Using Airbnb to make money

My friend and I are putting money together to lease a beautiful pad that would be in the hottest area with all the nightlife and action. We are doing this for the sole purpose of putting it up on airbnb so that we can charge upwards of $150-250/night (rent on the 2bd apartment itself is $2800).

Inspiration for this idea came from reading on article online about how people worldwide are raking it in by turning their couches or unused bedrooms into hotel rooms for paying customers.

Have any of you tried this route? What are your thoughts? We are looking at 2 places right now.
 

Pacesetter20

Kingfisher
Gold Member
Good luck, just make sure you have extra money to cover it in case things don't go as planned.

Also, review the lease, so that it doesn't prevent such activities.
 

Rah

Woodpecker
Interesting, let us know how it goes. On a nightly basis I know you could charge 2-3x a monthly rate, but you have constant vacancy risk and constant tenant turnover overhead (cleaning up after the last tenant, etc). I wonder how much more/less profitable it is than a normal long term lease. With the right location maybe you come out ahead. Good luck.
 

speakeasy

Peacock
Gold Member
I think something like this could possibly work. My main concern would be making sure that your landlord would approve of it. I know that neighbors would probably hate the idea of seeing strangers constantly coming and going and may complain, especially if it's a building with secured access. If they do any serious damage to the unit like start a fire or something, the landlord is coming after you. I wonder if there is any insurance you can buy that would cover such a mishap.

This is an interesting idea and something I may even have to consider trying myself. If you could get several of these going at once, it could be enough passive income to not have to work.

Some things to keep in mind, it must be in a high demand area where you will have few vacancies. You will want to have great decor and amenities there to make the place very attractive visually so you stand out.

Edit - -

What do you guys think would be more profitable? A studio, one bedroom or two bedroom?

And some other questions, if you are out of town, how would the renters get the keys? Is there a convenient way of doing that without having to drive out every few days? What about cleanup and washing sheets? Do you do it yourself or hire someone? Insurance if one of them forgets to lock the door and all your shit is stolen?
 

ManAbout

Pelican
GyopoPlayboy said:
My friend and I are putting money together to lease a beautiful pad that would be in the hottest area with all the nightlife and action. We are doing this for the sole purpose of putting it up on airbnb so that we can charge upwards of $150-250/night (rent on the 2bd apartment itself is $2800).

Inspiration for this idea came from reading on article online about how people worldwide are raking it in by turning their couches or unused bedrooms into hotel rooms for paying customers.

Have any of you tried this route? What are your thoughts? We are looking at 2 places right now.
What are the hotel occupancy rates in your city? Does the place come furnished? Or do you have the buy all the furniture yourself? You are going to have to lease it for 15 days a months at your average $200 a night just to break even. How much commission does AirBnB take? You are going to have to account for the cost of a cleaning service and any damages to the apartment and/or furniture.

All in all, it seems like a lot of work. If you get 80% occupancy for example, which is quite optimistic, you might walk away with $1000 to $1500 a month.
 
These are all very relevant questions. Here are the ones I have answers to:

Does the lease prevent such activities? Almost all leases will at least try to discourage such activity. The only way around this problem is to own the property free and clear. However, this is NOT the case for us as we will be leasing the property, then turning around and renting it out through Airbnb for profit. The language in the lease says that anybody who will be staying there more than 30 days consecutively must have his/her name written down as a lessee. It also prevents subletting the property, although this clause was left up to discretion of the lessor (so, negotiable). But what the lease usually does NOT explicitly cover is the renting of individual rooms or a spare couch. Tiny details, I know. But from a legal angle, it's important.

Would the landlord approve of it? From my research, I find that although most will not, some look the other way as long as it doesn't bother other residents within the complex or interrupt the normal flow of things. Those who don't will first ask the lessee to cease such activities and/or evict them. There may be a few (we haven't found any) who may press for legal action, but the language in the lease makes their cases weak, which is why instead of going through the hassles of legal action, they prefer to ask their lessees to stop or evict them. Evictions can be fought in court, of course, but the lessees also know that they don't have much of a case.

What would you do if your guests damage property? After a particularly embarrassing slew of accidents involving the burglary and damage of rooms back in 2009, Airbnb came out with a $1M guarantee for all host properties (per host), working into their payments a financial system of checks and balances to hold guests more responsible for their actions. So there are two systems at work here: To Airbnb, both the guest and Airbnb will be held responsible for damages, while to the landlord of the property, it will be the lessee (us). As long as the first system works itself out, the second will not need to be implemented. This is a great question, and one that we are currently following up with airbnb's customer service.

Do you have 1 or several properties? Which is more profitable? Since there are a lot of unknowns going into this venture, we thought it would be wiser to start with one to see how it goes. What we learn from this experience will affect our next step.

Is it in a high-demand area? Based on our research, the only way to make this venture somewhat profitable is to target only the most high-demand areas. PM me if you'd like more details, but suffice it to say that this plan would not work if your property is listed in Omaha, Nebraska.

What about the logistics? Cleaning? Getting the keys to the guests? Automating the process? The logistics will and should be handled by either myself or my partner at least for our first property.

What property type would be most profitable? PM me for more details on this subject, as it breaks down quite differently based on who you are catering to, but overall, the most profitable seems to be studios/1br's for couples traveling together.


What is the hotel occupancy rate in your city?
Hotel occupancy rate was and is one of the most important metrics we used when looking for the ideal location. However, it varies based on the area, especially in cities that are big. We narrowed down our list to tourist-rich spots where hotel/motel and even couchsurfing occupancy rates were high enough that we could turn a profit.

Your questions are all good. If there's anybody currently trying this out, I'd like to hear how it's been going for you.
 

speakeasy

Peacock
Gold Member
How do you find hotel occupancy statistics?

Will you be upfront with the landlord about your intentions? Or will you take the risk and not tell them?
 

playa_with_a_passport

Kingfisher
Gold Member
Imho, airbnb like small storefronts only make sense if you own the underlaying real estate.

Been doing airbnb for about a year now in a 4 family building(2 apt airbnb and the other ones long term tenants) I own in a shitty part of Brooklyn(Bed Sty/ ENY border). New York real state is its own little universe so unless you doing this in New York Shitty take everything I say with a grain of salt.

When I first started in January I was renting them on airbnb for $60 a night. I wasn't hoping much success because like I wrote before the area isn't the best and there aren't any amenities nearby that make the SWPL crowd go nuts. I am near the subway about 20 minutes ride to lower Manhattan.

To my surprise within the next couple of days I had the two apartments booked 3 months solid. This reminded me of something I read in a RE investing book "if you never have any vacancies that means your price is too low" I have slowly bumped the price to the lower $90's(sleeps 4) and I am still getting above 60% occupancy rate. Trust me you don't want 100% occupancy. If you can do the math I am clearing a decent amount a month but its not without downfalls.

NYC along with a lot of other cities have laws that explicitly forbid short term rentals(anything less than 30 days) so one call from your jealous neighbor and your are done.

Airbnb sends you a 1099 at the end of the year that gets added to your taxable income so make sure you account for that.

Your residential HOI might deny your claim if shit hits the fan at your spot and they determined you were running an illegal hotel.

If your spot is close to 100% occupied that means that its too cheap. If you are in a residential block your neighbors are going to figured out what's going on because of the increase traffic and new faces and your chances increases that something is going to go wrong.

Your book keeping and accounting Game has to be tight because it gets mind numbling keeping track of all those receipts and separating personal use vs rental use.

I know Mixx wrote a data sheet about this but if you intend on making money on this you have to be professional. You absolutely can't Game any of your females guest( 99% of people contacting me has been females) because just one review that says that you were "creepy" or "thristy" and you just fucked your money up.
 

speakeasy

Peacock
Gold Member
I'm doing a bit more investigating into this. I think PWAP is right. Unless you own the property, it may not fly as a money-generating operation, and even then, you probably won't be making much.

As I'm finding out, most cities make it illegal for a tenant to rent out a property. You are going to be hard-pressed to find a landlord who will let you do it. Many landlords would be okay with it if it's just an every now and then sort of thing, like hosting on couchsurfing. But if every week there's a new stream of people coming in, they WILL find out. And there WILL be complaints from other tenants.

Read this article about a person who was doing exactly what you are planning. He ended up getting evicted and a cease and desist notice from the court.

http://www.fastcompany.com/1839465/how-airbnb-earned-me-20000-and-restraining-order-my-landlord

http://www.fastcompany.com/1840715/my-airbnb-biz-got-me-evicted-heres-what-i-learned

Read the comments as well as it sheds some light on some of the red tape you'd be facing:

What Rod said and then some. I'm also a landlord in addition to being an Airbnb user. I like the service when I travel. I've even acted as a guest host for a friend who owns and rents out her guest house in New Orleans on Airbnb. Landlord's insurance and homeowners insurance exist to keep tenants safe, to compensate tenants and guests in case of accidents and injury (like if the roof caves in or something), and to protect a property owner from things like personal injury lawsuits as well as financial damage to a property caused by accidents, tenant or visitor damages, etc. (oops, sorry I burned your kitchen down making coffee for my Aibnb Guests!) Insurance companies are VERY clear on what constitutes a tenant (and even a "guest" or "visitor"), and what is and is not covered, and what activities a tenant can and can not conduct on a property in order for the landlord and property to be covered by insurance. Many commercial activities a tenant does on a property are not covererd and most leases have a section on this.

According to my own insurance company (I had thought about renting my own places out for Airbnb) neither landlord's nor homeowner's insurance covers bed and breakfasts (which is basically what Airbnb is), or a tenant subleasing out a property (why so many landlord's require any roommates of lease holder to also be on the lease).

As a user of Airbnb I also had concerns last year about my personal property. I was staying in a great place in SF, but there were no locks on the bedroom doors. I didn't even think about it, but my traveling companion did. His thoughts? Say another guest walks off with my Ipad, Laptop, and jewelry or something. Is the Air b n B Host responsible for negligence? How would I even make an insurance claim and police report?

I brought up this question to Airbnb last year after there was a big hooey in one of their rentals when an Airbnber totally trashed an apartment in SF and it made news headlines. I also raised the question if a "guest" is injured on an Airbnb property, who is responsible? Is a landlord vulnerable to lawsuits because of a tenant renting the property on Airbnb? What sorts of insurance do home owners and renters who are renting out for Airbnb need to cover their butts? My answer, sadly, from Airbnb, was what I can only describe as "Thank you for your concern" corporate PR spin - they completely avoided the question.

Like I said, I do like airbnb, and realize everything in life has risks, but as a landlord, no way in heck I'd be happy if a tenant was renting my property out on Airbnb. It's just too risky. I'd evict them asap. As for Airbnb, It will probably take a lawsuit for them to get their heads out of the sand and deal with this matter with their hosts and guests. It's a great service, but right now is pretty much just an underground B & B service that in many cases and cities is illegal due to lack of property business licenses, permits, and yes, insurance. And, as we see in this article, renters acting as Airbnb hosts are also taking a big risk with their landlords. I expect we'll see more Airbnb hosts get called out on this.
Landlord here: By making AirBnb a full-time business out of your appartment, you crossed the line.

For a landlord, there are insurance considerations, cost considerations (water/power/etc.), and the fact that a continuous stream of guests coming and going can be disruptive to other tenants.

If it were an occasional thing, you could let it slide. If it were a condo that you owned, you could work it out with the condo board.

But re-purposing your rented apartment as a full time hotel is abuse, just the same as it would be if you opened a cafe or concert venue in the same space.
A landlord insures the building that they own for specific kinds of usage - i.e.: tenants renting & living there, doing normal tenant things. Insurance is underwritten based on a common understanding of what that implies in terms of risk.

The risk profile for insuring a hotel is going to be considerably different than that of insuring a place that someone lives.

Its like car insurance: you have different insurance and different costs depending on what you're doing with your car - whether its driving too and from work every day, using it commercially to make deliveries, or keeping it for "pleasure" - evening and weekend use. Each has different coverage and different rates. Here, you can drive your "pleasure" insured vehicle to work 4 times a month (or something). If you get in an accident on your way to work, the insurance co will investigate and find out how often you've been driving to work. If you've been doing so every day, in a "pleasure" insured vehicle that doesn't cover work commuting, they will reject your claim, and you're screwed.

What that means for real estate is that if an apartment used as a full time AirBnB suite caught on fire and burnt down the building, sorting out the insurance would be a mess - i.e.: the landlord would make the initial claim, the insurance co would find out that the unit in question was being used for a purpose not covered by the policy (commercial hotel), and deny it. The landlord would then probably appeal with the insurance co and simultaneously sue the tenant. The insurance co would probably defensively sue the tenant as well, in case the courts stuck them with the tab. Everyone would be trying to land the liability on some one else, and the courts would sort it out over a very long time.

Same story if someone started a bakery in their apartment, or a cafe, or basically anything other than normal living.
I thought the idea sounded interesting at first, but I see that from a landlord's perspective, this isn't going to fly for insurance purposes. Maybe the alternative is to buy a condo. But even then, many home owners associations are going to be against it. I imagine a constant stream of foreigners coming in and out is going to depress housing values. It might help if it's sort of a detached condo, like a townhouse. If you can find one in a city where real estate is cheap with low property taxes but demand for vacation rentals is high + have an excellent local and attractive pad. And then if you did that, would you still make much of a profit when factoring in mortgage, insurance, property taxes?
 
I'm not well versed in this realm, but I did hear some news stories about this being a big issue in San Francisco with people leasing apartment only to rent them out for profit on airbnb. There were a lot of situations where neighbors complained to the owners, and guest renters caused damage to the apartments, and lots of conflicts between landlords and the people on the lease renting out on airbnb. I think they are trying to pass some law to forbid in in SF.
 

playa_with_a_passport

Kingfisher
Gold Member
I know quite a few acquaintances who are doing it in their rental two bedrooms. AirBNB is not so good as a money making scheme for renters but its an excellent way of subsidising a 2 or 3 bedroom apartment without having a fulltime roommate. Is all about not being greedy and keeping a low profile to avoid problems. If you keep the minimum stay at 7 days and you set up your pricing so that you have a maximum of 2 or maybe 3 guest a month, you shouldn't have any problems and most of your rent should be covered. Also, set up a zero tolerance rules regarding visitors, smoking, quiet hours and disruptive behavior. They violate any of your rules, just go "El Mech" on them and throw their shit out of the window.

As for insurance, anti short term rental laws and liability issues, they only really apply to people who are renting entire apartments. If you are renting rooms in an apartment you are living in, You have plausible deniability.As far as you are concerned they are roommates not "transient guest." After all there are no laws that state you can't have more than one roommate a month. Just be very vague about your apt exact location on the airbnb ad.

I am actually going through the hassle of setting up a bona fide Bed and Breakfast. As long as I make enough to pay my mortgage and living expenses I am good. I do not want permanent tenants. NYC is extremely tenant friendly and its not uncommon to take up to a year to evict a non paying tenant from an apartment and during that whole time you are required to maintain their apt and provide them with heat, hot water and a working lock.
 

username

Pelican
Gold Member
Idea I might do:
-Get an apartment in a foreign country (Brazil, Colombia, Argentina, etc.) that is popular with tourist in a nice part of the city, good size apartment, and that isn't too expensive.
-Advertise the rental as being super safe, English speaking, secure, and trustworthy to other gringos.
-Assume $1,000/month expense for the apartment; assume 70% occupancy (21 days) at $75/night which would be $1,575/month in income.

So it could be a good way to cover some of the expenses, allow you to get a nice apartment in a good neighborhood, and force you to be social.

If you could double up on the rents, like have two rooms for rent, then you could be bring in enough money, $3k, to live off of comfortably. Hell, even if rent was only $50 a night you would still be doing pretty well with 2 rooms.
 

speakeasy

Peacock
Gold Member
playa_with_a_passport said:
As for insurance, anti short term rental laws and liability issues, they only really apply to people who are renting entire apartments. If you are renting rooms in an apartment you are living in, You have plausible deniability.As far as you are concerned they are roommates not "transient guest." After all there are no laws that state you can't have more than one roommate a month.
Aren't roommates required to be named on the lease?
 
GyopoPlayboy said:
My friend and I are putting money together to lease a beautiful pad that would be in the hottest area with all the nightlife and action. We are doing this for the sole purpose of putting it up on airbnb so that we can charge upwards of $150-250/night (rent on the 2bd apartment itself is $2800).

Inspiration for this idea came from reading on article online about how people worldwide are raking it in by turning their couches or unused bedrooms into hotel rooms for paying customers.

Have any of you tried this route? What are your thoughts? We are looking at 2 places right now.
Yeah, it's not a bad idea. But I still think that the best bet for supporting your playboy lifestyle would be making money online with almost zero cost.
 

pitt

Hummingbird
Gold Member
playa_with_a_passport said:
I know quite a few acquaintances who are doing it in their rental two bedrooms. AirBNB is not so good as a money making scheme for renters but its an excellent way of subsidising a 2 or 3 bedroom apartment without having a fulltime roommate. Is all about not being greedy and keeping a low profile to avoid problems. If you keep the minimum stay at 7 days and you set up your pricing so that you have a maximum of 2 or maybe 3 guest a month, you shouldn't have any problems and most of your rent should be covered. Also, set up a zero tolerance rules regarding visitors, smoking, quiet hours and disruptive behavior. They violate any of your rules, just go "El Mech" on them and throw their shit out of the window.

As for insurance, anti short term rental laws and liability issues, they only really apply to people who are renting entire apartments. If you are renting rooms in an apartment you are living in, You have plausible deniability.As far as you are concerned they are roommates not "transient guest." After all there are no laws that state you can't have more than one roommate a month. Just be very vague about your apt exact location on the airbnb ad.

I am actually going through the hassle of setting up a bona fide Bed and Breakfast. As long as I make enough to pay my mortgage and living expenses I am good. I do not want permanent tenants. NYC is extremely tenant friendly and its not uncommon to take up to a year to evict a non paying tenant from an apartment and during that whole time you are required to maintain their apt and provide them with heat, hot water and a working lock.
Do you mind if you tell us how are you setting up your bed and breakfast? Did you buy a place? Are you renting it?

I am also looking to get another place for my airbnb operations, OP let us know how this goes.
 

pitt

Hummingbird
Gold Member
Can anyone think of a good excuse to tell landlords why i may have lots of guests coming to my house?

I am looking to rent a new place to put on airbnb. I want to tell my landlord that i have lots of friends around the world and i may have lots of people coming to see me. However, i want to come up with something better. Like tell him I write for a blog and we do lots of meet up sessions in order to expand our ideas. Anybody have any other ideas?
 
I have thought of this. As I have a house with 4 rooms all for myself.

BUT, no one here has thought of the cleaning (housekeeping). Everytime a guest leaves you have to clean up...
 
This could definitely could be done in Budapest. Actually, it already is. The rents are so low here, even for a nice pad in the city center. Westerners come here for a couple weeks or a month and they don't have a clue about the local rental market. They are paying 2-3 times the monthly rate one would pay for an annual lease and think they are getting a bargain.
 
Top