Sunday, February 21, 2016

"Will Real Estate Investors Take Over Airbnb?

From Priceonomics:
In 2012, Jon Wheatley bought a $40,000 apartment in Las Vegas so that he could rent it out on Airbnb

“I was surprised by just how cheap real estate was in Las Vegas,” says the British-born Wheatley. “I didn’t want to live in Vegas, and I wasn’t planning on being there very much. So when I looked at Airbnb, it looked almost too good to be true.” 

Wheatley looked at the rates of similar apartments on Airbnb, and he decided that the apartment could pay for itself. He bought the flat and spent 3 weeks and $10,000 on furniture and renovations. After a year of remotely renting out the apartment, he says, he’d made $13,000 in profit. 
When we ask if he recommends doing this, he replies, “One hundred percent. The model definitely works.”

In only 8 years, Airbnb’s premise—to allow someone to host a business traveler in a spare bedroom, or a family to rent their apartment to tourists while they’re out of town—has made it a $25 billion company. Co-founder Brian Chesky often talks about how anyone can turn extra space in their home into an asset that helps them pay their rent.

But the economics of short term rental sites Airbnb and VRBO also appeal to people who do not live in the house or apartment they rent out. This includes go-getters like Wheatley, as well as professional real estate investors. As a real estate crowdfunding platform, we at RealtyShares have experienced this increased interest firsthand. 

Outside the real estate scene, however, this development has not been met with a positive reaction. In cities like San Francisco and New York, where housing is a scarce, politicized resource, the prevalence of property owners renting out multiple apartments has inspired protests, critical press, and the attention of regulators and lawmakers.

What’s missing from the already fractious debate over Airbnb, however, is the fact that the big players in the real estate market aren’t involved. At least, they aren’t involved yet.

Companies like AvalonBay and Camden Property Trust own tens or hundreds of thousands of units, and they spend hundreds of millions of dollars buying and constructing residential buildings. These companies normally rent out apartments to people who sign year-long leases. But they could instead rent them out on sites like Airbnb. We partnered with Priceonomics to investigate whether this real estate investing trend could spread to these big players. 
At this point, we’re seeing that the uncertainty created by municipal debates over how to regulate Airbnb is keeping major investors out of the short-term rental game. For individual investors, however, the door is more or less wide open. 

The Rise of the Professional Airbnb Investor
The financial benefit of an Airbnb property is clear to investors. They can make more money from short term rentals for the same reason you typically spend more on lodging while you’re traveling than you do on rent. 

So how many professional real estate investors list apartments on Airbnb? And how large are their businesses?

The best way to see whether there is a big trend of professional investors using Airbnb would be to see how many hosts rent out multiple properties on the site. (After all, most people don’t have that many homes.) That kind of data, however, is hard to come by. The presence of professionals is a matter of controversy, which has made Airbnb selective about the information it shares....MORE