The Upsides & Downsides of Airbnb: A Landlord’s Perspective

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I recently managed to take a nice, relaxing vacation. Yep, I left everything behind for a few weeks and got away. That is why I have not been posting here for the past few weeks. It is great to get away from the routine for a while. Seeing and experiencing new and different things can get you thinking a bit differently. While on vacation, one of the new things I experienced was Airbnb, and it got me thinking.

For those of you who have never heard of this website/service, it is basically an online exchange where property holders (hosts) and travelers (guests) come together to offer and reserve places to stay. These places can be a single room or an exclusive resort. The length of stay can vary from one day to several weeks. It really is a very interesting operation made possible by the internet.

As a landlord, I was really curious about what the Airbnb experience would be like. After all, offering a place on Airbnb.com is not too far off from what I do, as the hosts on Airbnb are essentially landlords offering shorter term rentals.

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The Airbnb Experience

First, Airbnb is a great service. I think back to not too long ago and remember how different and difficult it was just to find a nice hotel to stay at while traveling, let alone a private rental. Now, no matter where I was looking to stay, there were a variety of places to choose from. Some were very expensive, others were cheap. Some were centrally located, while others were off the beaten path. Some had amenities like washers and dryers, others did not. There were a whole host of options that you could choose from. The variety was simply amazing, and it was at times hard to actually whittle down a choice.

Related: AirBnB vs. Traditional Rental Income: A Creative Way for Investors to Cash Flow in Expensive Cities

Second, ratings are everything in this virtual marketplace. Ratings, which are made for both hosts and guests, were one of the things that really helped in my decision-making process. This ratings system helps to eliminate some of the risk for both host and guest. Think about it: As a guest/tenant, you do not want your vacation ruined due to a poor location, poor service or cancelled reservation. So, after narrowing down some locations, I searched for hosts with excellent ratings from other guests. Were the accommodations what the host said they were? Were the pictures of the property accurate? Were the hosts responsive to guests? Were cancellations frequent? These were all qualities I looked for.

On the flip side, our hosts had to make a decision about us. Since I had never used the site before, I had no ratings. However, you can write a small narrative to your host about yourself and your plans. Thus, in my request I explained to the host that I was a landlord who understood the value of taking care of other people’s property. This seemed to help, and my requests were accepted. All I can say about this rating system is that I wish we had something similar for landlords and tenants. It might get rid of a few shady landlords and make some tenants think twice before doing some of the things they do.

In all, I had a very good experience with Airbnb, and as I said, I began to wonder about it. Could I do this with some of my properties? At first glance, it seems like it would be very simple. I advertise on the web, then sit back and wait for the guests to book, arrive and leave — and then I cash the check. Sounds good, but I bet it is not quite that easy. Here is why.

A Few Downsides

I think some locations may be better served by this service than others. I could try it here in Memphis, TN, but perhaps I would have much more success in more sought after tourist locations, say Manhattan, Paris, Orlando or Vail. How long would I wait for a guest? How often would my place be rented? How do I calculate income from this model? These are questions to which I have very few answers.

I also think a host has a bit more risk. As a guest, I was not really checked out at all. I had never used the service so I had no rating. All the host had was my contact info and my request. Without a review, it all comes down to just the word of the guest. Security deposits are charged, but I could really do a lot of damage and be gone in a short amount of time if I wanted to.

A host also generally has to provide more services. Furnishings, towels, cookware, appliances, pillows, sheets and more are all things a host may want to consider supplying. Plus, you need to check people in, check people out, and get the place ready for the next guest. And, if any little thing goes wrong, who is the guest going to call? They will call you, the host. This potentially means that you are on call 24 hours a day, just like a hotel desk clerk. During a busy season, this seems like it could all get very exhausting.

Related: Landlords Beware: The Potential Problem With Airbnb No One Talks About

To me, it seems that the key to successfully hosting on Airbnb is to hire services to help you and to also look for additional profit centers, just like any other landlord or business owner. For example, you can hire cleaning staff to clean and get the property “rent ready.” And you can also hire someone to get keys to guests and be on call. Further, you can stock the fridge with supplies just like hotels do with mini-bars or even provide other services such as bike or ski rentals.

Conclusion

In the end, operating on Airbnb is likely just like any other business endeavor. It is all about the numbers and the bottom line. What are your income and expenses going to be? Figuring out your income when just starting out, however, might be a bit difficult. But with a little experience and the right properties, being a host could be a profitable, fun and interesting endeavor. I might just look into it more.

What do you think? Would you be an Airbnb landlord? Anyone out there an Airbnb landlord?

Share your stories, good and bad, along with how you run your business with your comments.

About Author

Kevin Perk

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

12 Comments

  1. Jilly Whiting

    Thanks for the great write-up. We have been landlords for 25+ years. And we have a little guest house on our own property that we’ve “rented” out to travelers through Couchsurfing.org and WarmShowers.com. Both sites are FREE to the travelers (no reciprocation expected). We have taken in sooo many awesome people and also stayed and some pretty fantastic places (for FREE) and met some phenomenal people who have hosted us. Just this past March I really learned about AirBNB and decided to offer up our guest house. WOW! Who knew!!! I can’t believe how many people want to come and stay for a night or two. We have a traveler coming from Spain in a week for a week. Since mid April when our place went up on the site, we’ve had 7 sets of travelers come through (it is now just shy of 2 months that we’ve been listed on AirBNB as I type this.). ALL were wonderful and extremely respectful! It has been fun having some $$$ coming in from a place we’ve normally offered at no cost! We still open the place to Couchsurfing and WarmShowers travelers. All these sites have enriched our life tremendously. We have friends who each owned a home. When they became a couple, they sold their respective houses and rented a great house in downtown Phoenix. We stayed with them as Couchsurfers. They are the ones who really helped AirBNB “click” in my mindset. They now bring in enough monthly through AirBNB to pay their rent and in the summers they sublet their rented house and go travel the world, staying with some of the same people who have stayed with them. It is all so rewarding. I can’t stop talking about all of this!

    And – what a coincidence – as I type this (I am NOT making this up) , I just got ANOTHER request come through from AirBNB to rent the place tomorrow night! Mind-boggling. Gotta go respond…..

    Again, thanks for your article!

  2. Cesar De La Cruz

    My first investment was acquiring some properties in nyc so that I can Airbnb them and I’ve never looked back. As with any new business you make mistakes and mess up n the beginning, but now that I’ve got my systems in plave, it’s pretty much a passive income stream for me by now.

  3. Stewart Olney

    I have rented three of my bedrooms in my own house on AirBNB and it has been an awesome experience. We bring in $1500 a month usually (Rents in my area are 1000 – 1200). We usually get people traveling in for an event if they stay short term. Most of the time, people are looking for short term housing for a few weeks to a couple of months, and they are usually professionals who would make great tenants! We have been doing this for a year, and have not had any huge problems yet! (Just some false complaints of bedbugs, and some unsatisfied guests).

    If you have a rental near a hospital, college/university, tourist area, or large corporation with a large transient population that needs short term housing, consider furnishing and renting it out on Airbnb.

  4. ALLAN SMITH

    Airbnb has been culturally and financially rewarding for me. I have leases on two of the rooms in my house to friends, and the 4th bedroom is on Airbnb. I’ve had the opportunity to spend time with people from all over the world. And, of course, it’s a way-to-easy way to make money on a room that wasn’t doing anything before.

    Short-term rentals bring in bursts of larger chunks of cash, but they are very high maintenance. This article shed a lot of light on the situation for me:

    http://affordanything.com/2014/05/27/the-airbnb-experiment-how-much-did-i-make/

    The owner/landlord ended with a net profit of $580 greater than what they would have made with their $1,100/mo rental house. However, it was a LOT more work. Not passive income.

  5. James Bynum

    As far as non owner occupied, has anyone looked into getting or have installed “smart locks” on their doors so that all you need is a smartphone to access the property? I guess you still would have to have a backup plan in case the battery dies or whatever but you can quickly allow access to a certain person(s) for a set amount of time, and then take them off the list. When they check out.

    • Desiree M.

      Our house is pretty smart. We have a digital lock, 2 cameras, a Nest, and 2 scheduled Roombas.

      In the next few months the revenue from our rentals will buy us a smart phone lock. But the 3 year old digital lock we have is still working great, for only $50. http://smile.amazon.com/LAYKOR-Keyless-Electronic-Digital-YL-99/dp/B000VYO7Y0/ref=sr_1_3

      For the amount of travel and turnover we needed an easier than key solution. Digital locks are the best thing in the world because we can give the maid one combination to get in and the short term guests can use 4 numbers from their phone number so it’s easy for them to remember their personal combo to get into the house. And when they check out, it’s easy to deactivate that code.

      That battery lasted about 1 year and it’s easy to tell when the battery has a few months left. But we do have a hide a key in a combo box that will unlock another door in the house. That backup key has never been used, but it’s always there just in case!

      • James Bynum

        The smart locks aren’t that much more expensive, although the more pricier ones offer more features like the August lock. For one it fits over your current deadbolt so there is nothing to really change out, and it will even send you notifications as to which person you have given access to enters and leaves your house which is pretty cool. They range from under $200 to $300. The Kevo Kwikset and the August smartlock are I think the most popular ones out there. You can get more info by going to either: http://www.kwikset.com/kevo/ or http://www.august.com/

  6. Chris Newman

    You probably don’t want to do Airbnb in the People’s Republic of San Francisco, where small homes sell for $1 million and a one bedroom apartment rents for $3,000/month.

    The latest news is that the knee-jerk anti-capitalist leadership is claiming that the impact of 5,000 Airbnb units, in a population of 837,000, is so egregious that it’s causing problems by making housing available to wealthy tourists, rather than locals who can’t pay Airbnb rates.

    One Supervisor, and many others, want to limit Airbnb stays to just 75 days per year. The Mayor thinks that a 120 day limit is more reasonable. Neither offers property owners, who have to pay for these high-priced residences, any ideas on what they’re supposed to do with their property for the other 8 to 10 months of the year. Nor, explains how housing that’s available only part time will fix the city’s housing issues. But, it sure sends a message to the voters of “I’m doing something!”

    http://www.contracostatimes.com/business/ci_28280547/san-francisco-takes-another-run-at-regulating-airbnb

    Sigh… Makes me glad that I live in Snohomish county, WA, north of Seattle, where the REI opportunities are great and the county council only kowtows to Boeing and the Master Builders.

  7. Desiree M.

    Airbnb is great for house hacking – depending on location, room amenities, and the host.

    It’s not for everyone or every location, I agree. But it does work. I have 2 rooms in my 3/3 house on Airbnb going for top dollar because we made everything work for us.

    Location – This upgraded single family home located is within walking distance to downtown, Caltrain, Google bus, and LinkedIn. And within a few miles of NASA, Lockheed Martin, and many Apple sites. So we live in geek central. I love it!

    Room Amenities – We offer the fully furnished room of course, but also offer a mini fridge, microwave, tv, and high speed wifi. As well as full house access, laundry stuff, and 2 awesome hosts.

    The Host – We are 20 somethings that like camping, travel, tech, online marketing, cars, and beer. With this type of profile we cover about all of the Silicon Valleys’ common interests. If the guests feel like they can connect with the host and will pay more for the extra amenities, they will!

    Given all these things, we optimize our listing and end up getting 20 and 30 somethings staying with us. About 90% of the time we get interns that stay for 3 months or the occasional 1-2 week traveler to fill in vacancies. And we’ve converted 3 people off of Airbnb for month-to-month rentals.

    As previous people said, the location is huge because getting $2k+ a room is insane in many places. And the cleanup is usually a pain. But having people stay 3 months at a time makes cleanup 4 times a year easier to swallow. I have also tried the 2 other short term home vacation sites and Airbnb is by far safer for the host and is really pushing to our demographic target market. So it all works for what we wanted to do.

  8. Christopher Tredennick

    We have been renting our home on AirBnb for about 8 months now. It’s a great way to make extra cash while we are out of town. You will want a “team” to help you when things happen.
    Also, you don’t have to be in a “big” city to reap benefits. You’d be surprised how many people travel to the small towns and want a comfortable place to stay. My recommendation: figure out your target market and style your home for them. For example, we cater to small families (4-6 ppl) with and without pets.

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