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My Experience With AirBNB in Hawaii

by Leon Yang on August 26, 2014 · 19 comments

  
My Experience With AirBNB in Hawaii

Many of you may have heard about AirBNB by now.

For those who hasn’t, it is a website that essentially allow anyone to rent their room/house to others, mainly travelers, for a short period of time. It caught on quite quickly and it has been making a challenge for the hotel industry. I think it is probably for the better. I’ve had great experiences with AirBNB wherever I go, whether it is in Santiago, Buenos Aires, Sydney, or even in Hawaii.

Investing Through AirBNB

It is in Hawaii, just recently, that I met with someone who became a real estate investor via AirBNB.

Related: The 10 Best Real Estate Investments for Smart Real Estate Investors

He started when he bought a 2 bedroom 2 bath condo in Maui for about $150,000 back around 2012-13.

Little did I know, the real estate market in Hawaii also took a deep dive and there were bargains to be had everywhere. If I had known earlier, I would  have gone investing in Hawaii as well. I don’t know if it is me but I think that for some reason tourist destination cities get hit real hard during real estate busts but come back real strong.

Alas, I should stop dreaming about how I could have had a condo blocks away from the waters for around $150,000. In any case, during my stay in Maui I paid $65 a day for the property. I asked the host how often his place gets booked and he said he was pretty much booked through 2014 to early 2015. Wow! And this is just one room he was renting (he has another condo in the same complex as well).

The Numbers

Just doing a quick math, $65 * 25 (let’s say there are some vacancies), he is getting $1,625 a month!. If he rented out both rooms, he may be getting close to $3,000 a month. I don’t know about you, but I think that is some pretty sweet returns!

Related: Return on Investment (ROI) Versus Cash on Cash Return (CCR)

Basically, this host, through renting his rooms, renting his own vehicles as well, picking up guests from the airport, and occasionally giving diving lessons, has been able to live on the income without working. Although he has to often clean the rooms and deal with guests, he is living a pretty care free lifestyle.

I’m not here to suggest that we all go buy some condos in Hawaii and run AirBNBs, but I do find it very interesting how AirBNB has opened up another venue for a real estate investor. Perhaps for those of you who live in cities with a big tourist draw, it is possible to earn additional income, or even a higher income, via AirBNB. It is not a guarantee obviously and it takes work. But it is something to think about.

Conclusion

As for me, I don’t think AirBNB is for me since I live in Las Vegas. People don’t really come to my city to have a nice, relaxing time, do they? I am not looking to pick up beer cans every other day. All joking aside, I think AirBNB is something at least worth considering. Besides, you might meet some cool travelers such as I.

What do you think?

Be sure to leave your comments below!

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{ 19 comments… read them below or add one }

Michael Evans August 26, 2014 at 8:37 am

I love this investment model. My wife and I are looking to invest in vacation property and are looking at using this website for marketing.

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Leon Yang August 29, 2014 at 11:28 am

Great to hear! I hope it is something that would work out for you.

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Roger Goldberg August 26, 2014 at 10:29 am

I started using AirBnB to rent out two bedrooms in my 3BR condo in Brooklyn and it offers an incredibly lucrative return. Before AirBnB I would get about $1700/month from the two bedrooms. Since I started using AirBnB I now bring in anywhere between $4,500 – $5,000/month from these same two rooms. I am always booked. There is no shortage of demand. Here is one of my listings if anyone is curious what it looks like: https://www.airbnb.com/rooms/2435838
I used to charge $900/month for this room, now I charge $90/night and it is pretty much always booked.

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Leon Yang August 29, 2014 at 11:29 am

Oh wow! Glad to hear from another successful AirBnBers. New York is definitely a great market to be in.

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sara-dc August 26, 2014 at 10:33 am

We love AirBnB! We use often when we’ve traveled through Europe, here in the US and even in little Aruba. It’s a win, win for both hosts and guests. If you plan to use AirBnB as hosts & it’s a condo or apt, just make sure there’s no condo Board or regulation preventing you from doing so. We have friends in DC who host on airbnb and so far, their landlord nor the condo board seems to care. And yes, they’re able to pay their full rent w/the $$ and even extra to spend. We ourselves hosted for a while but our condo board told us to take down our ad or else we’d be fined $1,000. So no extra cash flow for us anymore there.

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Leon Yang August 29, 2014 at 11:30 am

Sorry to hear that. Yeah sometimes the rules can be a pain. I have never been a big fan of HOAs.

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Levi Bennett August 26, 2014 at 11:14 am

Great Post! I also live in a tourist destination (supposedly the biggest tourist destination on Planet Earth: Orlando, FL).. a few things I want to point out..

1. I have no idea about HI zoning and laws, but here in Orlando, short term and long term zoning was already a “thing” here, and strictly enforced (the lack there-of in many other parts of the country have contributed to the boom of AirBnB).. Now, granted, I LOVE AirBnB, and have used it, but I talk to clients all the time who think they can buy a vacation rental anywhere (because of AirBnB). So, they find a deal, only to be heartbroken that they can’t short term rental.. So my word of caution is, do your homework.. AirBnB is under heavy fire in certain parts of the country, most notably Florida, and New York (that I know of).

2. It’s true, short term rentals are awesome ways to make money, and usually have a higher return than a long term rental, however, it should be noted, that there is more work too. You have to stay MUCH more active in your listing, or pay a premium for someone to manage it for you.. but if you’re local, and want to run 4 or 5 (common here), you can do well.. HOWEVER, lets be honest.. 25 out of 30 days is unrealistic.. unless you’re the ONLY AirBnB/HomeAway/Flipkey person in your highly desirable area.. we always tell investors to use a basic 50% occupancy rule of thumb.. now normally, it’s about 55-70%, but.. 80% or higher is a bit unrealistic..

I hope this is valuable information, you can still make a boatload, and I highly recommend it. But I’ve talked to SO MANY people who get stars in their eyes with AirBnB and forget that it’s work, are disappointed about local zoning, and over-estimate occupancy. Just keep it in mind!

Great post though.. Personally, I love the short term rental movement online.

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Sharon Tzib August 27, 2014 at 12:51 pm

Exactly, Levi. As a former vacation rental property manager, I can assure you the owner is not pocketing 100% of the reservation fees ;) Just like any rental, there is always overhead. Good points.

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Leon Yang August 29, 2014 at 11:32 am

Thansk Levi for the contribution! Yes the rules and regulations can sometimes make it hard and vacancies happen all the time. I’d recommend those who want to try it try it out with their own place. Use the guestroom and test it out. If it works gradually expand. If not, then it doesn’t hurt too much.

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Andrew K August 26, 2014 at 11:21 am

What % of revenues does AirBnB take for its services? You must subtract this to get an accurate picture of how profitable it is versus traditional renting.

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Sharon Tzib August 27, 2014 at 12:50 pm

The host pays 3% of the reservation subtotal. There is also a guest service fee of between 6-12%, which is why I prefer Flipkey or VRBO when I’m booking a vacation – no fees to me, the end user.

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Frankie Woods August 26, 2014 at 11:38 am

Excellent post! I love this concept and will have to tuck it away from later consideration. I currently don’t own any property in “tourist” locations, so I don’t think this makes sense for me. However, I just read another post about an individual buying land in S.America. This could be a perfect business model for that type of investment, with the added benefit of adding diversification to your portfolio. I love it!

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Leon Yang August 29, 2014 at 11:33 am

I’m all up for buying land in South America. If you can diversify a portion of your investment in another country, it can work out great.

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lamac66 August 26, 2014 at 8:12 pm

Anything that gives the hotel industry completion is very fine by me! Good model.

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Kristin Whitaker August 28, 2014 at 9:52 am

Remember that property management fees in resort areas are very high, can get close to 50%. That quickly changes a cash-flowing property to a loss.

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Muju Hussain August 28, 2014 at 2:05 pm

Good article Leon! The only issue I see with renting a condo on AirBnB is your HOA board. Most of the HOA boards don’t allow temporary housing, which they consider hoteling, and they might penalize you if they find out about it. Now, it is different with renting the townhouses or the single families, but Condos, you have to be careful with. I thought about renting my condo on AirBnB since I live in DC, but after reading the bylaws of my condo association, I decided not to. This might not be the case everywhere, but I just wanted to put it out there.

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Leon Yang August 29, 2014 at 11:34 am

Thanks Muju yes condos have a lot of bylaws so you do want to be wary of them. But maybe the next time you can try to purchase a property without the HOA. I know in some places that are hard. I just never liked HOA that much personally.

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Cody Bacon August 28, 2014 at 5:03 pm

I had never really heard of this before, thanks for the article!

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Leon Yang August 29, 2014 at 11:34 am

Thanks Cody!

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