All Forum Posts by: Account Closed

@Kevin Coggins And that is happening too... here you have a case where a landlord is suing a tenant for $300,000 for illegally renting unit on airBNB that resulted in landlord being fined almost $60,000 by city. 

If you are fined $60,000 by city for something you had no knowledge of, and then you boot the tenant, thats a vacancy and lost income in addition to the fine. Eviction doesn't always solve the problem. 

If there is a pattern of abuse, as is the case with airBNB, you tackle the problem at the source. AirBNB knows or should know that there is a pattern of tenants leasing illegally, violating both landlords lease and local ordinances when operating an unlicensed hotel. 

They have sufficient instances of these incidents including lawsuit against them by the City, not just landlords.

@Andrew Johnson  In some of the states and cities there actually are rules, airBNB and the tenants just feel like ignoring it currently.

@Douglas Krofcheck This is interesting.. last I checked, if you are a landlord in New York or California who utilized a reasonable amount of debt to finance the property, you are barely cash flowing; with the play being mostly appreciation. Some already spend quite a bit, out of pocket, to maintain building during holding period. Now you have this 'great idea', that landlords should go out and spend more money on finger print readers, airBNB scanning software and schemes to track renters movement, now some renters are having privacy concerns. So the victim now has to spend more money, while airBNB and tenant, profits.

@Amy Ranae This is what appears to be happening within a 20 mile radius of Minneapolis currently in terms of inventory of multifamily with 5+ units. So it appears about $71,121 per unit, ballpark. This would also mean the price to sales ratio (or market GRM) is about 7.32 and a value of the target in the range of $711,207. Only caution, with inventory this scarce, hope listing prices aren't arbitrarily inflated when listed to increase comp prices.

@Amy Ranae There are various ways to go about valuing an asset such as an apartment, hotel etc... each however often has a pro and con and each will involve some level of estimation so there isn't and exact method that produces a universally unanimous value. Its just the nature of finance.

In a pure finance sense though... you would typically forecast future cash flows from the asset for a few years -- 10 years for instance and also forecast what the value/sales price of the asset will be in 10 years (remember you haven't figured its price today yet). Then you discount those future cash flows and terminal value of the property in 10 years to the present, using some discount rate to arrive at today's value of those future cash flow to determine the value of the asset. 

Issue with technique, various investors will use varying time frames for the holding period and varying discount rates, the value of the property in 10 years is suspect and cash flows may vary based on actual expenses etc....

There are of course still some ways around this... the value of any asset is still the present value of all future cash flows from that asset and cash flows ultimately comes from revenue so we focus on revenue to determine value.

Using your example for instance (vacancy rate of 10% is higher than national average by the way), we would have: 900 * 12 * 10 * .9 or $97,200 for yearly revenue. 

A few days ago when I looked into the median/average price to sales ratio for the industry (GRM of sorts for publicly traded firms), it was somewhere between 8.5 to 8.8. So on average, companies in the industry was selling for about that many times its yearly revenue. This would equal $826,200 or $855,360 in your case or about $82,620-$85,536K per door.

This is of course as accurate as conditions in the equities market reflect conditions of your local market and specifically the pool of companies utilized and general rationality of investors. New York and California however often can be dramatic ($400-$500K per door) but in most of the other states the variance shouldn't be too drastic.

Of course the sample can always be controlled just like a regular RE comp to utilize mostly companies that operate in markets similar to yours to refine the accuracy of the product.

You can also use sites like loopnet to gather the sales price of apartments listed in a similar market along with the number of rooms to compute average price per door/room. Often listing prices may be slightly higher than actual sales prices but it is a measure of what the market is 'currently doing' or what the going price is per door.

@Ariel Vincent Some cities and states do have laws and ordinances that make some forms of airBNB usage illegal. Here you have a City going after landlord for $1.2million.

City apparently feeling unheard when landlord and airBNB appear to be dismissive about rental ordinances.

http://nypost.com/2017/05/14/city-smacks-landlord-...

Here you have landlord suing tenant for $300,000 for illegally renting unit without consent and city apparently fining landlord $60,000 for the violation. In this case an eviction alone doesn't cure the expense.

http://www.nydailynews.com/new-york/manhattan/midt...

@Cody L. You seem to be ignoring a single fact... if the city or state says, "it is illegal to rent a room for a certain amount of days or operate a hotel without a license", and tenant ignores that, knowingly or unknowingly, a violation occurred. It wasn't a suggestion by the city or state but a rule or law. The landlord unfortunately is fined who in turn goes after tenant, airBNB or both based on specifics of case. Sometimes the guilty party is the landlord using the airBNB service, sometimes the tenant without the landlords consent. In this case you have a landlord with a large network of units, 50,000+, who is the forced to terminate numerous leases because after complaining to airBNB several times, they ignored the warnings, facilitated the illegal transactions, and profited from it. Its not just an advertising service. They are in business with the illegal host and offer a flaky insurance policy of sorts, that doesn't always deal with the nature of some of the crimes that result from the service in some cases. This is a serious complaint: 

http://www.businessinsider.com/aimco-sues-airbnb-f...

@Kevin Coggins lol... actually it seems like they have a problem with (despite numerous warnings) airBNB renting or enabling the rental of their properties without their consent. They also have an issue with tenants they know nothing about, creating what apparently has been a pattern of disturbances that they do not experience with the tenants they  actually had a formal lease contract with.

@Kevin Coggins It can be but also doesn't have to be. If the city or town says it is a criminal or fineable offense to operate an unlicensed hotel then that is what it is. 

What usually happens is that the landlord is getting stuck with all these fines by city for tenant violations it knew nothing about but is liable for. Some forms of negligence by the landlords tenant that results in injury to others in the community can get you in court.

In business though, the case doesn't have to be criminal to result in monetary liabilities. A party can allege economic harm or injury due to your actions or inaction and can civilly extinguish your assets.