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The BIGGEST PROBLEM with renting your home on Airbnb...
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what's up you guys it's Graham here so
here's a very common scenario that I see
happening a lot in a very stark warning
for anyone out there who wants to rent
their property on Airbnb the situation
usually goes a little bit something like
this an investor's gonna be looking for
a property to buy but nothing on the
market cash flows and makes money with a
long-term lease
however they start running the numbers
they realize that if they just furnish
it and list it short term on Airbnb that
they can make a ton of money starting
from day one so they go ahead they buy
the property expecting to turn it into a
short term furnished rental and make
bank this happens all the time like if
you want to make a property cash flow
and basically just be rolling in money
all day long or actually if you want to
dis basically start printing money and
you live in an area which is moderately
I'd tourism Airbnb is the best way to
force cash flow and some people even
take this a step further that if they
don't have the downpayment needed to buy
real estate instead what they will do is
go and rent a property for one two three
years furnish it lease it short term on
Airbnb and then profit the difference
between what they're paying and rent and
what that property makes them short-term
so this video is meant to explain how
doing this can actually be a very risky
and very bad idea and for everyone else
who's always wanted my thoughts and
opinions on renting an investment
property on Airbnb this is that video
now to start there's nothing inherently
bad or wrong about renting your property
on Airbnb in fact I'm all for it
especially if you live in a tourist
dense location it just makes sense like
if you can make quadruple the profit
renting your home short-term on Airbnb
and you're okay with some of the
turnover I think that's just the
financially smart move to take however
there's a big distinction between that
and what many other people do when they
rent their property on Airbnb many
people have started buying homes
specifically with the intention of
renting them out on Airbnb they're
buying these properties that were just
never ordinarily cash flow and they're
starting to rely on Airbnb and other
short-term rental websites to cover the
costs associated with the home for
example let's say they buy a property if
it's going to cost them $2,200 a month
between the mortgage taxes insurance
repairs and everything else associated
with that and on a long-term lease they
would be lucky to get $1,800 a month now
any experienced long term real estate
investor would look at that property and
they would
call it a loser to its face and then
just walk away wait wait a second wait a
second just hear me out on this one just
hear me out what if you just do some
minimal work to the property you lightly
furnish it and then you rent it on
Airbnb and with that you can make thirty
six hundred dollars a month now the
property makes sense to buy and as a
real estate agent this is something I
saw so many people doing from 2013 to
2016 they were buying all of these loser
properties furnishing them putting them
up on Airbnb and making so much money or
they were also going and signing one two
three year leases on these properties as
well doing the same thing and scaling up
incredibly quickly
just because of how much money they can
make from doing this but naturally
anything that's this good and is
profitable is going to be exploited and
abused and when that happens the
problems start coming up first we've had
people start renting out illegal
structures on Airbnb to make extra
profit then we had people trying to
circumvent HOA regulations to rent out
their condo short-term and then you want
people renting out their homes from
massive parties on Airbnb the list just
goes on now I say all of this as someone
who has nothing against Airbnb in fact
I'm actually all for it but at the same
time it's really important to be
realistic and understand that inevitably
people will begin pushing the boundaries
and pushing the limits of what they can
and cannot do and this is where the
issues start and because of these issues
this is where many investors also begin
going wrong the bad investors out there
will buy or rent these properties with
the expectation that the golden era of
Airbnb is going to last forever and they
could just sit back and continuously
enjoy these insane profits on a property
that would never ordinarily cashflow but
all of that is likely coming to an end
in many areas for example here in Los
Angeles regulation has banned Airbnb
rentals on rent controlled units and you
might ask yourself why did this happen
and my answer to this is because people
realize they could circumvent rent
control by putting their property up at
Airbnb and at the same time make like
three or four times the profit they
would normally be able to make and here
in Los Angeles the popular tourist
destination Santa Monica has had many
many issues with Airbnb now
Santa Monica has cracked down and
requires homeowners to be living in the
home as a primary residence if they rent
out their rooms many other areas have
also followed suit limiting the number
of days of property could be rented for
requiring permits to be issued and
issuing fines if those requirements are
not met then guess what happens to all
of those people who bought non cash
flowing properties with the expectation
that they could just rent it out on
Airbnb and make a profit if your
location cracks down and says sorry you
can't rent your property on Airbnb any
more good luck look that's Wyatt I mean
you're screwed the two options you have
are either coming out of pocket on a
property that never cash flowed from day
one we're selling the property to try to
recoup as much of your investment back
as possible relying on Airbnb is a very
risky proposition in the event your city
starts regulating what you can and
cannot do which chances are I believe
it's probably going to be happening in
many areas over the next one to three
years now part of the reason that cities
are doing this is because they're just
greedy and that they want their fair
share transient occupancy tax and some
cities just end up making more money
from the hotel industry so they don't
want anything else competing with that
and when it comes to this I think that's
just incredibly short-sighted from the
city's perspective now city shouldn't be
entirely profit driven but there are
some legitimate reasons for this as well
in areas like Los Angeles that already
have an extreme shortage of housing
supply air baby takes listings off the
market that would ordinarily be on the
market for long term residents further
driving up the prices of housing it
really incentivizes owners like me to
take rent controlled units off of the
market and rent them out on Airbnb so I
can just make double the profit but that
comes at the expense of driving up
rental prices for everybody else because
we're restricting inventory and taking
it off the market in favor of renting it
on Airbnb short-term now don't get me
wrong here because I'm all for doing
whatever you want with the property that
you own and I'm all for making as much
profit as humanly possible but there
does need to be a line drawn as to when
the boundaries might be crossed now in
addition to taking inventory off the
market it's also bringing increased
traffic to previously quiet
neighborhoods and this is something I
tend to agree with for instance I had a
neighbor who rented out their home on
Airbnb a few years ago and while most
people were totally fine and we're great
every now and then you would get these
crazy kids that come in and throw some
wild party leave trash everywhere be
really loud don't give it just leave it
a mess the people spilling onto the
streets and like why would you want to
deal with that no don't get me wrong
because not everyone is like this and
you're just as likely to get a really
bad neighbor who does all of this sort
of stuff when they owned the home so
don't get me wrong on that but the risk
of this happening is a lot greater just
given the more people see and rent the
home and even though many of us are
driven by profits and I know I certainly
am I still believe that we have a moral
and ethical duty to really make sure
that we do the best we can for the
greater good of the entire community so
what that said and yes I've said a lot
here's how you can rent a property on
Airbnb and not get screwed over by local
regulation and all so these are just my
thoughts on renting an investment
property on Airbnb in general the first
thing you got to do above anything else
and any good investor will tell you this
is that when you're buying a property
you should make sure that it cash flows
without relying on Airbnb this is where
most people begin going wrong when
renting a property on Airbnb they look
at the numbers they think the property
makes a lot of money on Airbnb so I'm
just gonna rely on this and when doing
so you expose yourself to a lot of risk
in the event that Airbnb eventually
regulates that and you're left with the
property that doesn't make any money and
therefore you lose money and I would say
the chance of this happening over the
next few years is pretty high instead
you should really view Airbnb as just a
way to supplement your income if you
have the cash flowing property but you
decide you can make way more money
renting it on Airbnb do it by all means
put it up on Airbnb and ride that gravy
train as long as you possibly can while
still complying with local regulations
then in the event that something happens
and you can no longer rent that property
on Airbnb like in many places now in Los
Angeles you know what no worries on that
you already have a cash flowing property
to begin with sure I mean it would be
nice to make a little bit more money but
you're not really gonna be hit that hard
the way you should look at Airbnb is
really just like it's the icing on the
cake and not the cake itself especially
if you have too much icing on the
take it just it doesn't taste very good
so if you can follow that you're gonna
be just fine
and in addition to that it's also very
important to realize that the reason
people make so much money on Airbnb is
that oftentimes it's a lot of work I
know many people who run an Airbnb --zz
and it's a constant hustle to make sure
that everything is cleaned the house is
fully stocked that all utensils are
there that nothing is broken that
everything is in working condition and
then dealing with tenants issues as soon
as they come in they have questions they
can't figure out something has something
works there's a lot of little
intricacies with every single property
and it's also very important to expect a
lot of these things to happen so when
you do it
you're not gonna be caught off guard for
example every single time I rent out one
of my properties to a new tenant the
first week or two is always full of
little questions and minor things about
where something is located or how
something works so this won't turn on or
little minor things now imagine having
that every two to five days as a new
guest comes in and stays at your house
so it's a constant hustle but with that
said if you're okay with a lot of that
work if you're okay with the turnover if
you comply with regulation you already
own a cash flowing property but you can
make more money on Airbnb I say I'm all
for it go ahead and do it and make those
profits and again anything that comes to
making more money I always encourage it
as long as it's as long as it's legal
the big differentiation there as long as
you what you do is legal and I'm all for
it but the big distinction here is that
you shouldn't rely on Airbnb otherwise
you're gonna have a bad time I really
personally believe that the battle with
Airbnb and city regulation has just
begun and we're going to see this
continue over the next five to eight
years I have a feeling that we've gone
from having basically no regulation to
eventually we're gonna have too much
regulation and then homeowners are gonna
be fighting against that and then
eventually we're gonna settle on a
middle ground so that homeowners are
happy and the city is happy and all the
tourism and the guests and everybody's
happy too everyone will be happy it's
just going to take a lot of tinkering to
figure all of that out so anyway that's
just my thoughts if you agree with me if
you disagree with me if you have any
personal experience with doing this
definitely comment down below like I
said I read every single comment I do my
best to respond to as many people as I
can so feel free to comment down below
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you know it until next time
