Thanks to a novel crop of internet-powered companies, sharing has replaced overpaying for many products and services like Scribd documents, Uber chauffeured cars,Shutterstock SSTK -5.92% video and photos, Spotify music, Rent the Runway designer clothing and so on.
When it comes to sharing your home—or borrowing somebody else’s—you can do that too. Airbnb, a San Francisco-based company, runs a website that makes it easy for owners of homes, apartments and rooms in over 34,000 cities and 192 countries to post photos of the homes and rent them out nightly or weekly.
If you’re a business traveler or an owner of a second or third home in a city where hotel stays are notoriously expensive or hard to find, you may ask: Should I buy into this?
As Airbnb has grown from 120,000 listings at the start of 2012 to over 300,000 listings now, it is evident that more homeowners are buying into this. Trustworthiness and customer satisfaction are highly valued and maintained through a 24/7 call line and review postings. The popularity and feedback of this service would lead me to believe using Airbnb to earn extra revenue for my second home is a great idea.
Understandably you may still be hesitant. After all, there’s a lot of controversy around Airbnb. The company has been criticized in cities like Chicago, San Francisco and Miami for pulling revenue away from hotels and for non-compliance with tax and zoning regulation. The brunt of these challenges are originating in New York City, where politicians, lobbyists and not-in-my-backyard activists are hindering the company’s efforts to operate. Last month New York state prosecutors subpoenaed data about Airbnb’s users in New York, which passed a law in 2010 prohibiting New Yorkers from leasing out their homes for fewer than 30 days if they’re not living there. A few Airbnb users have been randomly hit with fines.
Critics say the service robs state coffers of vital tax revenue. Airbnb has responded by publishing astudy claiming in one year the company generated $632 million in economic economy activity for New York City, and that its guests spend more time and money in the city than typical tourists.
None of this has spooked the owners of some pretty luxurious homes. For $1,450 per night, you can rent a stunning 3,750-square-foot loft apartment in Soho. Or for $4,500 per night, you can get an eight-bedroom waterfront villalocated on a private island in Miami Beach. You can even use the site to spend the night on a sailboat or reserve an art gallery for your next event.
The basic notion of renting out your home is nothing new. But Airbnb appears to be attracting users who wouldn’t have dreamed of leasing out their properties over bulletin boards, newspaper classifieds or Internet sites like Craigslist. Airbnb offers something the old methods could not: reliability.
I know a few homeowners and travelers who’ve used Airbnb to share homes. One successful real estate broker I know enjoys leasing his Miami Beach condo for $1,000 per night. When his wealthy clients come to town in search of a vacation rental—he steers them towards Airbnb. Another friend relies on Airbnb every time he travels to Los Angeles to rent swanky homes in the Hollywood Hills.
The controversy lingers as to whether Airbnb and other sharing sites create new business or just cannibalize existing sales and demand. It seems that in creating so much efficiency and reliability, Airbnb is appealing to a new segment of the market i.e. luxury homeowners, and effectively expanding the travel industry’s market base. All in all, this concept seems pretty compelling to me if, like my successful real estate broker friend, you would like to make some extra revenue from a luxurious second home you’re only using now and again.
Inevitably Airbnb will find a compromise with its opponents. However, if you intend to share your home with unfamiliar guests, take some precautionary measures to avoid possible downfalls. Your income stream will be more reliable and you’ll probably have more fun in the process. No matter how much a guest is paying for the privilege, here are some sensible steps to follow:
- Don’t misrepresent. Describe your property accurately and use high-quality, professional photos. You want your guests to feel they received what was bargained for. Happy customers whose expectations are met—and possibly exceeded—create the best marketing tools. You’ll receive better ratings and more business.
- Get insurance. Airbnb provides up to $1,000,000 of insurance coverage to its homeowners for loss or damage due to theft or vandalism caused by an Airbnb guest. But this does not take the place of homeowners or renters insurance. Review your policy with your insurance carrier to make sure you have adequate coverage. It would also be sensible to secure valuables in a safe and store clothing in a separate locked closet.
- Comply with your homeowners association or co-op board. They may prohibit subletting or limit short-term leases. Consult with your landlord if applicable. You may also consider adding a rider to your Airbnb rental agreement that addresses the concerns of these parties and outlines the responsibilities and liabilities of all involved.
- Reserve for occupancy taxes. Especially in New York City, the uncertainty over the law is unsettling hosts who are frightened of the possibility of owing back taxes and random municipal fines. Airbnb wants to clear everything up and move on, but until that happens, you are on the hook for potential occupancy tax charged to landlords for a short-term lease (less than 180 days). There’s a simple way to avoid tax anxieties: Set aside at least 10% of the rental income collected. (By the way, if you rent your home out for fewer than 14 days a year, you can do so tax free. But after that, you’ll need to pay federal taxes on some of surplus income you earn. Read more here.)
- Involve your neighbors. Consider notifying neighbors or the doorman about your plans to host, along with your strategy for how to make sure your guests are not disruptive. Sure, they might object. But if you request their support, they may be much more cooperative and keep an eye on things.
- Find long-term guests. Set a minimum stay of two or three nights. One night is just not enough. You don’t want to be a hotelier, deal with transients or frequent key coordination.
- Leave instructions. Leave a detailed list of instructions for your guests. You’ll receive many fewer questions during the course of their visit. Guests need to understand things like, how to turn on the television, pool heater, alarm system or any other tricky device. Also provide a list of safety instructions and useful telephone numbers.