.
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.
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.
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.
Now, any decent hotel will be doing periodic checks for bedbugs around the box spring and headboard, and any other wooden furniture. But there will always exist a small chance that the last person to be in the room brought a couple and you will get them.
Good news is they don't transmit any disease, and if they bite you, it just itches for a few days and goes away.
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.
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.
EDIT: I was sort of surprised that was the first zoning, when I just looked it up. I always mentally associated zoning with 1920s progressive social engineering.
But really, the whole idea that AirBNB should be able to ignore established zoning is another example of why I consider the "sharing" economy to be the "taking" economy.
Sharing space peacefully is exactly what zoning is aimed at.
These are all new builds in the past 8 years.
New York passed the first US laws, as far as I can tell from a quick search (although I do see vague references to San Francisco using zoning laws against the Chinese in the 1880s, and a lot of people, including Wikipedia, quoting a more limited achievement of 'the first comprehensive/city-wide zoning laws' for New York), but Europe definitely predated them. I believe Germany and some other countries also had them, besides France.
[0]: http://books.google.com/books?id=dONVGtJzxrwC&pg=PA20&lpg=PA...
But of course, most systems are not so well-behaved, so that is only a lead-in to the real examples, where you change the setup slightly and suddenly analysis grows more complex. Now what happens when you push lever X depends on what region of the state-space you're in! And sometimes pushing lever X can change the region of the state-space you're in, too! There is feedback and internal dynamics. I see very little libertarian economics that displays even a 101-level understanding of any of that.
To be very brief, you seem to think that libertarians believe, roughly,
(1) "the world is simple, so we should have simple rules."
Instead, you suggest:
(2) "the world is complicated, so we should have complicated rules."
But this claim is entirely unresponsive to:
(3) "the world is complicated, so we should have simple rules."
which is what most libertarians I know actually think. If you respond to (1) when your opponents are arguing for (3), you will not have productive conversations.
I don't like to psychologize people, but I wonder whether this attitude is a sort of mental heuristic on the left, which often finds itself fighting with folks on the right who seem to believe, roughly, that regulation is intrinsically bad, and should be abolished. This has encouraged the counter-formation of the view that regulation is intrinsically good, and should be preserved. I guess that's a little easier to remember than the subtler view that regulation is intrinsically bad, but should sometimes be preserved when it can still improve outcomes over the status quo.
It's almost as though you have to examine things case by case and decide whether a dangerous tool should be applied, instead of just forming a mental affiliation with it.
Edit: NY get's 10$ on a one room 140$ hotel room stay as it's $2.00 per day per room* + 5.875% of the rent. http://www.nyc.gov/html/dof/html/business/hotel.shtml
I think that there is a clear difference between renting out a room or occasionally renting your entire place, versus keeping a separate apartment strictly for renting out on AirBnB.
Not saying i agree, but that's the main motivation behind of Airbnb regulations, in NY and other places.
You could probably argue that they are most peeved about not getting the hotel taxes.
As others have pointed out, residential zoning laws aren't generally the product of corporate malfeasance. Usually they are there to help combat it. That's what NIMBYism is all about.
I probably wouldn't care because there would be no way to detect if it was happening, without me standing outside my door all night like a sentry.
Sure, I'd be annoyed if some of the guests came and went at all hours of the night and that was waking me up regularly, but that could happen just as easily with more permanent neighbors, and I'd be able to do just as little about that.
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.
A way to game this might be to:
1) Buy a place
2) Rent out 1 room full time to someone who agrees to #3 in exchange for below market rent.
3) Rent out the other room or rooms.
People might lie, but there is going to be some immediate negative feedback when people find out they've rented out a couch...
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.
I do think we're chronically underbuilding in a lot of places (SF being an extreme example), but the existence of steel and elevators is not a panacea for the "gentrification problem".
Well then, less allure would lead to lower prices, right? What's not to like?
Because the world does not exist for the benefit of the rich and privileged; not simply the "rolling in Maserati" rich but those in a position to enact those gentrifying policies--who are overwhelmingly upper-income and capable of exerting more time to get what they want, have more money to apply to their causes, and generally are better-educated and able to execute.
The "selfish vote" amongst the privileged is indeed a problem. A lack of social responsibility and a refusal to understand that those unlike you must too be able to live are moral failings. They are wrong, and situations that increase the effectiveness and value of the selfish vote amongst people with privilege are undesirable.
No? Does it exist for the benefit of the poor then? -They sure keep voting for more wealth transfers and taxes on the rich, and they keep getting them too!
Note that I'm just an ordinary middle-class white person. I just wanted to point out that the world does not exist for any group's benefit. We're all just people, all just individuals here.
No. But we have ample historical evidence that huge wealth and privilege disparity does not lead to societal stability. The selfish vote of those rich and privileged seeks to increase this disparity. The selfish vote of the poor does not.
I don't think I've ever seen an example of this reflected in prices. Do you know of any, or of any studies of this phenomenon?
It's sort of a Bavarian themed down-town and city in Washington state. Its allure and attraction to tourists depends on its theme.
I say I don't know if it's a great example because I have no direct evidence about prices, but I assume the reasonable volume of tourists and business must raise prices compared to other cities.
Berlin has been gentrifying ever since they tore down that wall. You can still buy apartments in East Berlin for under $100K.
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...
Some tourists would prefer to support the town they're visiting by directly paying shop owners, etc, instead of having "hotel taxes" of indeterminate destination tacked onto their expenses.
(But you're right, using "kickback" was needlessly offensive.)
If there's one thing I've learned in my old age, it's that I love buying things for people. Because then the power dynamic is in my favor: this is my city, enjoy your visit but leave no trace.
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).
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.
But yes, if I'm a neighbor there and I find out this is going on, I get angry.
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.
[1] https://www.tryringo.com
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.
Section VIII:
"Short term leases (leases with terms less than 30 days) are prohibited."
Edited to add: Americans almost always say "vacation" instead of "holiday" but you could be a long term expat who is picking up the local language.
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.