Is AirBNB really dead?

[Daniel Muscarella]

Hi all,

I'm a 19 year old and have been wanting to get into real estate, specifically renting a property and putting it on airbnb to get cash flow, however I been seeing around that airbnb isn't what it used to be.  People complain that there are too much for cleaning fees and that hosts make the guests do a lot of work that really seems unnecessary.  I also see people say that they rather get hotel rooms now instead of airbnb because it's a cheaper option.  So, I just want to see if anyone that is in airbnb can justify that and maybe give me some tips for someone that is starting out or wants to start out.  

[Jon Martin]

Where did you hear all of this? 

Yes, cleaning fees aren't cheap, so if you are only staying 1-2 nights it might not pencil out. Hotels can be cheaper, but you get what you pay for. You may not always save money with an AirBNB but you tend to get far more for your money. 

However if you are pooling with other people, it can be far cheaper than everyone getting separate rooms at a hotel, and you all have a common area to hang out without sitting on beds. Plus the ability to cook your own meals, outdoor space, being in unique neighborhoods, etc etc . . ... 

[John Underwood]

Quote from @Daniel Muscarella:

Hi all,

I'm a 19 year old and have been wanting to get into real estate, specifically renting a property and putting it on airbnb to get cash flow, however I been seeing around that airbnb isn't what it used to be.  People complain that there are too much for cleaning fees and that hosts make the guests do a lot of work that really seems unnecessary.  I also see people say that they rather get hotel rooms now instead of airbnb because it's a cheaper option.  So, I just want to see if anyone that is in airbnb can justify that and maybe give me some tips for someone that is starting out or wants to start out.  

 Airbnb does seem to be dead from my experience. I haven't received a booking in 6 months from them.

Vrbo is alive and well for me.

[Carolyn Fuller]

My Airbnb is in a regulated urban area where my main competitors are hotels. I always make sure my nightly rates plus cleaning fee are less than the nightly rates for the nearby hotels. 

After traveling for 6 weeks, staying in Airbnbs throughout, I experienced first hand that a lot of hosts ask guests to do way too much at checkout. I have reduced my ask to making sure the windows and door are all locked and texting me upon check out. I think that is just one of the things I've changed recently that have boosted my ratings significantly. 

When I travel I always prefer an Airbnb or BnB over a hotel even if the hotels are cheaper. Many of us prefer our own space or access to a washing machine and dryer or a full kitchen. Also, I don't know what the problem is with heating and cooling in most hotels but I find I can control temperature much more easily in Airbnbs.

I suspect that nightly rates for many urban Airbnbs have risen as regulations have reduced competition. A few years ago, I could book an Airbnb in Philadelphia for significantly less than I could book a similar unit in the surrounding small towns because the competition in Philly was so extreme. Now that regulations have been implemented that is not as true. After Boston regulations took effect, over 3000 STR listings disappeared. Before regulations, the competition in this area had been so intense that I saw some nightly rates that were less than LTR rates!

[Manny Vasquez]

Airbnb, VRBO and other STR platforms are performing very well with very healthy profit margins. I run an STR company in Orange and Los Angeles Counties and my STR's are performing quite well. I'm not sure where you heard your information, but it is clearly from a person who either has no experience in STR's, or if they had an STR they ran it poorly or the STR was situated in a bad location.

[Rhonda Cohen]

We regularly receive 5 star reviews and require a $200 cleaning fee for a 2 bedroom beach townhome. We require guests to load and run the dishwasher, remove all food and trash from the unit, and have guests text when they depart. We wash all linens including blankets between stays. We state this upfront at time of booking so guests know our expectations can cancel if this does meet their expectations. The $200 cleaning fee goes directly to housekeeper who is phenomenal. Excellent housekeeping is foundational for a profitable STR. These checkout routines honor the housekeeper's time.

[Evan Polaski]

@Daniel Muscarella, is Airbnb dead?  Yes and no.  As others mentioned, the issue with Airbnb is you never know what you are going to get.  When I stay in a major flag hotel (Hilton Brands, Marriott Brands, etc) I know exactly what I am going to get.  I know the sheets, toilet paper, pillows, mattress, etc.

When my wife and I had an Airbnb, we provided coffee, shampoo and conditioner, soap, etc.  Basically everything you get at a hotel.  But when I have stayed at some Airbnb's, even highly reviewed ones, they provide one roll of toilet paper, and ask you to provide your own, same with paper towels.  They barely have enough towels for all the beds (meaning one per sleeper) regardless of length of stay.  

My opinion, an Airbnb needs to be fairly large to make sense (like 3 plus bedrooms). I think there will always be value in having a full house for rent, but I also agree that SO many people have flooded into this space lately, buying almost any property to turn into a STR that you are competing with a lot more listing, and without something special about your property, your listing gets lost in the scrolling.

[Luke Carl]

@Daniel Muscarella I'd love to know where you heard this? I'm deep into this world on a daily basis so my perspective may be different. Was their new spring roll out a bust? Yes. But they're fixing it and getting it under control. VRBO has picked up the slack for me which I prefer anyway. The fact that you said "Airbnb" makes me think you're talking about some sort of metro market apartment unit rentals or something. I'm renting vacation homes on beaches and in mountains.

[Daniel Muscarella]

Thanks everyone for the insight.  I heard about all these claims from Tiktok and saw many people comment about the loads of tasks they were asked to do before checking out and saying hotels are cheaper.  However, I am aware that Short Term Rentals are becoming a lot more popular and it scares me because I want to get in this market but fear I may not be able to get a property in time because I still have to save up.  But I have a few questions.  

1. How did you guys start out?  Did you have a mentor? Did you just rent a property and listed it on Airbnb?  What would you say to someone that's completely new and trying to start out?

2.  What can you do to make sure your property stands out?  I'm going to be moving to North Carolina in August and plan to find a property where I can rent out and list on AIrbnb. 

[John Teachout]

We operate 3 airbnb spaces in our home and only use the Airbnb platform. We haven't noticed any decrease in bookings. We're not in a vacation area and the majority of our guests are in the area for work or have a reason like a wedding, sporting event, etc. It works well for us as a house hack.

[Bruce Woodruff]

Most of what you are hearing is not true. You're getting bad information...

1) Too much for cleaning fee - You charge the cleaning fee so you can set it at what you want. I hate places that have low nightly prices and stick you with a $150 cleaning fee. We charge $50 - $70 and do it ourselves.

2) Hosts make guests do too much work? I've never stayed in a STR that had me do anything except take out the trash and leave the place relatively clean...

3) Hotel rooms are not cheaper anyplace I've been lately.

Tips - Be honest, have a clean place in a desirable neighborhood, set your prices fairly. No problems

[Michael Baum]

Good golly @Daniel Muscarella, TikTok is not a reliable source of information on anything. Read the posts here and get a good snapshot of the market.

As per usual, I will say arbitrage is not the best idea. It is not really investing, just doing a job. 

[Nathan Gesner]

You're making a big mistake getting your information from TikTok and YouTube. Those places are full of false information designed to attract eyeballs. You need to read some books and really educate yourself, then study the markets and see what's happening in reality.

[Pat Lulewicz]

It may be challenging to make an arbitrage model work these days because many owners are familiar with Airbnb and they're worried about bad guests and parties, which can ruin their properties. Also, if a landlord isn't doing STR's, it may be a challenge to convince them to allow you to sublet. My leases require subletter approval, and a fee for it, so there may not be any margin or they may not approve the Airbnb guest.

With all of that being said if you find the golden goose that allows you to Airbnb the property , you can definitely benefit from cleaning it yourself and not charging a cleaning fee which will make you much more competitive and attractive to guests. It does create an additional job for you, but one that can have a decent return. Also have to think about where you're living while the guests are there.

[Curtis Mears]

@Daniel Muscarella

A bigger issue is finding a landlord willing to let you make money off his asset. I had a tenant try it and i removed him asap and was prepared to sue him to get any revenue he collected from my property. You will need to find a really bad landlord who allows subleases.

[Daniel Muscarella]

Quote from @Curtis Mears:

@Daniel Muscarella

A bigger issue is finding a landlord willing to let you make money off his asset. I had a tenant try it and i removed him asap and was prepared to sue him to get any revenue he collected from my property. You will need to find a really bad landlord who allows subleases.

 How would you go if you were 19 with no money and trying to get into real estate ?  What path would you take

[Jay Yazzie]

Quote from @Daniel Muscarella:

Quote from @Curtis Mears:

@Daniel Muscarella

A bigger issue is finding a landlord willing to let you make money off his asset. I had a tenant try it and i removed him asap and was prepared to sue him to get any revenue he collected from my property. You will need to find a really bad landlord who allows subleases.

 How would you go if you were 19 with no money and trying to get into real estate ?  What path would you take

First get a job,.... a W2 job will help with the lending side of it. 

Start making connections, ask to shadow investors, run errands for them (add value to their business or take tasks off their plate to free up their time). Look for deals for investors (whole sale) and sell them deals and build trust and wealth that way. Use their resources (lenders/HM) to get ahead and then find your first property, if you need more cash,... flip it, don't long hold it... and when you get established start holding some properties. 

Good luck

[Mike Shemp]

Airbnb made some recent changes that seem to be hurting hosts that don't have something unique about their property.  

For example in the White Mountains if you are just your typical 60's ski chalet in a neighborhood... that may not do as well as a cabin with a moutain view.

Mike

[Carolyn Fuller]

Quote from @Mike Shemp:

Airbnb made some recent changes that seem to be hurting hosts that don't have something unique about their property.  

For example in the White Mountains if you are just your typical 60's ski chalet in a neighborhood... that may not do as well as a cabin with a moutain view.

Mike

 Yep! The advertising that the platforms do has a dramatic impact on hosts. For years, the only platform I used was VRBO. VRBO kept my 1 bedroom apartment fully booked. Then, in 2016, VRBO started their extended family focused advertising and, all of a sudden, overnight, all my inquiries and bookings ended. No inquiries. No bookings. No nothing. I switched to Airbnb and it dominated my bookings, thereafter.

Now that cities around the world are regulating and restricting urban STRs, Airbnb's bread and butter, Airbnb has started going after the traditional vacation destinations by advertising amazing unique buildings in traditional vacation destination spots. That's got to negatively impact the host that does not have a standout building just as VRBO's big family advertising negatively impacted the small apartment hosts.

The power of advertising in real time...

[Caleb Brown]

Quote from @Daniel Muscarella:

Quote from @Curtis Mears:

@Daniel Muscarella

A bigger issue is finding a landlord willing to let you make money off his asset. I had a tenant try it and i removed him asap and was prepared to sue him to get any revenue he collected from my property. You will need to find a really bad landlord who allows subleases.

 How would you go if you were 19 with no money and trying to get into real estate ?  What path would you take

Get a job to have consistent income. You could also intern or try to help part time inside the industry to learn. One of the best entry level things is house hacking. 3-5% down. From there you can rent out rooms or get creative. All it takes is getting 1 deal to start

[Bruce Woodruff]

Quote from @Daniel Muscarella:

Like has already been said a) get a good job and put away $$, and b) learn, learn, learn....Give your time to Real Estate offices and Construction companies....

[Ryan Moyer]

The days of buying a random average property in a vacation destination and throwing it on Airbnb when you actually aren't any good at underwriting or hosting and stumbling blindly into 50% CoC returns are dead. That was never going to last. But Airbnb isn't dead. You just have to actually know what you're doing now.

If anything Airbnb is as alive as ever, because it's basically accepted as a investment asset class now.  It used to be if you had money to invest you thought about stocks or bonds or long-term single family rentals or multi-family rentals.  Now short-term rentals are an accepted part of that list.

As with any asset, the more accepted it becomes as an investment asset and the more people get into it, the lessor the returns are.  Just look at how long-term single family rentals have evolved.  It used to be that when you were looking for these deals you used the 2% rule.  That is to say you wanted the monthly rent to be 2% of the purchase price.  That is long gone as more and more people started buying LTR's as assets, and it shifted to the 1% rule.  People at the time freaked out.  1% rule, that is stupid, I used to get 2% I'll wait for that to come back.  Then over time 1% became the new 2%, and everyone accepted it.  Now, you can't even find 1% unless you have connections or value add, and people are happy with even less.

Short term rentals are headed down the same path. My first 2 I bought I had 80% CoC return. That is dead. But that doesn't mean it's still not a viable investment at 20% CoC. 20% is still pretty great even with the extra work involved.

Of course the big elephant still lingering out there is that short term rental revenue isn't as reliably predictable moving forward as long term rental revenue, so when you're putting in that revenue number to get 20% CoC you need to be sure it is a number that you can hit moving forward, and not something that was just a result of a large outlier travel year like we're looking back at now. I'm not confident that's the case, which is why I've put my purchasing on pause for a bit to see how things shake out. But once everything settles back down to reliable levels I'm happy "settling" for the now lower norm of 20%ish CoC. I bet 10 years from now we'll all be pining for the days where you could get 20% like we're pining about the days of 50-80% now.

[Bruce Woodruff]

Quote from @Ryan Moyer:

The days of buying a random average property in a vacation destination and throwing it on Airbnb when you actually aren't any good at underwriting or hosting and stumbling blindly into 50% CoC returns are dead. That was never going to last. But Airbnb isn't dead. You just have to actually know what you're doing now.

This ^^^^^^^

[Zachary Inman]

No, it's not dead. It's still a great platform for exposure alone. The water's been bloodied and AirBnB can afford to charge more now, so expect less returns than a few years ago, but there's still money to be made. 

[Andrew Hogan]

.

[Ian Dunross]

Quote from @Ryan Moyer:

The days of buying a random average property in a vacation destination and throwing it on Airbnb when you actually aren't any good at underwriting or hosting and stumbling blindly into 50% CoC returns are dead. That was never going to last. But Airbnb isn't dead. You just have to actually know what you're doing now.

If anything Airbnb is as alive as ever, because it's basically accepted as a investment asset class now.  It used to be if you had money to invest you thought about stocks or bonds or long-term single family rentals or multi-family rentals.  Now short-term rentals are an accepted part of that list.

As with any asset, the more accepted it becomes as an investment asset and the more people get into it, the lessor the returns are.  Just look at how long-term single family rentals have evolved.  It used to be that when you were looking for these deals you used the 2% rule.  That is to say you wanted the monthly rent to be 2% of the purchase price.  That is long gone as more and more people started buying LTR's as assets, and it shifted to the 1% rule.  People at the time freaked out.  1% rule, that is stupid, I used to get 2% I'll wait for that to come back.  Then over time 1% became the new 2%, and everyone accepted it.  Now, you can't even find 1% unless you have connections or value add, and people are happy with even less.

Short term rentals are headed down the same path. My first 2 I bought I had 80% CoC return. That is dead. But that doesn't mean it's still not a viable investment at 20% CoC. 20% is still pretty great even with the extra work involved.

Of course the big elephant still lingering out there is that short term rental revenue isn't as reliably predictable moving forward as long term rental revenue, so when you're putting in that revenue number to get 20% CoC you need to be sure it is a number that you can hit moving forward, and not something that was just a result of a large outlier travel year like we're looking back at now. I'm not confident that's the case, which is why I've put my purchasing on pause for a bit to see how things shake out. But once everything settles back down to reliable levels I'm happy "settling" for the now lower norm of 20%ish CoC. I bet 10 years from now we'll all be pining for the days where you could get 20% like we're pining about the days of 50-80% now.

 YES!

You have to run your STRs like a business, not a passive income stream. Cater to guests that DON'T want to stay in a hotel.

For instance - I have a STR where a family flew into town for a week because a child needed medical tests and possibly surgery. Can you imagine them staying at the Red Roof Inn? With strangers walking around coughing, laughing etc..

It's definitely doable if you treat it like a nice part time job. Where you work on it a little each day.