How To Make AirBnb Equitable for a Landlord

Question

Hello BP Forum!

SO, I'm super new to all of this. I have very little money but a ton of time on my hands, and recently, I heard about a 3 bedroom for rent. I looked up the area, and saw that I could (conservatively) make three times the rent price if I listed it on AirBnb. I don't have the cash right now to make a security deposit, plus first month, plus utilities, plus the cost of furnishing the house. BUT THERE IS SO MUCH POTENTIAL.

The owner is a friend of a friend and I know the house has been sitting empty for a while. I emailed her and asked her if I could AirBnb the place, and rather than pay rent, give her a very high percentage of the income.

I know many of you on here are landlords, and if someone came to you with an offer like this, what would you need to see to feel comfortable doing this kind of arrangement? Has anyone else ever done something like this?

Shannon McKenna · Answer

@Matt Beans Thanks so much for all of those tips! Especially the first one about trying to make it so that the "worse case scenario" can pull a profit. That is definitely a creative challenge that I am totally up for!

I just wanted to follow up and let you (and the rest) know the outcome.

The landlord got back to me and explained that because she lives across the street from the property, she wanted someone in there full time, and actually found a renter that would sign a two year lease.

BUT

She also said she really admired my creativity and having the guts to reach out to her. She invited me out for coffee, and now we text every day and go on "property rides" together. I am currently looking at another property to lease and then AirBnb out, and she has been instrumental in her encouragement.

So I guess even though this initial offer didn't work out the way I planned, I actually wound up getting something far better: the support of a badass female who can help me take the next steps in my real estate journey!

Matt Beans · Answer

Shannon, I think this is really interesting and I see you are thinking with an opportunity seeking mindset. I love that.

So, A couple things to consider

1) Be conservative when crunching numbers for your profit. Always consider a realistic worst case scenario. What I mean is Figure out your income with the worst expected vacancy from AirBnb you calculate. If you can pull a profit in a "worst case scenario" then you're definitely going to make money in any situation better than the worst case. This will mitigate your risk which is beneficial to you because you don't have the funds to pay a couple months of rent if no one AirBnB's it.

2) Create some sort of written agreement between you and the landlord where you'd basically be a "property manager" so the landlord cannot back door you.

3) Remember AirBnB does have a way they mitigate the risk to the owner. Look into that and use that as a benefit to the landlord to reduce their fear.

4) In regards to note number 1... Maybe roll with your idea of partnering with the landlord so you only pay her a percentage of what the AirBnB-ers pay. Maybe word it to where it sound like the landlord pays you a percentage so they feel in control because realistically, unless you sell yourself and work hard and bring a ton of value to the landlord, the landlord could hire a property manager to take your place and probably pay them less and pull a better profit. ON THAT NOTE, SELL YOURSELF AND HOW YOU SPECIFICALLY WILL BE A BENEFIT TO THE LANDLORD OVER ANYONE ELSE.

Hope this helps

- Matt Beans

Ariel Smith · Answer

@Shannon McKenna I agree that the largest risk an owner will see in doing this is the liability for "unknown" tenants in the property. It will be crucial that you agree to take responsibility for the guests and any damages done by them.

You also run the risk of them choosing to cut you out of the profits eventually and just do the Airbnb themselves...

Are you planning to live in the property and rent out spare rooms or rent out the house as a single property?

Rick Baggenstoss · Answer

@Shannon McKenna  Welcome to BP!  There are a few different ways to work it out with your friend/landlord.  First, be well informed about the risks including the perceived risks of short term rentals.  Landlords fear expensive damages and liability of short term rentals.   You'll need to know how to mitigate these risks and put your partner at ease.  Be honest about what you're doing with the house, of course.

If you committed to a long-term lease (perhaps with an option to buy), then you can better set up the house and build a reputation for the listing.  A one year lease puts you at risk.

As far as money goes, I'm setting up a couple Airbnbs now.  I'm spending about $4k for all the furniture, kitchenware, etc.  It's much cheaper but slower to pick things up from salvage sources.  Partnering with your friend for money is a great idea too.

In my opinion, you'll want to get the hang of managing one and then find ways to manage more.  There are economies of scale for maintenance and cleaning.

Hope that helps and good luck!

Al Williamson · Answer

Shannon, well played! Arbitrage is a great way to get going if you're fluent in short-term rentals. Marketing is where it's at.

I'm happy things worked out for you.

Shannon McKenna · Answer

@Ariel Vincent You're so right.

I definitely want to be able to assume the risk, and I would LOVE live on the property (it's beautiful and it's going to KILL on AirBnb if I can get her to agree to this) but right now I just don't have the cash to lease in the traditional way. I think there is "danger" that the landlord might just AirBnb herself, but I am pretty sure she does not have the time to do this, and just want the house to be dealt with. It would be almost as if I was managing an AirBnb for her with the intent to lease... a step below a rent to own structure.

I know this all sounds like crap to you big fish out there, but I am starting small and using any avenue I can to get my pieces out of Start and play the game!

Thanks for your response. You have given me a lot to think about.

How To Make AirBnb Equitable for a Landlord

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