The game has changed. Unlike the Monopoly game, you no longer need wait to own four houses before getting into the hotel business. Check out Airbnb.com. It allows any landlord (or anyone with an extra bedroom) the ability to attract business travelers and tourists via their website. Since travelers compare your rates against hotel rates instead of rental rates, you should be able to net a larger profit.
Airbnb is a Game Changer for Landlords
For a small fee (currently 3%), Airbnb puts you in the short term rental business. They handle the financial transactions, scheduling, customer service, help you put together an attractive ad, and even manage a feedback process afterwards. It’s completely turnkey. All you need to do is take care of your guests when they arrive.
I became an Airbnb fan while working in San Francisco for several months. The places I selected were much nicer than equivalently priced hotels. Now whenever possible, I pick Airbnb over hotels.
I considered converting one of my apartment units into a fully furnished studio suitable to a traveling business person, but I thought the process of checking people in and out meant I needed to be present. My schedule doesn’t allow for this, so I nixed the idea.
That was until I rented a cabin that was out in the middle of no way – in the hills of the beautiful Sierra Nevada.
Keyless Locks Makes Check Ins Effortless
The cabin owners run a very self-service type hotel that gets leads from their well-structured website. Their process was slick. After my dates and credit card cleared, the broker simply emailed me a cabin number and combination for the door lock. Apparently they change the lock’s combination after every uses. I never saw the guy, but I had everything I needed.
After my stay I put two and two together. How about using Airbnb to gather and manage leads, then use a keyless lock to allow guests and cleaning staff to let themselves in and out? The maid service could update the knob combination or, if you used a wi-fi door lock, you could update the lock combination from anywhere via your smart phone. Now that should work for any want-to-be passive investor.
Is the Short Term Rental Business Right for You
A few back-of-envelope calculations are needed to evaluate if you can use this tactic to squeeze more cash flow from your existing asset.
1. Where’s the Competition
Browse Airbnb.com or similar sites (HomeAway.com, Roomorama.com) to see if there are other hotel alternatives near your rental. If so, check out their pricing and packages. If you think you could make or exceed existing offerings, then move forward.
If there are no offerings near your rental, then think hard about your neighborhood and other factors. Stand down if you think your guest won’t be safe or if you’re not in a high demand area.
2. What’s the Potential Profit
Next step is to calculate if you could make more money competing against hotels than competing against other typical landlords. After accounting for Airbnb fees, cleaning fee after guest leave, utilities, and other expenses, you should be able to calculate a daily rental rate that makes the deal work for you. If you can net more by operating as a hotel – then go for it!
Click HERE to learn more about offering your rental as a hotel alternative.
Although I think becoming a hotelier is a winning idea, it still doesn’t work for me because my apartment complex:
1) Isn’t near a major business or tourist district
2) Is a tight-knit community that wouldn’t benefit from frequent resident turnover
3) Is in a neighborhood that requires an above average amount of street smarts
But if you’re able to implement this strategy, please leave a comment and let us know how it worked.
Want to learn more? Check out our course on how to be a profitable Extended Stays for Landlord