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Jason Reed
  • Investor
  • Minneapolis, MN
22
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The Coming Death of Airbnb

Jason Reed
  • Investor
  • Minneapolis, MN
Posted Aug 16 2017, 12:35

I have had a number of investors that have been excited to take advantage of airbnb with their rental properties and their own homes. Numerous clients of mine and aquaintances have already cashed in on airbnb. Properties that would normally bring in $1,200 a month are now receiving that in a matter of days. To further the frenzy, the Twin Cities will host the 2018 Super Bowl, nothing seems sweeter than getting $10,000 or more for one week's rent in February in Minnesota. 

I am all for capitalism and this is exactly what makes America great, however don't plan on cashing in on airbnb for the long-term. Despite the thousands of ecstatic owners that have used this great platform to earn new wealth, there are those that are being hurt by it. Airbnb directly injures hotels business. I know, you're not shedding tears for Paris Hilton and her pals, but owners that are currently cashing in on airbnb are already feeling their wrath. 

New York City, recently adopted legislation to ban any rentals shorter than 30 days. Airbnb spent $10 million fighting the legislation and then dropped a lawsuit after the city promised to only pursue the property owners and not Airbnb. In February, the New York Post reported that Hank Fried and a Real Estate Broker, Tatiana Cames, were collectively fined $17,000 for 17 violations. They are required to pull their Airbnb listings and will have the $1000 violation increased to $5000 each and then $7,500 each for a third violation. 

Similar bans have happened in Colorado, San Antonio, and Santa Monica. Hotels are the big ugly Gorilla that will cause problems for Airbnb, but they aren't the only problem that is surfacing. In Minneapolis, in 2010 the city collected $61 Million in revenue from the extra tax that they add to hotels. Couple this with the additional tax revenue that will be aversely affected by Airbnb, and the same folks that govern rentals will be looking to kill Airbnb because of the lost revenue. Restaurants, are losing revenue, along with downtown areas, as many of the Airbnb units are removed from the more densely populated areas. Once again, this will hurt large cities revenue sources.

Finally,  in large cities and vacation areas, voters will push Airbnb out of their communities. Politicians will respond to home-owners that vote, and many of them will complain about the tenants that are in the short-term Airbnb units. As a rental property owner, I know that it can be difficult to deal with tenants that are loud or disruptive to neighbors, this issue will be out of hand for many airbnb owners. After all, what are the consequences for a tenant that is in the property for two days, and then leaves the morning after they have kept the neighbors up all night. 

I am not against Airbnb, but I feel the end of this great revenue source is near.

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