Airbnb has made owning an income property so much easier in some ways. Not only do homeowners have access to a sophisticated booking system but the Airbnb name brings a huge amount of brand power to the table.
Airbnb is controversial in some circles. Some cities do not like it because it does not feel like it collects enough taxes. Some hotels disapprove because the high-end offerings that Airbnb now features forces them to step up their game.
No matter how you look at it, Airbnb is a disruptive service that is at the heart of the innovation vs. regulation debate.
Whether Airbnb offers enough features to steal you away from the comforts of the Marriott, everyone can learn lessons from Airbnb successes and failures in the last few years.
Hoteliers and city council officials aside, Airbnb is causing trouble in some places. In America’s most expensive locales, there is alarming housing shortage. Airbnb is reportedly making the living situations in New York City and San Francisco worse by taking rooms that could go to long term renters.
It is not hard to see why city planners find Airbnb so threatening. For those who are struggling to make their rent or mortgage payments, it is much more lucrative to rent out their home for $150 a night than $150 a week.
What the country is learning about the real estate market in high demand areas like the Bay Area and NYC is that Airbnb can actually drive housing prices upward. This is because it contributes to the scarcity in housing.
In San Francisco, the city council reported that as much as 40% of the available housing in the Mission neighborhood is now rented out through Airbnb. This is a problem in an area that already features a lot of displacement because of high rent prices.
San Francisco is currently the most expensive city in America to live in and you still need a cell phone booster to get any cell phone reception in the hilly outposts. The average monthly rental agreement comes to a whopping sum of $3,400.
The other thing we can learn is that the most successful Airbnbs are in high demand places. It seems that 4% of the housing units available in high demand areas of Hollywood and Venice are not on the general market because they are used for Airbnb.
So what does a property investor do to get the most for their real estate dollar?
The obvious answer may be to go for housing in high end areas. The industry that has sprung up around Airbnb has demonstrated that there is serious money to be made in renting out investment properties in these areas.
But this answer is too simple and does not take into account the effects that this practice has on local residents and local property prices. Too many people find themselves priced out of their homes every year. They then have to move farther and farther away from their local city to be able to find a place that does not drain their bank account.
This effect will only drive property prices higher and higher in the future. Eventually, it will impossible for anyone but the ultra-wealthy to buy in many areas.
This is illustrated by the discrepancies in the list of cities that make great investments versus the cities that are lucrative for renting a home on Airbnb.
The most lucrative places in America to purchase rental properties include: Austin, Houston, Dallas, Orlando and Provo, Utah.
Yet, the most lucrative places to invest in Airbnb are San Francisco, New York City, Miami, San Diego and Austin.
Essentially, to make the most money possible on Airbnb, you’re going to need to put the most money down upfront. You will also need to meet all the prerequisites for buying in high income areas. The competition for housing in San Francisco and New York City is high to say the least. You will need to be a very competitive buyer if you want to make money in that market.
Instead of buying up prime real estate just to rent it out short term, you might consider purchasing a house or apartment that offers a good deal for both short term and long term renters. You might consider finding an apartment that lies securely within the best of both worlds.
There is new criticism against Airbnb every day. You want to make sure that you can sure afford your rental should the scrutiny against Airbnb become more intense in your market.
You also want to make sure that you are not contributing to the larger problem. You do not want to become part of the reason that you cannot afford to live in your own neighborhood someday.
As policy makers look for new ways to shut Airbnb down, you want to make sure that your investment is safe whatever they decide.
