What do you know about Airbnb?

Question

Is it impossible and illegal to profit from Airbnb without owning the property? I got an invite to a webinar that talks about how to make a lot of money with Airbnb without owning YOUR own property, but I did not attend. This sounds shady that people can make money from Airbnb using someone else's home. That is sham. Right?

Gilbert Dominguez · Answer

If it has to do with business then you are always better of if you consult with and run everything with a qualified attorney. However, based on the prevalence of this strategy I would think there is a perfectly legal way to do it. Many property owners are perfectly willing to lease to you with the right to sublease the same property. However the more you are will to be upfront and disclose your purpose to an owner then I would think that more they will be ok with your strategy as long as they get their rental payment as agreed and on time regardless of whether you are able to rent out to anyone through airbnb.

I this was me I would be looking at touristy areas, places where there would be a great demand for temporary rentals. I for example always rent through airbnb when I go to Hawaii.

I bought a 2 unit building in Buffalo New York in the hopes I can attract people who want to visit or honeymoon around Niagra Falls. I plan to use airbnb there. Vetting is simplified and people generally pay in advance to Airbnb from which I get my rental rate of approximately $100.00 per night less Airbnb's cut.

I could not possibly hope for a monthly rental average of $2,000.00/mo. on a $45,000.00 investment otherwise.

Airbnb rates are generally more in line with and competitive against local hotel rates. In Honolulu Hawaii the lowest priced hotel room I could find was $200.00 per night and the average airbnb rate was $100.00 per night.

I own a 2 bedroom 2 bath house right outside of Ho Chi Minh City, a city which attracts millions of tourist per year and almost year round. I purchased the house all cash for $12,000.00. I usually average about $2,000.00/ per month with it through Airbnb. I could do that in the states.

It is the same as all real estate, Location, Location, Location !!!

Marcia Maynard · Answer

Here are my thoughts...

• Some people do rent space and then offer it on short-term rental platforms. It may or may not be legal depending on the location of the unit and applicable laws. 
• It may or may not be okay to do so depending on what the property owner allows by the terms of the lease agreement.
• There's plenty of information readily available on line from those who have built a business doing what the webinar proposes. No need to pay for the information.

Other things to consider...

• You would be entering the hospitality business, so it would be imperative to learn how to be a good host. Study up. Learn what amenities are important to guests and how to accommodate a wide variety of people. Great communication and interpersonal skills are paramount.
• Think about whether you will offer to rent out an entire place or just a room in your own home and how it will impact your lifestyle.
• Find out if there are special requirements the city or county imposes for those who offer their homes as short-term rentals. Some require licensing and/or inspections.
• Be open and honest with your landlord about what you would like to do and how you would keep their interest at heart and mitigate the possibility of damage to their property. Make sure your rental agreement allows for subleasing in this manner.
• Inform the neighbors about what you're doing and make sure they are not negatively impacted by your actions. Make sure your venture doesn't interfere with peaceful enjoyment of their own home and that parking is available for your guests without infringing on the needs of the neighbors. Consider offering a discount to neighbors who may want to rent your space on occasion for their family and friends. They may keep a watch on your property for you. They could be your eyes and ears. They could be your ally. Treat them well.
• Consider how hands on you will be with your venture.  The turnover of the unit between guests is critical. Learn how to do this quickly and efficiently. Will you do the make-ready between guests yourself or hire someone to help you with this?
• If you hire extra help, think about what will be involved. Employee or independent contractor? Be prepared to issue IRS W2s or 1099s if you're in the U.S.
• Airbnb collects the lodging taxes, business taxes, and other applicable taxes in some locales. In other locales you will need to do this yourself. Consult with the hosting platform and your own tax professional about what you will need to do.
• Make sure you carry adequate insurance. We maintain a $1M umbrella policy in addition to typical insurance. If it's your own property, you'll have at least a fire policy. If it's property you're leasing, renter's insurance. Consult with a qualified insurance agent about what you will need to cover your risk.
• You'll need good quality sheets and towels that will hold up to repeated washing.  Learn the best techniques for stain removal and what cleaning products are best to use all around. Learn the best products to buy for furnishing and taking care of your short-term rental.

We feel comfortable wearing our HOST hat and engaging in the hospitality industry. We own and manage 17 residential units in our town. We've been renting one of our houses out as a short-term rental to guests through Airbnb, year round, for over two years. We've maintained Super Host status the entire time. We didn't need to enlist the services of an attorney to do this. We didn't need to attend a webinar.

We feel comfortable wearing our LANDLORD hat and engaging in the residential housing industry.  We don't allow our 16 long-term tenants to sublet any portion of their home. Too risky.  Following is the clause from our rental agreement that makes this clear to our tenants.

"ASSIGNMENT.Tenant agrees to not sublet said premises, nor assign this agreement, nor any part thereof without prior written consent of Landlord. Tenant may not rent use of the unit, or any portion of the unit, to others. This includes use as a short-term vacation rental or posting on sites such as Airbnb, VRBO and HomeAway."

January Johnson · Answer

It is not impossible or illegal if you have an agreement with the owner.  I have a friend who manages a small 5-unit complex of 1 BR apartments.  She rents several of them from the owner at the market rate and then Airbnbs them with the owner's full knowledge.  She also manages one of them as an Airbnb property FOR the owner who lives in another state.  He doesn't care as long as he is getting rent enough to cover his mortgage and cash flow the property.  It can be done.(I also own 3 Airbnb properties in Panama City, FL.)

Myka Artis · Answer

@Tony Marcelle No it is 100% legal to do this dependent on the contract that is signed the local municipalities. I have many units that I don't own and I Airbnb with no problem.

Richard Sherman · Answer

I would just say something like I want the ability to sub lease as I have a  business doing short term rentals something like that.  They might be ok with it they might not.  I think there is a podcast or some posts about someone doing this on a large scale, like 20+ units.  I would search airbnb arbitrage or something like that.

Tony Marcelle · Answer

Does this Airbnb strategy have any similarities to doing a sandwich lease option on a regular rent to own home? What is the best way for a newbie to approach a landlord about leasing their home and using Airbnb if they have no idea what Airbnb is or how it works? It could get  very complicated when I have to go into full detail what Airbnb is with a landlord. Am I correct that I only need a regular rental agreement with the landlord with the right to sublease written in that rental agreement? I want to make sure I have the right. paperwork to get started.

Richard Sherman · Answer

@Tony Marcelle I agree with @Gilbert Dominguez .  He is spot on with all of his comments.  We have a primary house that we rent out for 5 months (during the high season, which for us is May through October) in Oregon Wine Country.  It is a large house with a vineyard behind it and amazing views.  During the time we rent that home on airbnb, we rent a small 2 bedroom cottage on the coast a couple of blocks from the beach.  During the 5 months, the home generates enough income to pay the mortgage for the entire year, all utilities for the whole year and pay for our place on the coast during the summer.  It is a unique property and we spent a lot of time getting it ready, but essentially, we live for free because of it, so it is for sure doable.  We just bought a 6 unit building on a creek in downtown Salem, OR, all units have a balcony or patio looking at the creek, but it is 3 blocks from the downtown main street, 10 blocks from a University and 8 from the State Capital.  We will take 2 of those units to start and rent them our AirBNB/Homeaway and see how it goes, but my guess is we can get 2-3x the rent even in a bad month.

You need to look for areas and properties that will attract traffic and interest.  People like unique properties, ones with character/location etc.  Be Upfront with the landlord if you are leasing and my guess is large companies will be resistant to this.

Tony Marcelle · Answer

Cool!!

Tony Marcelle · Answer

What type of paperwork am I looking at to start leasing the owners places in Airbnb? Do I need to run this past my lawyer before doing this?

Richard Sherman · Answer

Probably is shady, though as long as the person you are leasing from either is Ok with or has no rules against it then it is fine.  WHat they are talking about is leasing normal apartments/houses etc then doing airbnb in them...possibly perfectly fine, ;possibly a violation depends on where you are and who you are renting from.

What do you know about Airbnb?

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