If anyone is interested, this looks like the link to the place:<p><a href="https://www.airbnb.com/rooms/643721" rel="nofollow">https://www.airbnb.com/rooms/643721</a><p>Another thing to add to the "if you're thinking of doing this" list - don't write a post about it where you and the location can be identified. This is probably against the HOA agreement (short term leases are prohibited).<p>It also could be a safety issue if you aren't actually living there. Once someone knows the apartment number, someone could see when a particular place isn't going to be occupied and use that to their <i>(ahem)</i> advantage.<p>Seriously kids - don't do this. You'll probably be breaking a bunch of contracts and a fair number of hotel and zoning laws. Not to mention the insurance and liability issues that aren't even remotely discussed in the post.
If enough people do this it will be the end of Airbnb. This is one of the patterns the state of NY is using against Airbnb while Airbnb is arguing that the service is intended for people occasionally renting out their primary residence. If the state is able to prove a significant number of people used this model Airbnb is done in NY and I fear other states will follow.
<i>It’s possible to find a nice apartment in a major city for less than $50,000. The place I found was in Las Vegas and it cost $40,000.</i><p>Wow, I had no idea things were that good/bad. Here in the UK, I deliberately choose to live in a cheap part of the country and you'd still be talking $120k or so for an equivalent 1 bed flat. This really illustrates to me why efforts to turn various areas in the US into "mini Silicon Valley" areas could actually work.. when you can have a good, secure base for a year's salary, it surely changes your attitude to risk.<p>I don't think there's anywhere in the UK you could buy a house for under $100K where you wouldn't be getting bricks through your window or dealing with gangs of chavs on a daily basis. I wonder if this goes part of the way to explain why Brits are far more reluctant to take risks in the entrepreneurial sense.. you gotta be on a darn good salary to have a place of your own <i>anywhere</i> on our isles.
If you're thinking of doing this but aren't sure about the legal side of things, consider buying a duplex or quadplex and living in one of the units yourself. This will let you qualify for owner-occupied rates on the mortgage and insurance, likely insulate you from a condo agreement which would forbid renting, and means that you're the primary party who'd suffer from guest misbehavior, which strikes me as socially optimal. Also, if you tire of Airbnb transient relationships, duplex units are fairly easy to rent out "traditionally."<p>Downside: more capitally intensive, and requires you to be OK with owning a house.<p>This is (pre-Airbnb) one of the classic hacks for middle class Americans to start real estate businesses, since you can fairly easily get sufficient cash flow and/or equity after running a duplex for a few years to get a bank to OK you adding other rental properties.
Good, concise write up with real numbers which is nice. But the woman who is doing all that cleaning and contact work for $200/month is the one making this possible (so it seems) and that could quickly eat up profits (though the ROI is great enough that there's lots of room there).<p>EDIT: Also, is there currently an AirBnb manager market? Similar to the cleaner/manager he has, it would be great for people to invest remotely. Do research, fly in to inspect potential properties, purchase and give the cleaner/manager a nice cut? I know there are property management companies but there seems to be some extra finesse (and possible discretion) needed here that I haven't seen from PM companies before.
This has to be illegal, right? I can understand renting out your vacation home or apartment when you're not using it, but buying a home/apartment to run essentially a mini hotel has to run afoul of zoning/licensing/regulations in most places
Hi j0ncc,<p>Thanks for sharing. I was wondering if you could shed light on your inventory risk, meaning do you find that the market price for your rental and nights reserved is highly dependent on the economy, tourist season and weather conditions or fairly resistant to external circumstances. Furthermore, is your product fairly fungible meaning if you have had to deal with competitive pricing in your locale and/or have had repeat customers.<p>Also, I'm guessing given the relative low price of your rental income and your buying in cash; real estate fluctuation risk is relatively low. Does your purchase qualify as a first time home-owner tax credit?<p>For comparison, a $50K investment with 8% market annual return will compound to $68K in 4 years or $92.5K in 8 years. Using cash-flow discount model, assuming that your real estate property value stays the same and annual income the same, you spend $50K to yield $90K ($40K in illiquid property value and $50K in generated cash) in 8 years, making your net present value of your $50K investment to be discounted at $21.8K. Just food for thought.
<i>Find a great property manager / cleaner -- Without one of these doing this remotely would be impossible. I managed to find a great local cleaner on craigslist. She charges a flat fee of $200 per month which covers unlimited cleanings.</i><p>And she's probably illegal . . . But even if she's not illegal, how can this "property manager" live with himself, taking advantage of people who don't "know" enough (whether of the language or minimum wage laws) to understand that they are being taken advantage of? I was born in Vegas and have seen what that city has become -- if there's one thing in abundance there it's under-the-radar immigrants.<p>This post represents everything that is wrong with the property management and rental industry:<p><i>White man want easy money. White man charge high rents. White man hire nice, busy ladies who no speak English to do hard work cleaning. White man hire nice, fast men who no speak English to do hard work painting and carpet replacing. White man take profit for himself and give teeny bit to people who no speak English because they no understand how hard it is to make easy money.</i><p>His cleaning lady is even laundering towels and sheets for $200 per month? How nice of her.<p><i>I have about 3 or 4 sets of sheets and towels. This way the cleaner doesn’t need to wash everything in the 3 hours between guest check in and check out. They can simply take all the dirty sheets and towels home, wash them, then next time they swing by the apartment have a clean set of everything ready to drop off.</i>
Just buy houses in Flint or some other lowly rust-belt city. Buy the property for $5,000, fix it up a little (wait to see why) and then find a renter for $700/month. If you're lucky they'll be section 8 so you don't really even have to worry about them skipping out on the rent.<p>Worst case you spend a few months evicting them and then spend a couple grand fixing it up after the house is completely trashed from piles of trash and holes in the walls and urine and feces in the floors. Then the next family moves in and the cycle repeats.
Thanks for this, I wondered what the details might be like.<p>I don't suppose you've had the County come after you for occupancy tax yet have you? While in general there are a <i>lot</i> of hotel rooms in Vegas (something like over 140,000) the hotels are a pretty strong political block and have been a thorn in the side of some folks who went the VRBO route.
Stuff like this makes me sad. When I first used Airbnb three years ago, it was easy to find a real person letting out their room or apartment to make some extra money. Nowadays, it's very difficult to tell who is a real person and who is just like this guy: an absentee landlord for a place they've never lived in. It's an abuse of the system, and it's people like this who are going to get Airbnb shut down. Blame them when it happens.
Does Lockitron work for someone who happens to not have mobile phone service where the rental is? As convenient as it is, it seems like short-duration travelers to a country don't always bother with having a working mobile phone where they're going. If so, I'd hope it's obvious in the listing.
That's roughly a 25% annual return. nice. We're renting out our place in Buenos Aires. We're clearing 10% return and I use it when I go back there to meet with the team. Stays about 80% -90% full, great location. Guests love it. My wife (who doesn't work full time) manages it remotely. It's been a very positive experience and my takeaways are similar to the writer's. It's not passive income, but it's steady...
Could someone explain to my ignorant self why zoning a property as hotel and paying hotel tax is necessary? What is it for and why was it created?<p>It seems like a lot of these new startups are the same old business model but skirt costly taxes and regulation (Uber for taxis, Airbnb for hotels, Bitcoin for money transfers)
Was there anything specific when applying for insurance? Did you need to disclose it was being rented out or anything (I'm assuming if you had to this would affect premiums)?
<p><pre><code> Average monthly revenue: $1,634
Rough monthly profit: $1,134 (after cleaning, bills and other expenses)
</code></pre>
subtract $200 for the monthly maid service, $196 for Las Vegas' 12% hotel tax.<p>HOA fees, utilities, cable, and everything else is only $104 per month? Something doesn't add up here. (But I'm a botanist, not an accountant, so I may not understand something)
This guy's twitter handle is @jon. Color me jealous.<p>Smart idea though. I've heard of some people who do this in NYC on a larger scale and all of them have reported raking in the cash and even hiring managers so their income is pretty much entirely passive (they just deal with the manager(s)). Seems like a pretty sweet gig if you have the capital.
As a condo owner and resident, the last thing I want is to find myself living in a boarding house. My personal belongings, safety, privacy, the quality of the grounds, and the value of my property all seem to me to be threatened by AirBnB's take down of local regulations, taxes, and HOA covenants. As an individual, my rights are eclipsed by disproportionate corporate power. What are the realistic prospects for Class Action Lawsuits against AirBnB and other scofflaws ala the States vs Big Tobacco?
If anyone's interested in creating HDR photos for real estate, check out my startup TurboHDR (<a href="https://www.turbohdr.com" rel="nofollow">https://www.turbohdr.com</a>) which is a service to generate HDR photos in the cloud.<p>Strictly speaking it uses "exposure fusion" which isn't true HDR but the end result is similar to a tone-mapped HDR image and is generally more realistic with fewer artifacts.<p>FWIW it's written in Go and hosted on Google App Engine.
How are you promoting Lockitron when they are still not shipping? <a href="http://blog.lockitron.com/" rel="nofollow">http://blog.lockitron.com/</a>
Getting the cleaner to manage 'guest relations' for this cheap is probably a great deal not easy to replicate.<p>Handling them poorly could quickly result in bad reviews.<p>On the other hand, those kind of profits are really just short term until the market catches up. People are not stupid to not take easy profit and / or governments will crack down with regulation and taxes.
Stuff like that is what's going to kill AirBnB. Sooner or later they will have to crack down on this, because if they don't the municipality will, and if they won't (and they will), HOAs will.
So you have roughly, a 27% ROI for your first year -- which seems good.
Have you accounted for:
Income tax?
Property tax?
Insurance costs?
Legal risks: (i.e., you potentially in violation of law)?
Liability risks: (i.e., something happens to a tenant)?
Property damage risks (may be included in cleanup costs)?
Labor costs (i.e., your time)?
Property value appreciation/depreciation (could be a positive)?
After that is all taken into account, I wonder if you end up netting more from a passive investment.
Under the Las Vegas Code of Ordinances (assuming the condo is in the city), the issue is going to be whether the guy is considered an "operator" of "an establishment that rents or holds out for rent guestrooms on a daily or less-than-weekly basis." In that case, he needs a license and needs to pay taxes. See: <a href="http://library.municode.com/HTML/14787/level2/TIT6BUTALIRE_CH6.46HOMORO.html#TOPTITLE" rel="nofollow">http://library.municode.com/HTML/14787/level2/TIT6BUTALIRE_C...</a><p>Beyond that, all that really matters is the "Covenants, Conditions, and Restrictions" (CCRs) document that is recorded in the land records when the condo was created and any other local and state regs governing renting of rooms.<p>The Rules and Regulations statement about short term leases is easily overcome. Just create an operating company that you lease the condo to under a long-term lease - run all the money through the operating company, pay the rent to the owner, and distribute net income. The only "lease" will be the long-term lease to the operating company. Again, there may be local regs about this (or the state's Landlord-Tenant statute: <a href="https://www.leg.state.nv.us/NRS/NRS-118A.html#NRS118ASec180" rel="nofollow">https://www.leg.state.nv.us/NRS/NRS-118A.html#NRS118ASec180</a>), but the "prohibition" under the Rules and Regs is easy to deal with. Again, what matters are the CCRs that are recorded in the land records. If they allow it, my bet would be that this guy's scheme is fine.<p>Plus, I'd also bet that he talked with an attorney about this. If he didn't, he's a damned fool.
It sounds like travelers to Vegas, the hotel capitol of the US, are savvy enough to check airbnb. And VRBO it seems as well. This is a big pain for searchers. Hipmunk shows each of these, but not very well as they only have a handful of the 1000s of listings from Airbnb. We've tried to help with this at <a href="http://AllTheRooms.com" rel="nofollow">http://AllTheRooms.com</a> by aggregating everything we can find.
<i>I live in constant fear of getting a bad review.</i><p>I wonder when is someone going to come up with an idea how to fix this. As far as I can tell there's not a lot a supplier on airbnb/ebay/etc can do about them. It's all too consumer centric... My subjective opinion is that most bad reviews are unwarranted, left by customers that have unrealistic demands.
isnt he missing income taxes? In germany you would have to pay up to 42% income tax on the profits, depending what other earnings you have.. Still an okay return though.
Hmm I don't see any mention of equity here but only profit. If you're able to cover the cost of mortgage + HOA/property tax + expenses of running the place then the equity is the profit. Assuming the price of the place is the same in, say, 10 years. Then you've built up 10 years worth of equity buy having someone else pay your mortgage...<p>Of course if this place was bought cash, you could have done the same thing in reverse. Take that money and loan it to an individual to buy a house. The only difference is there's no extra profit to be made but also no added risk of not finding clients, repairs, etc. (unless someone wrecks the place and it becomes worthless)
This is illegal in the netherlands.<p><a href="http://nos.nl/op3/artikel/562868-airbnb-mag-alleen-nog-met-toestemming-van-de-vve.html" rel="nofollow">http://nos.nl/op3/artikel/562868-airbnb-mag-alleen-nog-met-t...</a>
I think this is pretty common already....
I used ABnb twice last week and both hosts were doing this....one of them currently lives in Nigeria actually.
I googled one of the condo's I was staying in and the rent was around $1300 a month, I then looked at the calendar for unit and realized the rent would be paid with about a week and 1/2 of bookings which was present.
It's a nice hustle. I'm thinking about doing it though I live in the NE and a comparable unit would run me $2000+ a month I think. I need to do some research but this posting gave me some more ideas
I really like the mention of Lockitron, the whole 'keyless entry' idea really is going to be the future of AirBnB rentals.<p>I have several customers who are AirBnB hosts who use my service, Ringo [1], which lets their guests into the units via the apartment buzzer. That combined with Lockitron, and you never need to worry about key transfer again. You can effectively live on a different continent than your AirBnB property.<p>[1] <a href="https://www.tryringo.com" rel="nofollow">https://www.tryringo.com</a>
Having had more than my share of asshole neighbors, I'd be very worried about their representation in such a constantly churning population.<p>And I would have little sympathy in compelling the local authorities to enforce any and all laws and regulations that would put a stop to the resulting disruption.<p>I see far too many instances, today, of people thinking of and acting on "me, me, me", while ignoring those around them whom they are screwing over.
Thanks for posting this. I've been debating getting one of these micro homes (<a href="http://www.indiegogo.com/projects/nomad-micro-home-easily-assembled-under-30k" rel="nofollow">http://www.indiegogo.com/projects/nomad-micro-home-easily-as...</a>) and setting it up in Whistler to do exactly the same thing as you are... Airbnb it year round.
Sounds risky. Four years is a long time. The price of the property can fall sharply, cities might decide they don't want "commercial" one-room hotels, and finally a renter might wreck the place or sue you for something.<p>Yeah, I know, reputation system, rare chance, but rare chances is the kind of thing you often don't want happening to 60K investment!
We're building a service called Airenvy (airenvy.com) that caters to short term renting on services like airbnb. We could have been tremendously helpful to the author had we been in the Vegas area. We are growing rapidly in SF and our property owners love all the money we're making them! On average we increase income by 30%!
Haha - Nice dude!<p>I scraped AirBnB last year to compare it to local prices with the same intent last year to automate. Totally do-able and profitable. Local tenant & housing laws are the most important thing to keep track of IMO. You can outsource the Q/A with guests.
HackerNews? Is this like saying I sell things on eBay, because it's the new world economy? I would be more interested to hear about the tax situation than furniture delivery times.
"I'm buying up this incredibly valuable resource to lease it to people who only need it temporarily so I can turn a profit! Cool, right?"
50k for an appartment in LV ? That sounds way cheaper than I expected. Impressively cheaper. Would you consider making it your full income at that pace ?
I think this is great. Vegas is the perfect spot. It was overbuilt, there is lots of extra supply, and lots of tourists. Great they made it happen.<p>I would think there are two dangers:<p>1) It can take a lot of time, and time is money. If you make 200K/year, your time is worth ~100/hour. Spending 100 hours on this takes away a 10K profit.<p>2) You are the on the hook for big surprises: Theft, something breaks, etc.<p>But again, great for the OP!
very interesting post, it's always great to read about other sources of income. I wonder if renting on airbnb is more lucrative than renting in general.
I still don't "get" Airbnb. How can anyone be comfortable letting a complete stranger into their home?<p>I'd freak out if someone were to start fiddling with my electronics, perusing my Laserdisc collection, etc.
So what happens when<p>1) Your apartment gets trashed. They break your walls, pour cement down your drain, break the furniture, etc?<p>2) Tenants refuse to move out. I'm sure there are all kinds of laws protecting them, and it's very hard to kick them out even if they aren't paying.<p>3) Somebody gets injured on your property (slips in the bathroom and breaks an arm), and sues you for a shitload of money.<p>Also, you forgot amortization in your calculations. Things will wear and tear.