3 ms·
For Airbnb this is a very smart move. Airbnb knows demand and supply extremely well and is poised to be able to offer some very highly leveraged financial prod
by resters 8y ago
For Airbnb this is a very smart move. Airbnb knows demand and supply extremely well and is poised to be able to offer some very highly leveraged financial products to fund the buildout.
This is in my opinion the most significant initiative being done by any SV or YC company. By significant I mean that it promises to end a lot of market failures and disrupt a lot of big players.
At the risk of making this comment too long for casual readers, I'll elaborate:
Consider the incentives for developers. They buy and develop plots of land or existing distressed properties with the goal of bundling as many profitable sales into the same heavily subsidized financing event.
When the developer sells a property for $500K there may be $250K in the land, $100K in the structure, and another $150K in things like appliances, furnishing, HVAC, etc.
The sale is largely emotional and is driven by the way it is legal to bundle all those add-ons into the subsidized financing. This fact alone explains much about the housing bubble. The $150K worth of bundled items are worth $75K after they have been used for a week.
The buyer consents to this because it's the cheapest way to finance a luxurious lifestyle, even though it's marked up significantly. As long as the market keeps going up, the buyer doesn't get bitten by it.
Airbnb knows which parts of the financing bundle make sense for long term value and which can be most profitably leveraged when the unit is used as an Airbnb listing.
If you think of a rental property simply as an asset, you want the kitchen renovated periodically to maximize the market value of the listing. Landlords with 12 month leases, mortgage companies with 30 year mortgages, and most notably real estate brokers with <30 day commissions have no incentive to maximize any of those elements, and have plenty of incentive simply to maximize the amount financed.
Airbnb's interests align perfectly with home buyers on this, in a way that the incumbents' do not.
If this takes off at scale it will reduce profits for realtors, builders, developers, and interior decorators/furniture sellers. It's a pretty amazing opportunity that uniquely maximizes the value of Airbnb's data. Wow.