Will Real Estate Investors Take Over Airbnb?
By Tyler Durden
In 2012, Jon Wheatley bought a $40,000 apartment in Las Vegas so that he could rent it out on Airbnb .
“I was surprised by just how cheap real estate was in Las Vegas,” says the British-born Wheatley. “I didn’t want to live in Vegas, and I wasn’t planning on being there very much. So when I looked at Airbnb, it looked almost too good to be true.”
Wheatley looked at the rates of similar apartments on Airbnb, and he decided that the apartment could pay for itself. He bought the flat and spent 3 weeks and $10,000 on furniture and renovations. After a year of remotely renting out the apartment, he says , he’d made $13,000 in profit.
When we ask if he recommends doing this, he replies, “One hundred percent. The model definitely works.”
In only 8 years, Airbnb’s premise—to allow someone to host a business traveler in a spare bedroom, or a family to rent their apartment to tourists while they’re out of town—has made it a $25 billion company . Co-founder Brian Chesky often talks about how anyone can turn extra space in their home into an asset that helps them pay their rent.
But the economics of short term rental sites Airbnb and VRBO also appeal to people who do not live in the house or apartment they rent out. This includes go-getters like Wheatley, as well as professional real estate investors.
Outside the real estate scene, however, this development has not been met with a positive reaction. In cities like San Francisco and New York, where housing is a scarce, politicized resource, the prevalence of property owners renting out multiple apartments has inspired protests, critical press, and the attention of regulators and lawmakers.
Photo via Airbnb
What’s missing from the already fractious debate over Airbnb, however, is the fact that the big players in the real estate market aren’t involved. At least, they aren’t involved yet .
Companies like AvalonBay and Camden Property Trust own tens or hundreds of thousands of units, and they spend hundreds of millions of dollars buying and constructing residential buildings. These companies normally rent out apartments to people who sign year-long leases. But they could instead rent them out on sites like Airbnb. We partnered with Priceonomics to investigate whether this real estate investing trend could spread to these big players.
At this point, we’re seeing that the uncertainty created by municipal debates over how to regulate Airbnb is keeping major investors out of the short-term rental game. For individual investors, however, the door is more or less wide open.
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Source: Will Real Estate Investors Take Over Airbnb?
