What the Multi-Billion Dollar Sharing Economy Means for Real Estate Investors

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Greetings to the BiggerPockets community! This post will be the first of a series on the sharing economy.

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!

Airbnb currently has 2 million listings worldwide. Starwood-Marriot, the largest hotel chain in the world, currently has 1.1 million rooms. That’s almost double the amount!

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?

airbnb_expensive_real_estate_markets

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.

Related: My Client Tripled His Income Using Airbnb: Here’s What He Should Know About Taxes

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.

airbnb-tax-impact

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.

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

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!

About Author

Glenn Carter

Glenn is a real estate investor and writer based in Montreal, Canada, who is the author of Secrets of the Sharing Economy. Glenn's passion is to teach people how to make money in the sharing economy through his website The Casual Capitalist. Special thanks to Stephen Cook for his outstanding contribution to the Casual Capitalist Community.

20 Comments

    • Glenn Carter

      Hey Andrew, I love those kinds of stories. It’s such a flexible option. I found that my primary residence (condo) in Montreal was so popular on Airbnb that I made a deal with a friend who lived down the road to stay with him some night and we split the income, we made a killing. HOUSE HACKING!!!

    • Glenn Carter

      Hey Brock, I hope so but so far municipal and state/provincial governments aren’t taking it on as they should from a regulatory standpoint. Edmonton here is Canada is a great example of a municipality who has really taken on the issue of the sharing economy, but these examples are few and far between. The Ontario government is now partnering with Airbnb, but only to help ensure Airbnb hosts pay taxes. Seems like misplaced attention. Anyway, I hope you’re right 🙂

      • Brock Adams

        Agree Glenn. I think the folks in the U.S. care less for government involvement unless they feel something infringes on their personal property rights. The recession has created the shared economy. Many are discovery alternative revenue streams for their families however homeowner’s association in SC, GA, and FL are developing some strict laws and restrictions against individual property owners. These HO association can be an investors nightmare. Give me a backed up toilet any day:)

        • Glenn Carter

          Totally agree, government intervention should be minimal except to ensure common sense safety frameworks are implemented. Also agree with your HOA statement. I have a condo in Montreal where they banned short-term rentals. I can see both sides of the coin, my next door neighbor doesn’t want an army of partyers going through my place on a regular basis. But I also have the right to do certain things with my own property. There is a happy medium somewhere, this isn’t all or nothing. An interesting proposal I’ve seen make by Tim Hudak, an Ontario politician, is to allow short terms rentals for a certain amount of days in the year. Not sure if this would satisfy the average real estate investor. It’s a start.

  1. Sachin Acharya

    Great article!

    Talking about government regulations, here in Dubai, airbnb is technically illegal. Let me explain. There are new laws in place that put restrictions on individuals offering short term rentals. You need to have a license which is only granted if you have more than x number of properties. I’m not sure what the exact number is but not less than 40.

    Time to move to US or Canada I guess 😉

    • Glenn Carter

      Yes Sachin! We are always beholden to our local governments. Some are more favourable to sharing economy than others. In Montreal for instance, technically Airbnb hosts have to register with the city as a hotel, and pay a tax. Similarly with Uber, Montreal in 2015 confiscated over 400 Uber vehicles as it is technically not allowed here yet. Uber is winning that PR battle though as they are paying all of the impound fees for drivers, legal fees, and even renting them a vehicle while their car is impounded so they can keep driving for Uber.

    • Glenn Carter

      You are not alone! Welcome to the party, let me know how it works out for you. The best way to test the sharing economy waters is to become a user first. Then you can discuss with sellers what works and what doesn’t in your specific jurisdiction.

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