Airbnb is changing the face of the hotel and rental industry. In fact, many people are opting to rent their units through Airbnb, straying away from the traditional tenant and landlord relationship. In cities such as Los Angeles and San Francisco, where rent control is strict, Airbnb has been used as an effective way to deal with rent control regulations.
WHAT IS AIRBNB?
Founded in 2008, Airbnb (aka Air Bed & Breakfast) is an online marketplace for people to list their property for short term rental. It offers travelers the comfort of staying in a home like environment rather than a hotel at an, oftentimes, more affordable price. In addition, it gives property owners a way to make extra money when they’re not using their properties. It’s easy to say it is a win-win situation.
HOW AIRBNB WORKS?
Owners can create a listing on the Airbnb website, specifying the location, price, date available, and all other terms of the rental. Guests will book through the website and owners will be notified of the booking. Owners can do their due diligence before accepting the booking.After the guest checks in, owners are paid automatically via Paypal, direct deposit, or money wire. Airbnb will take a 3% service fee per transaction.
If there are accidental damages to the property or the guests, Airbnb offers a free Host Protection Insurance, which will protect owners from liability claims up to a million dollars.
WHAT’S HAPPENING WITH AIRBNB?
Currently, Airbnb is unregulated, causing a series of uproars in high density cities such as San Francisco and New York City, claiming that the company is driving up rental prices in these areas. Several lawsuits have been placed, but none have proven to affect the company.
In recent time, many property owners have successfully rented out all their properties using Airbnb, earning a lot more money than they would the traditional way, especially in rent controlled areas. Although the surplus is quite impressive, many critics are concerned over the uncertainty and risks pertaining to the frequency of rental bookings.
There are also concerns about renting property to a complete stranger and the dangers that may pose. Airbnb has taken measures, allowing property owners to request government issued IDs from potential guests to verify their identity. There is also a review system in place on the website that will give owners an idea of who they may be renting to.
SHOULD YOU USE AIRBNB?
There is no clear answer here. There are always pros and cons to every method of rental. In the case of an Airbnb rental, property owners should be aware of all the risks, such as property damages, income risks, safety risks, etc. If dealt with improperly, these risks may become a huge financial burden on the owner.
Also, owners should keep in mind that Airbnb does require a lot of management and upkeep. If the property is in high demand, Airbnb rental may indeed become a full time ordeal. This may be an overwhelming process for a property owner who is starting out in the Airbnb rental business. Some property owners, renting several units, have opted for Airbnb property management companies that will deal with the process entirely. Keep in mind that property management companies may charge you a hefty fee for such hands-on services.
In addition, if you’re looking to possibly sell your property down the line, Airbnb may pose a problem. Owners should keep thorough track of the income and costs of running the business. Oftentimes, lender will not consider Airbnb income unless an owner can prove the income is consistent over at least a one year period.
Overall, Airbnb may be a great way for property owners to make extra money or get around the tight rent control regulations; however, there are always risks that should be considered. If you’re interested in learning more ways around rent control, please give us a call at 818.915.9118 or send us an email!