Using AirBnB as a Tenant.

20 Replies

Hi Everyone,

I wanted to get your viewpoint on the idea of securing a property from an owner on a month to month lease agreement, only I would then turn around and become an AirBnB host on that same property.  This is an innovative way to create significant cashflow using OPP (other peoples properties!).

I know cities are starting to regulate on AirBnB and short term rentals - e.g. SF only allows up to 90 days, but I am not clear on the rules surrounding being an AirBnB host as a sublet to my master lease agreement.


Has anybody tried this and what cities in the bay area would you think is best / worst to try out this creative strategy?

Thanks,

Paul

I have yet to try. I’m doing a house hack in a triplex that I just picked up. The other two units are stable and I spend 1 week a month at the property so I will be doing the same. I’ll keep you updated with my findings. I am in the Miami market so results are expected to vary as well as ordinances pertaining to the use of Airbnb
-Pierson

You approach a perspective landlord with a offer to partner with them. Sign a partnership agreement where by you guarantee his rent on the unit and split any profits from the airbnb above that amount. 

It works on the same principal as with investing where one partner is the finances and the other manages the business with a slight twist since you are also the tenant responsible for the rent.

Hey @Paul Bryzek , what you're talking about is Brian Page's Bnb Formula strategy.  If you plan on scaling that type of business I think his class is well worth the $1k especially if you have never hosted on Airbnb before.  

I do this currently and it is actually much more profitable if you don't split the profits with the landlord.   I would start trying to get owners to rent to you straight up for market rate and move to a profit sharing only if that doesn't work.  

In Denver, if I shared profits it wouldn't be worth it with all the work involved, shoot for a net profit of $500-$1000 per month per property.  I can't imaging this is the case in SF, but in some cities the margins are so good you can afford to pay a property manager to host the rental and still make money, making the income 100% passive.  Hope this helps! 

This is actually a great model and as posted in the above responses can generate fantastic cash flow. I also pay flat rates and not splitting revenues. I’ve run into an unexpected issue with keeping up with all of the landlords that are willing to do this arrangement!

@Paul Bryzek - I am thinking about doing this idea as well. I am in the research phases right now and it seems to make A LOT of sense if you're looking for an extra $500 to $1,000 a month in cash flow. Obviously, be careful with the regulations in the Bay and be sure that you're doing it legally. 

I know J. Martin has started a successful business in Oakland doing just that. He's now financially free and travelling 10 months of the year. Al Williamson (based in Sacramento) is also a good person for you to meet. He is an expert on short term rentals and I'm sure would be glad to help. 

The ability to do this will also depend on the lease. Some leases (mine included) bar the tenant from operating a business out of the property. If the lease includes that clause you'll want to be very careful as you could be evicted on those grounds and your brand with AirBnb would be (probably irreparably) damaged. In that case, the only way to proceed would be with the landlords blessing, and likely would include profit-share to them. 

@Paul Bryzek there are several people in the Bay Area doing this. 

@J. Martin has been very successful with this strategy.  He quit his day job and is essentially a digital real estate nomad!  Currently he is backpacking through SEA, so I dont know how often he is checking BP. I am not sure about the AirBnB portion, but doing furnished rentals, using a master lease process is definitely an attractive strategy.

-Arlen

Originally posted by @Paul Bryzek :

Hi Everyone,

I wanted to get your viewpoint on the idea of securing a property from an owner on a month to month lease agreement, only I would then turn around and become an AirBnB host on that same property.  This is an innovative way to create significant cashflow using OPP (other peoples properties!).

I know cities are starting to regulate on AirBnB and short term rentals - e.g. SF only allows up to 90 days, but I am not clear on the rules surrounding being an AirBnB host as a sublet to my master lease agreement.


Has anybody tried this and what cities in the bay area would you think is best / worst to try out this creative strategy?

Thanks,

Paul

 @J. Martin got started this way, in part, IIRC. I've encountered several other people that have done it too. Most extreme success example I've seen is net income, according to tax returns, of ~$250k/yr. Not just airbnb, but a mix of furnished rental income streams like corporate accounts, etc. Geographically concentrated in that case in Silicon Valley, not Oakland. 

A basic pitch you can make is to offer the landlord a few hundred bucks per month above market rent, a larger security deposit, and you will cover all routine maintenance. And then negotiate from there (f. ex. some LL may not want to let go of controlling routine maintenance). And then what you ask in return is that the lease allow you to sublet. If you go spamming landlords on craigslist I'm guessing you will get a lot of "no," in-person networking will be your deal maker I think. 

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

I have 2 vacant units coming up in Oakland. I thought about turning these into corporate rentals since it’s in a great neighborhood and next to UCSF Children’s hospital. Tons of nurses and families do corporate housing in the area. 

I decided against it because I’m not ready to run a business and would just rather have long term tenants.

I think J is successful because he has a team in place to manage the properties and is willing to provide upkeep for the units. He doesn’t involve the landlords for small maintenance issues, which is exactly what a landlord wants to hear. 

@Calvin Kwan Rent to me with a master, and I will run the AirBnb business for you :)

@Craig Curelop - Thanks for the contacts. I read that this strategy is already not possible in SF and Oakland is considering regulations, but have yet to do it.  From my perspective, that leaves open the entire rest of the bay area outside of SF.  May SJ is a great market as well.  

Is anyone familiar with potential legal pitfalls to this strategy and things to avoid as to not end up paying the city large amounts of fines?  This industry is so new that it is still highly unregulated which makes it very exciting to me.

Originally posted by @Paul Bryzek :

@Calvin Kwan Rent to me with a master, and I will run the AirBnb business for you :)

@Craig Curelop - Thanks for the contacts. I read that this strategy is already not possible in SF and Oakland is considering regulations, but have yet to do it.  From my perspective, that leaves open the entire rest of the bay area outside of SF.  May SJ is a great market as well.  

Is anyone familiar with potential legal pitfalls to this strategy and things to avoid as to not end up paying the city large amounts of fines?  This industry is so new that it is still highly unregulated which makes it very exciting to me.

I'm open to renting the units out for Airbnb use.  Shoot me  DM and we can chat.

Originally posted by @Calvin Kwan:

I have 2 vacant units coming up in Oakland. I thought about turning these into corporate rentals since it’s in a great neighborhood and next to UCSF Children’s hospital. Tons of nurses and families do corporate housing in the area. 

I decided against it because I’m not ready to run a business and would just rather have long term tenants.

I think J is successful because he has a team in place to manage the properties and is willing to provide upkeep for the units. He doesn’t involve the landlords for small maintenance issues, which is exactly what a landlord wants to hear. 

That being said, if any other folks are looking for rental units to Airbnb, please shoot me a DM!  

@Paul Bryzek - Yes - I also know a few people doing along the peninsula and the East Bay. SJ could be interesting too. Especially because it's so close to Levi's Stadium. If you do go to SJ, I would suggest trying to get a place that is walking distance to the Light Rail. 

Also - I would hate to give you advice and then have you pay a fine. But I know most cities (including Denver) will give you a warning before heavily fining you. 

Originally posted by @Craig Curelop :

@Paul Bryzek - Yes - I also know a few people doing along the peninsula and the East Bay. SJ could be interesting too. Especially because it's so close to Levi's Stadium. If you do go to SJ, I would suggest trying to get a place that is walking distance to the Light Rail. 

Also - I would hate to give you advice and then have you pay a fine. But I know most cities (including Denver) will give you a warning before heavily fining you. 

May I offer better advice. You should never run an AirBNB in any city that prohibits it. The fine would probably go to the landlord who owns the building, so this is a good warning to property owners. Landlords should stay away from renting to someone who plans to AirBNB the property. There is too much risk.

Originally posted by @Calvin Kwan :

I have 2 vacant units coming up in Oakland. I thought about turning these into corporate rentals since it’s in a great neighborhood and next to UCSF Children’s hospital. Tons of nurses and families do corporate housing in the area. 

I decided against it because I’m not ready to run a business and would just rather have long term tenants.

I think J is successful because he has a team in place to manage the properties and is willing to provide upkeep for the units. He doesn’t involve the landlords for small maintenance issues, which is exactly what a landlord wants to hear. 

 Calvin, 
Since you have 2 vacant units in Oakland coming up next to the hospital and don't want to run the business yourself (I have 3 people running my operation), would you be interested in having me as your tenant? :) I'm nice, take care of and have the unit inspected regularly, always pay rent early, don't bug my landlords, and won't take you to rent control court! :) I also have some over at 55th St in N Oakland just down the street from the children's hospital. Not sure which UCSF Benioff you're referring to, but I like all 3 locations. I have several references from local landlords on BP, including one on this post! ;)

*Update: Just saw @Paul Bryzek already jumped in with the idea. Way to keep your eyes open to opportunities Paul :)  Calvin, still throwing my hat in the ring. You know I'm in for the long haul, have experience in the biz, people to manage it, and good relationships with the landlords I work with, from BP. (and a free ticket to the 2018 Summit ;) I can also give you tips on managing for later when you want to try it out yourself. I'll touch base, and see if its good for both of us. 

@Paul Bryzek ,

Yes, a bunch of people do this, including myself, as @Arlen Chou , @Craig Curelop , and @Chris Mason . It can be a good business at the right scale. Some growing pains and I didn't like being on-call/on-internet 24/7 for things that pop up while scaling. But better now that I have a team. 

Scott Shatford wrote a book on doing this. It's sold on Amazon for $5 I think for the ebook. He runs Airdna.co(m). They sell a lot of Airbnb data also. I only sublet for over 30 days, so the short-term rental regulations don't apply (all laws I've seen so far define short-term rentals as 28-30 days or less). 

I pay market rent. To be honest, the numbers in my biz wouldn't work paying above market. There are a lot of labor costs (implied or explicit, depending on how you run it.) You have depreciating furniture. Fixed overhead, combined with seasonal revenue, typically. Maybe with the right place doing short term, could afford to split revenue. 

But see what's going to make the landlords happy. A lot of them in the Bay are just tired of dealing with that occasional ******/combative tenant, and primarily do not want calls or headaches. 

Updated 5 months ago

All my landlords know that I sublet, and the right to sublet is included in the lease.

Sounds like subletting, which I recommend being very careful with depending on the laws in your state.  Here in MA, that is ground for eviction if done without landlord consent. 

Anyone utilizing this strategy in Denver? I have an open room that I'm interested in using with AirBnB but haven't hosted before.

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