We've all heard horror stories about renting out an area of your house on Airbnb, or at least about Airbnb in general. You might be wondering about the pros and cons of renting out an area of your house on Airbnb.
For example: A couple went out of town one weekend and they tried using Airbnb to rent their home out to a couple of – as they said – “nice-looking college kids.” They came home the following Monday to a dry sea of red Solo cups on the floor, along with a couple of voicemails from their neighbors wondering why they were blasting EDM all night while the rest of the neighborhood was trying to sleep.
That doesn't have to be every case, though. If you're just renting out an extra bedroom on Airbnb, you don't have to worry about problems like that —at least not to the same extent.
Renting out an area of your house on Airbnb allows you to bring in considerable cash flow while gaining cultural experience and knowledge. Beware, though, it doesn't come without drawbacks: short-term rentals aren't legal in all cities, there's an increased risk of property damage, and, finally, it's a whole lot of work.
But first let's start with the positives.
There's a popular way of gauging the risk and return of a rental property called, “The 1% Rule:” If the property's monthly rent is greater than one percent of its selling price, it's probably a good investment. If, for example, you can buy a house for $100k and rent it out for $1k, it's going to completely pay for itself in less than ten years (even with a ~10% vacancy rate).
In some areas, particularly densely-packed cities that bring in lots of tourists, renting out that house on Airbnb can blow “The 1% Rule” out of the water! Even if you don't live in a city or own a rental property, renting out part of your house on Airbnb can effectively cut your living expenses in half overnight.
Think about it: You're comparing an unfurnished long-term rental with a completely furnished house or apartment that you're already living in. People are willing to pay a premium for a temporary stay in a nice home, especially if you maintain a good rating on Airbnb.
If you want to get an idea of how much extra money you can bring in on Airbnb, do the same thing that travelers do: Compare it with the price of a hotel in the area. There's a solid chance that you'll be making anywhere from two to three times the amount that you'd be making even if you rented out the whole property.
Next, let's talk about how renting out an area of your house on Airbnb can give you some experience in...
Hundreds of thousands of travelers all across the globe use Airbnb to find cheap accommodation during their adventures, and they'll be more than happy to tell you some stories about where they've been and where they're going.
Not only will that give you plenty of stories to tell your friends, but there's also ample evidence that interacting with people of diverse cultures helps develop your own cultural intelligence, which will help you bridge the divide between dissimilar groups in your organization or social circle.
It's important to learn the customs of how people of various cultures interact if you want to communicate in a way that doesn't cause any unnecessary friction, and the only way you can really develop that cultural knowledge and intelligence is through first-hand experience. Renting out a bedroom on Airbnb can help with that.
Legality of Owning an Airbnb
San Diego, San Francisco, and New York City have, in the past, banned short-term rentals, making it illegal to rent out your home on Airbnb. Las Vegas and New Orleans are following suit, and you might be able to guess why. Noisy vacationers are turning otherwise quiet neighborhoods into college-town frat rows. Also, enterprising landlords are looking for any reason to kick out their long-term tenants in favor of the higher-paying short-term travelers.
A short list of other cities that have either completely illegalized Airbnb or placed considerable restrictions on the service include:
- Santa Monica
Make sure you know the law in your area. You might have to register your home as a separate business, particularly if you want to qualify for business insurance. Which brings me to the next con:
Risk of Owning an Airbnb
A homeowner's policy might not cover all damages related to short-term rentals, particularly if your house isn't registered as a business. Airbnb has a “Host Protection Service” that provides primary coverage for liabilities up to $1 million, but their site lists a few things that aren't covered:
- Property damage due to things like pollution or mold.
- Damage or injury from something done intentionally (not an accident).
- Loss of earnings.
Personally, the second one is what I'd be most worried about. If AirBnb decides to claim that property damage was not the tenant's fault but rather your own negligence, there's little recourse.
Work of Owning an Airbnb
You were probably reading through my description about how Airbnb can potentially triple the return on investment from a rental property, thinking to yourself, “Why doesn't everybody do this? It's easy money!”
Well, that's because it isn't easy money. Renting on Airbnb can quickly become a full-time job. You're going to need to keep your house presentable at all times. If you're a pack-rat with a penchant for leaving your dirty clothes on the kitchen table, your rating on Airbnb will reflect that, and you'll lose quite a bit of business as a result.