In 2008, a couple of roommates who couldn’t afford rent in San Francisco started inviting tourists to sleep on air mattresses in their living room, and serving them breakfast in the morning X. Little did they know, they were about to flip the short-term lodging industry on its head. Less than 10 years later, Airbnb, as their company was aptly named, had 4 million listings in 191 countries worldwide—a figure higher than the number of listings held by the top five hotel brands combined X. More and more property owners and real estate investors are converting their rental units into Airbnb. If you’re considering doing the same, this article is worth the read.
With a decade having passed since the inception of Airbnb, there are now many data points to help one weigh the pros and cons.
For the purposes of comparing Airbnb to a rental unit as an investment, a pro that jumps out is more revenue! It is reported that when in a good location, well furnished, well photographed, and attended to with great care and customer service, Airbnb units are raking in revenue that is three times that of a comparable unfurnished long-term rental X. Moreover, Airbnb enables its users to post a listing—include written descriptions, photographs with captions, and a user profile where potential guests can get to know a bit about the hosts—at no costs X!
Another advantage of Airbnb over the conventional rental unit is flexibility. With Airbnb, the property owner can either lower or raise the price an infinite amount of times in one year. This enables one to capitalize on holidays and events, much like hotels do. Conversely, once a lease agreement has been signed in long-term rentals, the rent can’t change X. When one is faced with an emergency, it is nice to have the option of raising the price.
Airbnb also offers the flexibility of using the space when you want or need it. While renters typically have access to the unit for the duration of the lease, which often range from a few months up to a year, Airbnb users typically use the space for only a few days at a time. If the property owner has friends or relatives who want to stay for a weekend, the space can be marked off the calendar for a few days, without disrupting the business X.
The benefits of serving as an Airbnb host also come at a cost. First, there is the modest 3% that the platform charges to keep them in operation X. Secondly, it’s estimated that a host may spend up to eight hours a week preparing and managing a property, on average. More specifically, rooms and houses must be swept, sheets and towels washed, windows cleaned, etc. Even if the owners aren’t doing the cleaning themselves, cleaning services can be expensive and they do add up X. There’ s a reason why hotels have entire staffs dedicated to this. With each guest turnover the cleaning cycle begins anew X. Thirdly, being an Airbnb host definitely makes filing taxes more complicated X.
Before pulling out the calculator to conduct a cost benefit analysis, one must first determine if this is even a legal option.
Many cities—including San Diego, San Francisco, and New York City—have, in the past made it illegal to rent out one’s home on Airbnb X. If it is an option though, it is one certainly worth considering. Although it is time consuming, when done correctly, the revenue can be three times greater, the marketing is free, and it can be more flexible than the rental unit.