Rentrepreneur - A new type of investing

Something I didn't see mentioned, is what about your financial ability to make the rental payments?

Say the properties you lease with the intention of subletting through Air B'n'B don't rent, or are vacant for some period. Can you afford to cover this shortfall?

To me this is a huge risk to an owner, and for what? 5-10% more rent?

Also, the lease agreement. Would it still fall under residential? Or are we now entering the commercial market? What if you don't make the payments and are taken to tribunal, as an owner would the agreement be thrown out because it's a commercial transaction?

Furnishing - are you doing it? Or are you looking at already furnished places?

I have known people to do exactly what your proposing, some it works out exceptionally well - others it doesn't. Personally I wouldn't do it as an owner.

 

Have you ever used Airbnb? Payments are made upfront.

 

And if you stay there longer?

 

I think it's a great idea. I don't think the challenges are insurmountable. Just needs an insurer to see the gap in the market and offer a suitable product.

All the negativity here sounds like a congregation of taxi drivers discussing how uber will never work.

There's a reason its called disruptive innovation.

 

As a landlord I'd probably consider it, but only if it were 20% or something above standard rent for the risk.. Say extra $100 rent/wk. Depends I guess on the location, but in a desirable area of say the Goldcoast, 80-$100? x 3 nights a week the "host" is getting. Could work out profitably for both.

At least if you had any property damage or shortfall in any insurance claim you had some extra to cover it.

Doing it behind a landlord's back however, well that is quite different. Not hard to check abnb to find out if your property was on there.. and all the evidence is there.

 

No i havent. I didnt claim to know the ins and outs of it. As i said if the system can eliminate the non extensive list of risks i mentioned. Then it may be a goer

 

Ive stayed in a few Airbnbs, in new york, melbourne twice and KL, in all of them the owners had cleaners instead of doing the work themselves.

Personally i think theres a decent gap in the market for specific airbnb/shortstay cleaners. Make sure sheets, towels etc are changed/washed, replenish basic fridge and pantry items etc. Good point of difference

 

I think airbnb, uber etc are great, im up to around 170 or so uber rides on my own account alone and have invested in a few different companies trying to do something innovative and disruptive so i love the idea of it.

What i disagree with is the idea of doing it behind the landlords back, i wouldnt want someone to do it to me and i wouldnt do it to someone either.

Btw speaking of taxi drivers, being indian i have some family friends who own taxi plates or have driven taxis for years, there have been some tense conversatiojs when the word uber has been mentioned...

 

Honestly, I've thought about doing the same but I think in my current situation of a full time job, a volleyball management job taking 2 nights per week and my own 2 airbnbs I just dont have time to give it adequate attention and if I did, I would have too much scope for dropping the ball somewhere.

However:
* You can make double rent if the place is well located.
* Furnishing the place can be done on the very cheap. You need a little bit of time to do it though (Gumtree). I even found some very good quality quilt cover sets etc from Op shops. A budget of around $3,000 could cover good quality dining table and chairs, fridge, washing machine, a few beds, sofa, coffee table, bedside tables, bedside lamps, TV, Entertainment unit, a wardrobe, dishes, pots and pans etc if you buy well. But it does take time to organise to buy and furnish. Also... if you do it I suggest get a 9kg washing machine from the get go.... you'll need to have a lot of washing done regularly.
*Stock up on sheets and towels. Poly cotton is the way to go for sheets... pure cotton wrinkles too much.
* I wouldn't stress about vacancies if its remotely well located. It will rent.
* You'll be responsible for Electricity and Wifi, toilet paper, shampoo, body wash, dishwashing liquid etc but this can easily be covered by your Airbnb takings.
* Sometimes finding cleaners isnt easy. Be prepared you may need to pay them quite well.
* Recommend tiled or timber planked floors over carpet, because carpet can get dirty easily.

Now my confession. (And please... no haters! I'm sharing this for everybody to see what could go through somebody's mind.) If I was to do it, I would probably do it on the quiet. The landlord is making it available for rent and I will pay the rent... and in turn I will use that property to make money. If I were to do it I would personally limit myself to a smaller property as anything bigger I feel would be more risky... don't want parties etc. But yes... doing it for multiple properties would definitely be doable and viable.

Posting on a forum like this full of landlords obviously you'll get a response of many people against it. I suppose if it was posted on a tenant's forum the responses would be quite different. Airbnb hosts have their own forum too... so you could go and see what other hosts think (by the way, I havent looked up this question on that forum!)

For a place I owned, I expressively said in the ad that the tenant could sublet one of the rooms for an extra payment of something like an extra $50 a week to me. Which would actually make that rental yield quite excellent to me without the extra work on my part.
So if you can find a landlord that says its ok and its located somewhere where it would work... yes. Definitely. Otherwise you'd have to look to do it possibly on the quiet. I don't know if doing this would get you on a tenant database if found out... I guess it probably wouldn't as you are paying the rent but I don't know for sure.

I would assume minimal extra damage would be done to the place, I certainly haven't had any long term property damage from Airbnbing except for dirtier carpets than normal which I got steamed cleaned.

The property will always be well presented between guests and I suppose landlords can be happy with that aspect!

 

some interesting points there @Gockie

personally i think airbnb can only work from a reasonably hands off POV if the property is mid-highish range. Someone paying say $250-500/night is less likely to have an issue with a $120-150 cleaning charge and even if you had to pay a bit extra as a host, the revenue brought in would justify it. of course downside to this is that it will require a larger initial capital outlay not only for the purchase but the furniture etc.


i dont have any experience as an airbnb host but from a commercial POV i can see why some people doing lower price rentals choose to clean and wash themselves, the margins are tighter. for me im far too lazy so this wouldnt be an option.

 

Note, airbnb allows a "cleaning fee" added to the cost of the stay. As a host you can make that whatever you like. Typically it makes sense to have that on a whole house rental, and its not typically common on a room only or shared room type situation.
I also have a bond on my 2 properties, (roughly equal to a night's stay), but have never claimed on it yet.

 

Does it go to a tribunal somewhere if there's a dispute over whether that bond should be claimed? How would that work if the visitors are from interstate/overseas

 

You just make a claim to Airbnb... note I said I hadnt actually claimed on it though. The stuff I read on Airbnb says you need to request the bond within a day of the guest checking out.
I note that you tend to interact with guests quite a bit before they book and they are honest! I had one guy accidently taking some of my breakfast stuff and he asked how he could return it, another guest who accidently took an umbrella with her and only realised at the airport, another who broke another umbella but replaced it himself, and another that was extremely tall like, possibly over 2 metres) and broke the lightbulb in the laundry with his head! They all fessed up and were willing to pay to replace. (Ps. I actually felt bad for the guy with his head breaking the lightbulb... omg!)

Then just a week ago I had a guy and his new wife staying at my place for their honeymoon and left me a full on arrangement of flowers, and plenty of other guests have been leaving me gifts, can be local food (some wonderful stuff!) or just other souvenir items from their home countries. I also love the touching notes and comments that guests leave me.
Heaps of fantastic guests.

If you run it more as a job you might lose some of this personal touch, but, the profits are also to be had...

 

It certainly isn't allowed if you don't disclose it. Of course, if you disclose it, the landlord wouldn't be all too happy.

 

If you want to compare it, then it would be closer to someone borrowing someone's car (eg http://www.carnextdoor.com.au/), then using that as a uber taxi.

Most uber drivers use their own car, so AirBnB'er using their own property are fine, its more about the issue where you rent the property then airbnb it.

Alternatively, an uber driver could probably rent a car for $50 daily, but im sure the insurance clauses would screw them over.

 

What if you set up a Airbnb management company that recruits landlords and manages the listing for them on Airbnb? Landlord (and owner occupiers) needs to have all the insurances in place; you're not tied down to a lease; and you take a share of cream on top.

Bit similar to people who help other people manage eBay listings. There's a lot of lazy people out there, or those that just don't have the know-how to do it themselves.

You could even set up a separate company that leases out furniture, for the places that are unfurnished.