What the Multi-Billion Dollar Sharing Economy Means for Real Estate Investors
Greetings to the BiggerPockets community! This post will be the first of a series on the sharing economy.
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Specifically, we will introduce the sharing economy through the lens of real estate investing. This includes what the sharing economy is and isn’t. In these posts, we will show how landlords can up their investing game using the sharing economy. This includes how they can leverage underutilized assets to earn income outside of monthly rents.
What Is the Sharing Economy?
But first, what is the sharing economy? The sharing economy is the fundamental shift between the economic principal of scarcity to one of abundance. This is about how we can capitalize on the abundance of the consumer generation.
The sharing economy is composed of hundreds of online platforms that enable people to turn otherwise unproductive assets into income producers. These include homes, cars, parking spots, clothes, consumer items, pets, hobbies, and much more.
Many of you will be familiar with services like Uber or Airbnb, and it is likely that quite a few of you have used them already. But these platforms are just the tip of the sharing economy iceberg, which is poised to complicate titanic industries like taxis and hotels, among others.
This new business model is not really sharing, it’s access. People are craving access, and business is booming!
According to a TIME Magazine study, one in five American adults have sold services in the sharing economy. Similarly, they also found that two in five adults have purchased services in the sharing economy.
So we know that the sharing economy is here to stay, but what does that mean for real estate investors?
Meet Jeff. Hi, Jeff!
Jeff had been a part-time landlord in Montreal until a year ago. He decided it was time to take his real estate business to the next level. Jeff wanted to quit his job as a bean counter at a local accounting firm, but realized his real estate cash flow wasn’t enough.
To supplement his income, Jeff took advantage of the sharing economy:
- He started renting out his spare bedroom on Airbnb ($400/month).
- Jeff also capitalized on his extra parking spaces by renting them out on JustPark ($100/month).
- In the small amounts of spare time he had, Jeff drove for Uber during peak hours ($800/month).
- Finally, Jeff is a Tasker on TaskRabbit doing small painting jobs ($300/month).
Total: $1,600/month for an average of 15 hours of work per week.
As a result, Jeff has been able to transition into his real estate business full-time while still being able to put food on the table.
But that’s not all. Jeff has also learned to be a user of the sharing economy to help with his real estate business. But more on this later.
Jeff epitomizes what the sharing economy is all about — that is, the use of online platforms and communities to exchange underutilized assets for money. While on the surface it may seem like a simple concept (and is!), this process has many significant repercussions.
This includes the fact that the sharing economy has created an army of micro-entrepreneurs. And they are redefining the traditional ownership model.
Remember, it’s now all about access, not ownership. Please think about this point for a second — and its implications for real estate. We will get into this later.
The sharing economy is creating an entirely new demographic of people who are capitalizing on excess. The old mentality of excess consumption is being replaced by access consumption.
Instead of owning a car, you can use one only when needed. Instead of owning a thousand articles of clothing, you can rent them. Instead of paying for a taxi or hotel, you can leverage the excess of others.
Where there is demand, there is supply. The boom in the sharing economy is not difficult to understand. And whether we want to admit it or not (yes, taxi industry, I’m looking at you), the sharing economy is here to stay and will only get stronger.
What Is the Sharing Economy Worth?
PriceWaterhouseCoopers (PWC) notes that the sharing economy earns approximately $15 billion in annual revenue. By 2025, PWC predicts that this will skyrocket to $330 billion a year.
As of 2015, Airbnb was already valued at $30 billion, which is almost as much as Hilton. Uber is currently valued at some $60 billion, larger than Delta Airlines, FedEx, and even Viacom. Traditional corporate giants are beginning to pour money into the sharing economy. For instance, General Motors recently announced they were investing $500 million in Lyft.
This is why we should be — and are — embracing the sharing economy. I would also argue that the legal difficulties facing the sharing economy are good. Any disruptive force is exactly that because there is no frame of reference for how to regulate it.
What Does the Sharing Economy Mean for Real Estate Investors?
Now we get to the million-dollar question: What does this mean for investors? The answer to this question is: It depends.
If you are looking for income supplementation, then there are dozens of sharing economy platforms that can help you with that. These include Airbnb for home-sharing, JustPark for parking, Roost for storage sharing, BeMate for luxury home-sharing, Fon for Wifi sharing, Vayable for tour sharing, and the list goes on and on.
If, on the other hand, you are looking to leverage sharing economy platforms to boost your business, then there are also dozens of sharing economy platforms that can help. These include Fiverr for research, 99Designs for graphic design, TaskRabbit for contracting, Handy for cleaning, Upwork for copywriting and marketing, and much more.
Both of these topics deserve careful attention. Keep an eye out for separate posts on these topics that will be coming to you shortly.
Take one thing from this discussion. For real estate investors, the sharing economy is not limited to Airbnb. It’s only the start. It’s about getting creative, like Jeff from Montreal.
There are so many platforms available to real estate investors that can help step up their investing game. And in the coming days, we will introduce these platforms to you in more detail.
Stay tuned, and please share (ha!) this article.
Investors: What do YOU think of the sharing economy? Do you take advantage of this niche to help build your business?
Let me know with a comment!