Is AirBnB a Good Way to Rent Property?

Before I discuss if Is AirBnB a good way to rent property, let me welcome you back to the JustAskBenWhy blog in 2016. This article is my first in this calendar year. In fact, it’s been two or three weeks since I last published on this blog. I apologize for being somewhat lackluster in this respect, though I must say, in my defense, that it wasn’t entirely my fault…

To make a long story short, JustAskBenWhy website experienced a catastrophic failure in the early part of December. Hostmonster, which is owned by BlueHost, which was hosting my site at the time, had been giving me trouble for a few months prior. Every month I’d experience some down-time. As per their guidance, I had purchased upgrades to my hosting package in hopes of improving the situation, but continued to have problems.

Finally, in December, they had a serious crash in which they apparently lost a good portion of their network. My understanding is that this was a serious hardware failure, and it took several days for them to get back online.

Unfortunately for me, while the host recovered their infrastructure a few days later, the crash corrupted files on my site, which made it impossible to load. Furthermore, and this is the most outrageous part of all of this, while I was paying them for daily backups, those idiots were storing the backup files on a server which was on the same part of the grid as my website, and as a result, I not only lost the website, but all of the backup files for the site!

Time-travel 3 Months Back

Prior to purchasing the daily backup service, we had routinely backed up the site once per month. Unfortunately, the most recent version of the site that we had access to at this time was from 3 months prior, and when we finally get the site up on the internet, it was this version that we had to revert to.

As you can imagine, we had nothing but work to do to get caught up. We had done a lot of upgrades to JustAskBenWhy.com in the prior 3 months, including the entirey of the Mastery Circle platform. All of this had been lost in the crash…

Not that it’s an excuse not to write, but hopefully this gives you some perspective on what I’ve been dealing with. I’ve since moved the site over to GoDaddy and all I csan say is that so far so good – my site has never run this fast, and when I did encounter a problem, they were aces at helping us figure out the cause and the solution!

Finally, before I move onto today’s content, I feel obligated to forewarn you – if you have a website which facilitates any of your activities, I’d suggest you stay away from either HostMoster or BlueHost. Both platforms are atrocious, the service is slow, the employees are not very knowledgable, and there is no empathy shown to the client in times of trouble. I am not being paid anything to promote GoDaddy, but their talent and service are infinitely better than those other guys – period!

Is AirBnB a Good Way to Rent Property??

And now, since things are getting caught up (finally), and I can start thinking about writing again, I want to tell you briefly about an interesting situation involving AiBnB.

This is important in 2016 for several reasons. One – because AirBnB vacation rentals are becoming more and more commonplace. The platform has grown tremendously over the past few years, and I know many investors who lean heavily on it to conduct short-term vacation and business rental business in many markets.

But, there is an even more interesting angle on AirBnB, which I think is responsible for its tremendous growth. As far back as 2012 I remember article on CNBC.com relative to the discrepancy of cost of housing and incomes in America, leading to the entuallity that many people will be forced to share housing…

In 2016 this is now a very real reality. The median price of homes in America today hovers around $200,000, while median income is not quite $54,000, meaning that lots of families made less!

To cope, one of the avenues many are pursuing to cope with the expense of owning a home is moving-in together with other family members, such as parents living together with kids. However, for many the idea of buying a home and subletting one or more rooms has become a viable solution, and lots of these folks rely on AirBnB…

Case-Study

One of my Mastery Circle students did exactly this. His name is Joe, and he happens to be in one of the more attractive, economically-speaking, markets in the country. Naturally, this means that the price of housing is pretty up there.

Well – in 2015 Joe searched for a house-hack small multi-plex, but was unable to find anything suitable. So, he ended up buying a nice, newer construction, 4-bedroom house, with the intent of renting out 2 of the bedrooms. This works well for Joe and his wife, since they don’t have any kids living with them, and therefore having tenants in their space is not a huge issue.

Now, understand – the entire notion of Joe buying this house is underpinned by an ability to offset a portion of his debt service. It’s not that he totally can’t afford the house, because he can. But, he had options, and if it were not possible to pursue a rental strategy, I am not sure that Joe would have bought this house…

Prior to purchasing the home, Joe studied the HOA to make sure there was no prohibitive language, and there wasn’t!

Joe Used AirBnB for a Year

Joe and I spoke at some length as to which platform to market his rentals on, and he decided that AirBnB was best suited to his needs. He liked the short-term nature of it. He liked the higher quality of tenants, many of whom are professionals in transit, or vacationers – both classes have money for rent 🙂

Things went well for about a year, until…

Letter from Municipality

Things went well, until Joe received a letter from the town one day, which informed him that he was in violation of a statute by running an illegal Bed & Breakfast out of his home, and that a huge fine would be levied against him if he didn’t cease and desist immediately!

Joe contacted the authorities, and it turned out that the whole rigamarole began because someone complained about cars being parked in the street at his home. He tried to reason and find common ground with the city, who did not have clear regulations on the book as to precise definition of B&B vs. a rental, but eventually had to give-in.

Conclusion

There is a lot more to this story, and if you are one of my Mastery Circle members, more is coming – Joe will be my guest on the next Live Webinar! The details are very interesting indeed.

However, when I heard of this, I did a quick search. And, indeed, it appears that AirBnB is on the radar for somewhat facilitating “illegal hotel operations”. Here’s an article on CNBC.com.

Understand – many of these people are just folks like Joe trying to cope with high real estate prices. But, it could be, that they are all soon deemed on the wrong side of the law, and if you are one of them, or considering this business model, perhaps this is enough to give you a moment of pause!

What do you think, guys? Is the hospitality lobby going to put AirBnB out of business?

8 Comments

  • Curtis Smith Reply

    I empathize with the Joe’s out there! My read of this says Joe needed to have mowed the neighbors lawns for free.

    Every business should spend a quiet Saturday at a coffee shop with no one else, just to think about potential business risks, how to stay ahead of the competition, what new business ops are popping up?

    The neighbors getting mad was #1 on my 10 second pondering list of Vbro/AirBnB.

    We have a Vbro landlord in our neighborhood who would unknowingly (ya right) rent to flash mob party throwers. LOL after the 2nd mob party crashing our neighborhood there where more blue lights than … He’s still in business but no more parties.

    There are more than just this business model that heavily depends on “others”. IE Lonnie deals, renting or seller financing of mobile homes in parks, depends on good terms with the park manager (which can change on a dime), AirBnB depending on the good graces of the neighbors…

    What other businesses depend on a “fickle others”? This is an interesting question.

  • Al Reply

    Welcome back Ben.

    AirBnB is lobbying hard for cities to have host get licenses, pay the same taxes as hotel and be allowed to share their primary residences. This takes the wind out of the lobbyists arguments.

    Cities such as Sactamento, CA are updating their ordinances to make room for the sharing economy. I think AirBnB will survive just as eBay, Amazon, and many others have.

  • Kelly Reply

    I don’t think the hospitality lobby will put AirBnB out of business just like the taxi lobby won’t put uber out of business. Consumer demand is too strong. But I do think it is important to research, understand, and comply with rules as feasible. Certain cities have come to specific terms with AirBnB requiring landlords to be permitted (eg Portland). Better safe than sorry. Pony up the permit when you can to protect your income.

  • Brian Reply

    The free market always provides, and will remain ahead of the government, and their taxes.
    AirBnB is a great example of this, Uber is another.

    I agree with Al, it’s here to stay, and will impact hotels significantly. Just as Uber is doing with the taxi industry.
    Both of which have had monopolies on their industries for far too long.

  • Niko Reply

    I think this is Big Brother overkill. If I own a property, why should someone be able to tell me that I cannot rent it out? I mean where does it stop? I think peer sharing is a great idea and it helps people to self-sustain. The government doesn’t benefit from this however, so instead of looking of ways to help us common citizens out “which is there job”, they go out of their way to shut us down… I personally used Airbnb several times both in the U.S. and Europe. I even hosted for a few months. Each experience was a very good one. I hope they figure out a happen medium and are here to stay.

  • Lara Reply

    Airbnb is being more adopted in states so I don’t think it will go out of business. I think if you know how to legally practice Airbnb hosting, it could be a good investment opportunity. I was reading how there is a rise of Airbnb investor hosts (on RealtyShares) and I can’t imagine investors or travelers allowing to Airbnb to become extinct. It’s become such a vital business for many different parties.

    I did a search if traditional investments or Airbnb investments are better (just to see if it’s worth figuring out the legal issues) and I did find cases where people made more money through Airbnb. So that’s definitely encouraging. I think it’s about finding the RIGHT property for Airbnb though. I found Mashvisor when searching, which helps you find good Airbnb (or regular) investment properties. So I DO think Airbnb is a good way for renting properties and that there is a demand for it (investors and travelers).

    Thanks Ben for the insight.

  • Sarah Reply

    I think so long as you vet your clients properly, that shouldn’t be a big deal. Honestly, I think that traditional renters are a bigger problem, because the people that use AirBnB are typically of a higher income bracket than your average pool of renters.

  • shantanu sinha Reply

    Hello Ben,

    AirBNB is hard to put off track from the business areas.
    Free market always have provided and will remain ahead of the government.
    AirBNB is one of the best suited example for this.

    If someone owns a property, than what the big issue for not renting them.
    Government do not receive benefits from this act done from our side, so they
    always look to stop us out, in spite of helping us out.

    People those are using AirBnB are higher in their income and the main problems starts when,
    dealing with the traditional land owners.

    Thank you for sharing this among us.

    Shantanu sinha

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