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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