9 ms·

Secrets of running a six-figure Airbnb business

69 points by weu 13y ago

cylinder 13y ago
I don't know why this is getting so much media attention as if it's some new innovative concept. Airbnb is just a new marketing platform for these types of listings. I've subleased two apartments multiple times using Craigslist alone (free, and I can use my judgment to screen for ideal tenants). Sites like HomeAway have done vacation rentals for a long time. Serviced apartments and extended stay hotels have existed for ages, allowing short-term stays and short leases, usually targeted towards corporate employees who are temporarily on assignment or relocating. It's not a new industry at all, but inside the tech echo chamber people want to act like it is so they can pat themselves on the back for their "disruption."
- pbreit 13y ago
  Yeah, I was going to say that vacation rentals have been around since people lived in caves. The surprise isn't so much that money can be made but that people are rather brazen about breaking lease terms and laws (which I believe are reasonable; who wants an everchanging parade of random, unvetted people traipsing through the hallways?).
  - seanmcdirmid 13y ago
    Most people never really technically lived in caves, its only most artifacts of stone age people that wasn't washed away with time was found in caves. That being said, I'm sure you can find a cave-based Airbnb rental. [1] [1] https://www.airbnb.com/wishlists/stay-in-a-cave https://www.airbnb.com/wishlists/stay-in-a-cave
  - tomg 13y ago
    Someone's renting their place out on airbnb or similar in my building (in NYC) and it kinda sucks. Most people are just rude but otherwise uneventful, but some are noisy, some smoke outside my window, some can't figure out how trash works. Some lock themselves out at 4:30am and buzz and bang on my window until I let them in since my buzzer is the only one that works. Not sure what to do.
    - cylinder 13y ago
      Make a fuss with the landlord. The standard lease agreement in NYC requires landlords to be informed of subleases in writing. They can object with a reasonable basis.
      - greenyoda 13y ago
        If someone who I didn't know was banging on my window at 4:30am asking to get into my building, I'd call the cops.
        tomg 13y ago
        Heh, yeah I mean people do get locked out though sometimes... gotta do the neighborly thing. Calling the LL / Calling the cops are a bit more of a nuclear option that I'm looking for; I just want to find out who's doing it so I can discretely ask them to inform their renters of a few things. I don't want to see airbnb go away :)
  - stevenwei 13y ago
    I imagine a major difference is that most vacation rentals are rented out by the owner of the unit, whereas it seems like a lot of Airbnb rentals are being offered by tenants who are under existing rental agreements (which likely stipulate they can't sublease without permission from the landlord).
- Irishsteve 13y ago
  It makes things a little easier; you can have payments managed by airbnb, bookings, and support
  - cylinder 13y ago
    Sure, it's an improvement but it's not disruptive or a game-changer. One thing most NYers don't realize is that if you sublease to someone and there's proof (agreement, payment record etc), they can squat in your place and not pay any rent. You will have to use the courts to evict just as any other landlord must. In NYC this will take up to 8 months. You can't just get the police to throw them out.
    - geebee 13y ago
      I am fascinated with your second comment. I've asked this question on HN before as well, though my focus was on San Francisco rather than NYC. What happens if the airbnb tenant does pay rent, but insists that he or she is now a long term tenant governed by SF landlord-tenant law. Tenant protection laws are very strong in SF, and typically require some kind of "cause" for eviction. If San Francisco courts do not recognize the legality of a short term rental agreement, what would they do with it? I'm not a lawyer at all, these are just questions... but would the courts allow the tenant to remain as a long term tenant? How would the calculate the rent? Would they simply disregard unenforceable provisions and default to existing law? Does anyone know if this has been litigated?
      - pavel_lishin 13y ago
        IANAL, but I think that there is a minimum period of time required before one becomes a long-term tenant - and it's something on the order of a month or three.
        Arelius 13y ago
        I think that's true. But I think it's much shorter at least in SF. Something on the order of 15 days to a month.
- larrys 13y ago
  "I don't know why this is getting so much media attention as if it's some new innovative concept." Well for one thing a fancy web 2.0 site [1] and airbnb is filled with pictures of hip looking people and the same place on airbnb just looks better than it would on homeaway. Everything about it (presentation wise) is nicer. Things like that shouldn't matter but they do matter to people. More or less puts a halo around the property being offered. Right now, looking on the homepage at airbnb I see "New York, London, Paris, San Francisco, Sydney, Tokyo" even those city names (in the mind of a browser) will add value. (The halo of those names. Similar to how a watch company wants to hire a famous golfer etc.) [1] Which even I will have to agree gives a better experience or shine to the whole process.
- j-g-faustus 13y ago
  I think it's similar to eBay: eBay didn't invent "buying and selling stuff", but it was still disruptive e.g. to classified ads in local newspapers. It's a limited form of disruption, but still disruption. Airbnb is potentially disruptive in the same way as early eBay, by providing a larger market (more options for buyers, more customers for sellers), and by inserting themselves as a trusted intermediate (potentially increasing convenience and trust in the marketplace, which can lead to a larger total market - more people engaging in short-term rentals when the process becomes more convenient). One model of technical innovation: Once in a great while there is a major technical innovation, but to become a product in widespread use the 'technical' innovation (inventing a new type of product, say "horseless carriages") needs decades worth of 'process' innovation (making the product simpler and cheaper to produce, e.g. Henry Ford's assembly lines, and making it easier to use, e.g. by standardizing the controls for steering/braking/etc across all cars). In this model, Airbnb is, or could be, a process innovation that makes short-term rentals a viable option for more people. If it succeeds - too early to tell, but looking good so far - it would be a disruption in that sense.
throwmeaway2525 13y ago
My guess: now, profitability. Later, competition (and intervention).
- JonFish85 13y ago
  Hotel taxes will probably make it not worth the hassle. That, or the landlords / HOA will be much more strict about this sort of a thing.
  - toomuchtodo 13y ago
    So what you're saying is I should make a startup to provide aggregated hotel tax and HOA/local jurisdiction information over JSON based on physical address. Y Combinator here I come! /s
    - rebel 13y ago
      I'd wager that's a better idea than many of the other pitches I hear
      - deleted 13y ago
        [deleted]
      - deleted 13y ago
        [deleted]
beambot 13y ago
> Making a Living in the Sharing Economy Ephemeral landlords are a farcical interpretation of the "sharing" economy.
nostromo 13y ago
A night at a hotel is so much more expensive than a night at an apartment. That arbitrageurs would find and exploit this loophole seems obvious in retrospect. This invisible hand is pushing up the cost of an apartment, and down the cost of a hotel room. People talk a lot about the downsides of Airbnb on HN, but there's also a big upside -- increased mobility. When I was 20 I would have loved a worldwide leaseless exchange for furnished apartments, both short-term and long.
- megablast 13y ago
  In my experience, of looking around hotels in Europe and Australia, there have always been better value hotels than airbnb apartments. All the Airbnb places were not cheap at all, and were going for the more expensive crowd. They were mostly out of the way, whereas we got some great hotels in the city.
  - kitcar 13y ago
    I've had the same experience in major American cities - hotels being cheaper than AirBnB - but only when looking at full apartment rentals on AirBnB. You can (obviously) usually rent a couch cheaper than a hotel room, but that's not really comparing apples to apples. That being said, both AirBnB and hotels make it difficult to compare their prices "apples to apples" as hotels tend not to include taxes and service fees in their posted prices / AirBnB tends not to include cleaning fees (last time I checked)
- DougWebb 13y ago
  That arbitrageurs would find and exploit this loophole seems obvious in retrospect. This invisible hand is pushing up the cost of an apartment, and down the cost of a hotel room. What we need now is software that can find apartments for rent and people looking for a place to stay, offer to rent the apartment for a bit less than the owner wants and offer to rent it to the people for a bit more than they're looking to pay, pocketing the difference and doing this hundreds of times per second. This will provide "liquidity" and make the AirBnB market "more efficient".
  - deleted 13y ago
atwebb 13y ago
It seems that people are just prodding local governments to intervene here. I'm guessing there's going to be a lot of "That was good while it lasted" posts in a year or two.
- baddox 13y ago
  It seems like it's only getting easier for people to voluntarily organize these apartment-sharing or -renting deals. If it's not through AirBnB, it's Craigslist, or any number of online competitors. Governments can and probably will try to crack down, but I think they're on the losing side of this battle. And I hope I'm right.
Mikeb85 13y ago
This is illegal in many parts of North America and the world, and certainly against nearly all rental contracts... With news like this getting out with increasing regularity, I don't think it's going to last long...
- HeyLaughingBoy 13y ago
  True and it's interesting for reasons I haven't seen mentioned yet. When I was a landlord I remember having two tenants who were subletting the house. I didn't care, in fact I specifically told them that I didn't want to know about anyone not on the lease. My reasoning was that if they wanted to have a few friends live there and split the rent, it meant they would have no problem paying me every month. However, I wanted to limit the damage liability to just the two official ones. Now, if I knew they were subletting through AirBnB and making multiples of what they were paying in rent, I'd have to ask myself why I needed them and why I shouldn't just do the same when their lease was up.
davidedicillo 13y ago
Interesting. The first 6 months I lived in SF I was able to pay my rent by renting on Airbnb the I apartment I was still renting in Miami.
peter303 13y ago
No big secret. Just another small business man evading all kinds of taxes, like tourism tax and income tax. These together can reach close to 50% of revenue. Wait until the IRS sticks its fingers in the "sharing economy". It already requires amazon and ebay to issue 1099-Ks for "large users", defined as $20K or more of gross revenue a year.
- rhizome 13y ago
  I see it as a tit-for-tat for the reality of huge companies paying little or no taxes. Democratizing tax shelters, so to speak. See also: http://en.wikipedia.org/wiki/Double_Irish_arrangement http://en.wikipedia.org/wiki/Double_Irish_arrangement
- eigenvector 13y ago
  You didn't read the article, did you? "Airbnb installed a pop-up window on its site to remind hosts that they should follow their local laws when they register, and Bradley plans on paying San Francisco’s 14% hotel tax (that's on top of the 3% that Airbnb charges for payment processing). Airbnb sends its hosts 1099s so they can pay taxes on what they earn, and he also plans to pay income tax on his Airbnb revenue."
  - tossmeup 13y ago
    That'll cover it. The IRS will stand down now. Thanks! abnb know they are on pretty thin ice and I am starting to think the bubbling of this trope on HN is a marketing scheme by some people who bought a bunch of apartments and want to unload them on the "new 49ers." 6 FIGURES! Then down at the bottom... "It's a business. It's a hustle. You gotta stay on top of it." Sounds eerily like the MLM pitch. You make your hours! Run your own business! Get rich! Someone starts pitching that there will be landlord collectives and network payments... just get some friends in who you want to share the good fortune with! Or in layman's terms, you are about to give up a dream job to become an inn-keeper who can't afford, due to your lack of economies of scale, to hire the maids, concierge's etc. abnb offers a mostly non-frills stay at a place where only the bottom line matters. Most hotels offer a value proposition outside of a narrow range of clientele. abnb fixes a problem for rich kids. $150/night? Hostels and shit. This is barely a temporary disruption. How many times do you want to wash someone else's sheets and towels before you figure out that $1000/mo ain't that much money given how much time you spend. If you start making 6 figures by playing monopoly IRL, the IRS will step in, local regulation will step in, and that arbitrage evaporates. Now, you're trying to dump an apartment into a glutted market.
baddox 13y ago
> and they [city officials] argue Airbnb hosts owe occupancy taxes, which assure tourists pay their fair share for police, street cleaning, and other public services they use while in town. I don't think that argument makes sense. Each apartment is being paid for in the same way it would be if the actual owner lived there.
chourobin 13y ago
Managing 6 apartments and taking that kind of risk (90% occupancy) seems like an awful lot of work for this kind of return.
- avenger123 13y ago
  His sunk costs seem to be low. As long as he actually doesn't buy the apartments and do this, the risks are small. Worst case scenario is he terminates his leases and he's back to square one. This is a dream real estate scenario. No mortgage, and really high cash flow every month. The risk is that as more people do what he is doing, supply will increase and prices will go down which will likely make his cashflow equal his lease payments.

69 points by weu 13y ago

I don't know why this is getting so much media attention as if it's some new innovative concept. Airbnb is just a new marketing platform for these types of listings. I've subleased two apartments multiple times using Craigslist alone (free, and I can use my judgment to screen for ideal tenants). Sites like HomeAway have done vacation rentals for a long time. Serviced apartments and extended stay hotels have existed for ages, allowing short-term stays and short leases, usually targeted towards corporate employees who are temporarily on assignment or relocating. It's not a new industry at all, but inside the tech echo chamber people want to act like it is so they can pat themselves on the back for their "disruption."

pbreit 13y ago
Yeah, I was going to say that vacation rentals have been around since people lived in caves. The surprise isn't so much that money can be made but that people are rather brazen about breaking lease terms and laws (which I believe are reasonable; who wants an everchanging parade of random, unvetted people traipsing through the hallways?).
- seanmcdirmid 13y ago
  Most people never really technically lived in caves, its only most artifacts of stone age people that wasn't washed away with time was found in caves. That being said, I'm sure you can find a cave-based Airbnb rental. [1] [1] https://www.airbnb.com/wishlists/stay-in-a-cave https://www.airbnb.com/wishlists/stay-in-a-cave
- tomg 13y ago
  Someone's renting their place out on airbnb or similar in my building (in NYC) and it kinda sucks. Most people are just rude but otherwise uneventful, but some are noisy, some smoke outside my window, some can't figure out how trash works. Some lock themselves out at 4:30am and buzz and bang on my window until I let them in since my buzzer is the only one that works. Not sure what to do.
  - cylinder 13y ago
    Make a fuss with the landlord. The standard lease agreement in NYC requires landlords to be informed of subleases in writing. They can object with a reasonable basis.
    - greenyoda 13y ago
      If someone who I didn't know was banging on my window at 4:30am asking to get into my building, I'd call the cops.
      - tomg 13y ago
        Heh, yeah I mean people do get locked out though sometimes... gotta do the neighborly thing. Calling the LL / Calling the cops are a bit more of a nuclear option that I'm looking for; I just want to find out who's doing it so I can discretely ask them to inform their renters of a few things. I don't want to see airbnb go away :)
- stevenwei 13y ago
  I imagine a major difference is that most vacation rentals are rented out by the owner of the unit, whereas it seems like a lot of Airbnb rentals are being offered by tenants who are under existing rental agreements (which likely stipulate they can't sublease without permission from the landlord).
Irishsteve 13y ago
It makes things a little easier; you can have payments managed by airbnb, bookings, and support
- cylinder 13y ago
  Sure, it's an improvement but it's not disruptive or a game-changer. One thing most NYers don't realize is that if you sublease to someone and there's proof (agreement, payment record etc), they can squat in your place and not pay any rent. You will have to use the courts to evict just as any other landlord must. In NYC this will take up to 8 months. You can't just get the police to throw them out.
  - geebee 13y ago
    I am fascinated with your second comment. I've asked this question on HN before as well, though my focus was on San Francisco rather than NYC. What happens if the airbnb tenant does pay rent, but insists that he or she is now a long term tenant governed by SF landlord-tenant law. Tenant protection laws are very strong in SF, and typically require some kind of "cause" for eviction. If San Francisco courts do not recognize the legality of a short term rental agreement, what would they do with it? I'm not a lawyer at all, these are just questions... but would the courts allow the tenant to remain as a long term tenant? How would the calculate the rent? Would they simply disregard unenforceable provisions and default to existing law? Does anyone know if this has been litigated?
    - pavel_lishin 13y ago
      IANAL, but I think that there is a minimum period of time required before one becomes a long-term tenant - and it's something on the order of a month or three.
      - Arelius 13y ago
        I think that's true. But I think it's much shorter at least in SF. Something on the order of 15 days to a month.
larrys 13y ago
"I don't know why this is getting so much media attention as if it's some new innovative concept." Well for one thing a fancy web 2.0 site [1] and airbnb is filled with pictures of hip looking people and the same place on airbnb just looks better than it would on homeaway. Everything about it (presentation wise) is nicer. Things like that shouldn't matter but they do matter to people. More or less puts a halo around the property being offered. Right now, looking on the homepage at airbnb I see "New York, London, Paris, San Francisco, Sydney, Tokyo" even those city names (in the mind of a browser) will add value. (The halo of those names. Similar to how a watch company wants to hire a famous golfer etc.) [1] Which even I will have to agree gives a better experience or shine to the whole process.
j-g-faustus 13y ago
I think it's similar to eBay: eBay didn't invent "buying and selling stuff", but it was still disruptive e.g. to classified ads in local newspapers. It's a limited form of disruption, but still disruption. Airbnb is potentially disruptive in the same way as early eBay, by providing a larger market (more options for buyers, more customers for sellers), and by inserting themselves as a trusted intermediate (potentially increasing convenience and trust in the marketplace, which can lead to a larger total market - more people engaging in short-term rentals when the process becomes more convenient). One model of technical innovation: Once in a great while there is a major technical innovation, but to become a product in widespread use the 'technical' innovation (inventing a new type of product, say "horseless carriages") needs decades worth of 'process' innovation (making the product simpler and cheaper to produce, e.g. Henry Ford's assembly lines, and making it easier to use, e.g. by standardizing the controls for steering/braking/etc across all cars). In this model, Airbnb is, or could be, a process innovation that makes short-term rentals a viable option for more people. If it succeeds - too early to tell, but looking good so far - it would be a disruption in that sense.

throwmeaway2525 13y ago

My guess: now, profitability. Later, competition (and intervention).

JonFish85 13y ago
Hotel taxes will probably make it not worth the hassle. That, or the landlords / HOA will be much more strict about this sort of a thing.
- toomuchtodo 13y ago
  So what you're saying is I should make a startup to provide aggregated hotel tax and HOA/local jurisdiction information over JSON based on physical address. Y Combinator here I come! /s
  - rebel 13y ago
    I'd wager that's a better idea than many of the other pitches I hear
    - deleted 13y ago
      [deleted]
    - deleted 13y ago
      [deleted]

beambot 13y ago

> Making a Living in the Sharing Economy Ephemeral landlords are a farcical interpretation of the "sharing" economy.

nostromo 13y ago

A night at a hotel is so much more expensive than a night at an apartment. That arbitrageurs would find and exploit this loophole seems obvious in retrospect. This invisible hand is pushing up the cost of an apartment, and down the cost of a hotel room. People talk a lot about the downsides of Airbnb on HN, but there's also a big upside -- increased mobility. When I was 20 I would have loved a worldwide leaseless exchange for furnished apartments, both short-term and long.

megablast 13y ago
In my experience, of looking around hotels in Europe and Australia, there have always been better value hotels than airbnb apartments. All the Airbnb places were not cheap at all, and were going for the more expensive crowd. They were mostly out of the way, whereas we got some great hotels in the city.
- kitcar 13y ago
  I've had the same experience in major American cities - hotels being cheaper than AirBnB - but only when looking at full apartment rentals on AirBnB. You can (obviously) usually rent a couch cheaper than a hotel room, but that's not really comparing apples to apples. That being said, both AirBnB and hotels make it difficult to compare their prices "apples to apples" as hotels tend not to include taxes and service fees in their posted prices / AirBnB tends not to include cleaning fees (last time I checked)
DougWebb 13y ago
That arbitrageurs would find and exploit this loophole seems obvious in retrospect. This invisible hand is pushing up the cost of an apartment, and down the cost of a hotel room. What we need now is software that can find apartments for rent and people looking for a place to stay, offer to rent the apartment for a bit less than the owner wants and offer to rent it to the people for a bit more than they're looking to pay, pocketing the difference and doing this hundreds of times per second. This will provide "liquidity" and make the AirBnB market "more efficient".
- deleted 13y ago

atwebb 13y ago

It seems that people are just prodding local governments to intervene here. I'm guessing there's going to be a lot of "That was good while it lasted" posts in a year or two.

baddox 13y ago
It seems like it's only getting easier for people to voluntarily organize these apartment-sharing or -renting deals. If it's not through AirBnB, it's Craigslist, or any number of online competitors. Governments can and probably will try to crack down, but I think they're on the losing side of this battle. And I hope I'm right.

Mikeb85 13y ago

This is illegal in many parts of North America and the world, and certainly against nearly all rental contracts... With news like this getting out with increasing regularity, I don't think it's going to last long...

HeyLaughingBoy 13y ago
True and it's interesting for reasons I haven't seen mentioned yet. When I was a landlord I remember having two tenants who were subletting the house. I didn't care, in fact I specifically told them that I didn't want to know about anyone not on the lease. My reasoning was that if they wanted to have a few friends live there and split the rent, it meant they would have no problem paying me every month. However, I wanted to limit the damage liability to just the two official ones. Now, if I knew they were subletting through AirBnB and making multiples of what they were paying in rent, I'd have to ask myself why I needed them and why I shouldn't just do the same when their lease was up.

davidedicillo 13y ago

Interesting. The first 6 months I lived in SF I was able to pay my rent by renting on Airbnb the I apartment I was still renting in Miami.

peter303 13y ago

No big secret. Just another small business man evading all kinds of taxes, like tourism tax and income tax. These together can reach close to 50% of revenue. Wait until the IRS sticks its fingers in the "sharing economy". It already requires amazon and ebay to issue 1099-Ks for "large users", defined as $20K or more of gross revenue a year.

rhizome 13y ago
I see it as a tit-for-tat for the reality of huge companies paying little or no taxes. Democratizing tax shelters, so to speak. See also: http://en.wikipedia.org/wiki/Double_Irish_arrangement http://en.wikipedia.org/wiki/Double_Irish_arrangement
eigenvector 13y ago
You didn't read the article, did you? "Airbnb installed a pop-up window on its site to remind hosts that they should follow their local laws when they register, and Bradley plans on paying San Francisco’s 14% hotel tax (that's on top of the 3% that Airbnb charges for payment processing). Airbnb sends its hosts 1099s so they can pay taxes on what they earn, and he also plans to pay income tax on his Airbnb revenue."
- tossmeup 13y ago
  That'll cover it. The IRS will stand down now. Thanks! abnb know they are on pretty thin ice and I am starting to think the bubbling of this trope on HN is a marketing scheme by some people who bought a bunch of apartments and want to unload them on the "new 49ers." 6 FIGURES! Then down at the bottom... "It's a business. It's a hustle. You gotta stay on top of it." Sounds eerily like the MLM pitch. You make your hours! Run your own business! Get rich! Someone starts pitching that there will be landlord collectives and network payments... just get some friends in who you want to share the good fortune with! Or in layman's terms, you are about to give up a dream job to become an inn-keeper who can't afford, due to your lack of economies of scale, to hire the maids, concierge's etc. abnb offers a mostly non-frills stay at a place where only the bottom line matters. Most hotels offer a value proposition outside of a narrow range of clientele. abnb fixes a problem for rich kids. $150/night? Hostels and shit. This is barely a temporary disruption. How many times do you want to wash someone else's sheets and towels before you figure out that $1000/mo ain't that much money given how much time you spend. If you start making 6 figures by playing monopoly IRL, the IRS will step in, local regulation will step in, and that arbitrage evaporates. Now, you're trying to dump an apartment into a glutted market.

baddox 13y ago

> and they [city officials] argue Airbnb hosts owe occupancy taxes, which assure tourists pay their fair share for police, street cleaning, and other public services they use while in town. I don't think that argument makes sense. Each apartment is being paid for in the same way it would be if the actual owner lived there.

chourobin 13y ago

Managing 6 apartments and taking that kind of risk (90% occupancy) seems like an awful lot of work for this kind of return.

avenger123 13y ago
His sunk costs seem to be low. As long as he actually doesn't buy the apartments and do this, the risks are small. Worst case scenario is he terminates his leases and he's back to square one. This is a dream real estate scenario. No mortgage, and really high cash flow every month. The risk is that as more people do what he is doing, supply will increase and prices will go down which will likely make his cashflow equal his lease payments.