At Landlord by Design we have received a lot of questions about AirBNB or similar services. The reality is the AirBNB model has been around for a lot longer than the company named AirBNB. What AirBNB has done is brought new technology to the concept to make it easy for many people to cash in on renting rooms, homes, or any type of living space. They have also brought new ideas to the forefront that have captured the imaginations of many people all over the world. For example: Before AirBNB the owners of a tree house in Brazil may have found it hard to rent it out. Now (click link here) they can.

In the time before the internet and airBNB, people still rented space in there homes, however, it was not as easy to reach a mass audience. What AirBNB and companies like them did, was make it easy and cool to rent space and make money.

In my region there are two main companies cashing in on the AirBNB concept. They are companies set up to manage other people’s airBNB’s, also to help developers fill vacant units. These and other business’s like it have been created due to the popularity of AirBNB. Check out Host Often vacation rental management and also Oversea vacation rentals.

The question I often get asked, is if AirBNB is a good idea. To answer that, I say it depends. With any real estate venture you need to have a goal.

Ask yourself the following questions:

• Why do I want to rent space?
• How much money do I want to make, and in what time frame?
• How much work am I willing to do?
• Do I have a desirable space to rent out (both location and quality are important factors)?
• Do I have the time and or commitment it takes to run a short term rental space?
• Do I know the building / condo corporation / landlord / zoning or by-law regulations pertaining to short term rentals in my area?
• Do I know the impact it will have on my insurance premiums / do I have the correct coverage for short term rentals?
• Do I want strangers in my home on a frequent basis, also will my neighbors be OK with strangers in the area?
• Do you know the tax laws in the area you live in?
• Have you checked with a tax accountant about potential positive or negative impacts having a short term rental will have on your personal finances or taxes you will have to pay.

Once you have completed your research and decide to go forward, you will then need to make a plan, set goals and execute the plan. The plan needs to be realistic.

I was speaking to a defeated airBNB host a while ago. She complained that she found it really hard to have the airBNB room ready to go on short notice while working a full time job and raising children. She said she would like to hire a cleaner, but it would cost too much, since the room has to be up to five star hotel standards (usually takes 2 – 3 hours once you consider washing sheets, towels, dusting, lint rolling the bed and making sure the room is spotless and hair free.) The room was just a single room and a bathroom in her basement, and not in a highly desirable location. She asked what she was doing wrong, since she heard about so many people making lots of money with AirBNB.

I explained that she was not doing anything wrong, and that it does take a lot of work. The truth is that in real estate investing the margins are thin. The way to increase revenue is by shortening the terms or increasing the amenities and of course location, location, location. It is true that AirBNB allows you to do this, however, the trade off is more work. If the cost of the additional work required (such as a cleaner) cannot be recovered by additional revenue, then either you have to do the extra work or change the model.

In this case I suggested that she either rents longer term (once you get above 30 days, everything changes) or set a minimum amount of days rental along with a cleaning fee. It is quite common for short term rentals to charge a $100 cleaning fee. This might sound expensive if someone is planning to spend one night, however, if they plan to spend 5 nights, it is basically $20 per day (not a bad deal especially if the nightly rate is $80)

The next step if she chooses to rent short term would be to find a reliable cleaner (click here for an example), buy an extra complete set of bedding and towels to switch out between quests, and get an electronic coded door for the entrance to the rental. Then have a guest binder (like you often see in hotel rooms) displayed in an obvious place for the guest. The binder should include your contact info, basic instructions for anything in the room such as coffee maker, toaster, blinds, etc.., house rules such as quiet times, parking location, guest policies, and of course the Wifi password.

She will also need to set goals on how many nights per month the room will be occupied, decide on incentives for longer stays (if needed) and make sure all regulations are followed to allow for the AirBNB space.

The airBNB concept is becoming controversial, and regulated over the past few years. If you are buying a property that only cash flows if used as a short term rental, make sure to have an exit strategy in case you are not allowed to use it for a short term rental in the future. Check out the following headlines about short term rentals:

• Top Cities Where AirBNB is legal or illegal
• Hotels Urge government to force Air BNB to pay up
• 10 Tips for Airbnb, HomeAway, and VRBO vacation rentals
• H&R Block Airbnb host reporting guide
• Understaning the Airbnb tax reporting process
• Province changing rules around Airbnb and other short-term accommodations rentals

If you decide to enter the world of short term accommodation, I hope you found this article helpful.

For more ideas on ways to make money in real estate click this link

Until next time,

Design your landlord experience,

Michael P Currie

If you do not have my book yet, click here now.

Photo Credit to Pixabay