The hotel industry is running scared. The reason? Airbnb, the company that allows homeowners to rent out their spare rooms and couches to travelers. The homeowners make money and travelers get a bed for the night, often at a lower cost than what a traditional hotel would charge.
Are you thinking about renting your spare rooms out on Airbnb? Here’s why you should, and also a cautionary note on why you should think twice.
The Risks of Renting Out on Airbnb
The Airbnb model is great for travelers, but what about for hosts? Here are three major considerations you need to take into account when you rent your space out on Airbnb.
1. You Might Get Evicted
If you own your home, this doesn’t apply to you. But if you rent? Pay attention. Subletting your place on Airbnb might get you evicted.
Remarkably, it happened to Airbnb’s poster child, Shell.
Much like Madonna was the face of Pepsi in the 80s, Shell was the face of Airbnb in New York. Her face had been plastered across subway adverts for the company, and she had appeared in video commercials, talking about her experiences with providing free accommodation for those displaced by Hurricane Sandy.
Shell’s apartment was a beautiful and spacious 1880s Dutch barn, located in hip and happening Stuyvesant, just on the outskirts of New York City. Her rent was $4,000 a month. And like many rentals, Shell’s lease expressly forbade her from subletting her apartment.
When her landlord caught wind of what she was up to, he was furious. “Friends are one thing,” he said. “Groups of social-networking strangers is a completely different ball of wax.”
Not long after, he gave her the boot. Shell had to find a new flat, and her loyal customers had to find somewhere else to stay when they were in town.
In another similar story, 72-year-old artist Eileen Hickey was evicted from her home in 2018 after hosting on Airbnb in a bid to pay her husband’s medical costs. Money reported that she was hit with a $185,000 fine; it was one of the highest penalties the city had ever seen.
2. You Might Break the Law
In some locales, Airbnb—much like Uber—operates in a sort of legal grey zone.
For example, according to the law, most apartment owners in New York cannot rent out their properties for less than 30 days unless they are living in the apartment at the same time. The law theoretically helps to ease the city’s already-acute housing problem; services like Airbnb have made short-term rentals more profitable for landlords than long-term leases.
And New York is far from being the only example. Other major global cities such as San Francisco, New Orleans, Barcelona, and Vancouver have all implemented similar measures.
In its official guidance for hosts, Airbnb outlines some commons laws and regulations that you could run afoul of in your city. They include business permits, housing standards, zoning rules, taxes, and housing association rules. Rules change between cities and countries; consult with your local authority if you need more information.
You could also land yourself in hot water if you rent out an Airbnb property while paying a mortgage on the same unit. Depending on your provider and location, you might be expressly forbidden from sub-letting your flat or house.
Finally, you need to consider your insurance provider. You might not be covered for lettings. As we’ll see shortly, despite recent initiatives, Airbnb doesn’t provide liability insurance for hosts, so you need to make sure you’re adequately covered for personal injury, negligence, and property damage claims made against you by members of the public using your property.
3. Someone Might Trash Your Apartment
When you rent out your apartment or spare room to a near-stranger, you’re making some very big assumptions. You’re assuming that the person you’ve entrusted your house will treat it with respect and that none of your belongings will be stolen.
And for the most part, that’s usually the case. There have only been a few notable exceptions of people having their homes turned upside-down. But when things do go bad, they go really bad, as San Franciscan Airbnb host Emily J found out back in 2011:
“Someone named Dj Pattrson (was it a guy? A girl? I still don’t know—but I have noticed much too late that the person misspelled their own last name) came into my home earlier this month (apparently with several others, according to witnesses) and set out on what I believe to be the carefully-planned theft and destruction of my home and my identity. With an entire week living in my apartment, Dj and friends had more than enough time to search through literally everything inside, to rifle through every document, every photo, every drawer, every storage container and every piece of clothing I own, essentially turning my world inside out, and leaving a disgusting mess behind.”
The immediate response of Airbnb left a lot to be desired. In a later blog post, Emily slammed the lack of support provided by Airbnb, and talked about how her life hadn’t gone back to normal.
“In the meantime, I am still displaced, bouncing between friends’ homes, clutching my pillow and what’s left of my normalcy. I spend my mornings recalling nightmares and breathing through panic attacks, and my afternoons scouring the city’s pawn shops in the vain hope that I might recover some of my stolen treasures. I do not feel anything close to safe.”
To the credit of Airbnb, in the years since this high-profile incident, they have released their Host Guarantee, which promises to protect all hosts from damage and theft to the tune of $1,000,000.
However, the guarantee does exclude some notable items—including cash and jewelry. And even you’re fully recompensated, you are still facing all the hassle of working through the process and restoring your property.
The Rewards of Renting Out on Airbnb
Despite the horror stories, there remain some compelling reasons why you might want to rent out your space to near-strangers on Airbnb.
1. Money, Money, Money
For many, Airbnb is their main source of income, with some charging upwards of $100 a night to rent out their spare room that would otherwise lie dormant. Entire homes can go for much, much more.
And if you have a bit of capital behind you, you can acquire enough properties to build a six-figure Airbnb business, as Bradley, the subject of this FastCompany article does.
“At 90 percent occupancy, Bradley can make about $4,000 per apartment on Airbnb. He pays about $2,000 of that in rent and utilities. That comes out to about $2,000 profit per apartment per month, or $24,000 each year. With six apartments, he could make up to $144,000 in a year.”
That’s more than the average wage of a software developer in Silicon Valley. And if you’re still not planning on living entirely off your Airbnb rental, you can still offset your bills, your rent, and your mortgage.
2. You Meet New People and Expand Your Horizons
This is something that rings true for both guests and hosts.
This summer, I spent three nights at an Airbnb booking in Brussels, Belgium. The room was far cheaper than most hotels in the city and I got to stay near the splendidly modern skyscraper headquarters of the European Commission.
My host for the weekend was a Japanese translator, working in the city. And mine wasn’t the only room that the host had rented out. Next door was a Spanish couple off to attend a rock concert in the nearby city of Leuven.
After leaving Brussels, I hopped on a train to Antwerp, where I stayed with a Belgian-Nepalese couple. Like my previous booking, other rooms in the property were booked. I met a Kyrgyz UN worker visiting friends in the city, as well as two film students from Los Angeles who had taken two months off for a European trip. It makes perfect sense for digital nomads too.
It’s highly unlikely I would have met these interesting people, had it not been for my choice of accommodation. And when you open up your home to strangers, you get a chance to meet people you otherwise wouldn’t have met.
Share Your Airbnb Hosting Experience
Are you an Airbnb host? Have you had any bad experiences? Good experiences? Make sure you share your Airbnb stories in the comments below.
If you would like to learn more, check out our comparison of Airbnb, VRBO, Homeaway, and hotels. And make sure you also check out our list of incredible Airbnbs that were used in films and TV shows.
Read the full article: The Risks and Rewards of Renting Out Your Apartment on Airbnb