The AirBnB and house hacking bubbles

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The AirBnB and house hacking bubbles

Post by jacob »

https://www.vrmempire.com/post/housing- ... n-100-000s

Also have to wonder about the FI through daisychaining rentals that have grown in popularity in the past 10 years.

CS
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Re: The AirBnB and house hacking bubbles

Post by CS »

I can't help but think this is good for the local neighborhoods. The rental stock is already low without losing so many to tourists.

Seppia
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Re: The AirBnB and house hacking bubbles

Post by Seppia »

“a long string of impressive numbers multiplied by one single zero always equals zero”

It’s funny how people tend to forget the risks of leverage at the worst possible times.

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TheWanderingScholar
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Re: The AirBnB and house hacking bubbles

Post by TheWanderingScholar »

I hate AirBnb. Robs companies who follow the laws and rules of hotel regulation of business, takes away possible rentals which increases rental market, and in general makes local neighborhood which people live in, into tourist hot spots. Which honestly sucks for the common person.

sky
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Re: The AirBnB and house hacking bubbles

Post by sky »

This will be a major change in my town. Probably lower housing values and some property management companies getting hurt financially.

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Ego
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Re: The AirBnB and house hacking bubbles

Post by Ego »

This will certainly be an interesting time. Some bubbles pop, others inflate.

Right now these AirBnBers (and regular people) are planning to abandon their leases, turn in the keys and walk away. If they operated as a corporation they will only lose their security deposit. If they rented the places as individuals, they're screwed. They can eventually declare bankruptcy, but this is not 2008.

Gone are the days when you could leave behind bills, drive a few states over, get a new apartment and a job before the bad debt hit the credit reporting agencies. Systems have matured and the average mom and pop landlords now have access to background screening with nationwide rental reporting data. Now the software packages that process online rent payments are reporting in real time. Employers pull this data when they do background checks.

Also, they will have a ton of stuff to shed or donate but nowhere to sell or donate it to. Nobody is buying second-hand stuff through Craigslist right now. Flea markets are closed. Auctions are off. Thrift stores are not taking donations. The only option is putting it all in storage until things settle down. Storage defaults will explode in a few months.

Last month I bought a flea market canopy and tables in anticipation of becoming a regular market seller. I've been watching for a good deal on a van but I think the used car market is going to take several months to bottom out so I'll start with our Honda Fit for buying and rent a truck or make two trips for sales days. I'm going to have to renew the business license I had for selling at markets as they have specific requirements.

I am not trying to take advantage of others misery. I am just adjusting to the new reality that the decomposer industry is going to have a glut of resources.

SustainableHappiness
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Re: The AirBnB and house hacking bubbles

Post by SustainableHappiness »

Related to this. I just found out that the 6 month potential mortgage relief in Canada does not apply to rental properties. Landlords who over extended themselves are freaking out.

Not just AirBNB I guess.

ertyu
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Re: The AirBnB and house hacking bubbles

Post by ertyu »

enter REITs.

@Dream of Freedom, you had a bunch of reits in your portfolio, what names would be able to snatch properties on the cheap. Question obviously not limited to DoF. Does anyone know?

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Bankai
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Re: The AirBnB and house hacking bubbles

Post by Bankai »

On a more general note, the current crisis is punishing bad decisions/planning/strategies at all levels (as all crises do):

1) countries are punished for lack of decisiveness/slow response and lack of preparations: what could've been closing borders is now closing borders, halting economy for months, tens of thousands of deaths and trillions of 'stimulus' money

2) businesses will be punished hard for overleveraging, taking debt to buy back shares, lack of robustness, lack of cash pile, too complex and fragile supply chains, etc.

3) Individuals are punished for lack of preparation: no stash, all eggs in one basket, ignorance, overleverage, lack of a secure job or diversified income streams. Bad health is being punished big time, although very many people are at no fault here, there are some with bad lifestyle habits

4) nations for electing incompetent leaders

It looks like a big reset button is being pressed. Some will go under, others will turn their lives/businesses/countries around. The best prepared and adaptable will survive and thrive in what might be quite a different world a few years from now.

Colibri
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Re: The AirBnB and house hacking bubbles

Post by Colibri »

@Bankai

I totally agree. But people are telling me I am a heart of stone, no compassion monster bitch to think this way. I don't know ?

Jin+Guice
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Re: The AirBnB and house hacking bubbles

Post by Jin+Guice »

I've run an air bnb since 2014 (we rent our front bedroom) and our neighborhood is notorious for having tons of air bnbs. Air bnb is very unpopular amongst the masses and I take a lot of flack for running one. Even as an operator, I take pleasure in seeing people who leveraged into having a bunch of air bnbs blow up. There are blocks in New Orleans where 25% of houses are air bnbs owned by people who live 3,000 miles away.

I didn't realize rental arbitrage was still a thing. A dude I used to catch rides to grad school with was on that hustle circa 2015, but most of the landlords got wise to that shit around 2016/2017. It was sort of a shame because I new a couple of people who used to sleep in their cars for a few nights and use it to make rent, but the early "arbitrage" (def not what they called it back then) people sort of ruined it for everyone. New Orleans currently requires a license for air bnb or air bnb like activities. Based on the number I still see operating, I feel like some people are skirting the rules somehow, but I think the rent to air bnb scheme is long dead here.

I am wondering if the housing market here will crash as a result of this.

Seppia
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Re: The AirBnB and house hacking bubbles

Post by Seppia »

TheWanderingScholar wrote:
Wed Mar 25, 2020 4:57 pm
I hate AirBnb. Robs companies who follow the laws and rules of hotel regulation of business, takes away possible rentals which increases rental market, and in general makes local neighborhood which people live in, into tourist hot spots. Which honestly sucks for the common person.
Same. I also have great disdain for Uber and the likes. Basically taking advantage of the "contractors" loophole and the fact that most people can't do math* to practice what is basically widespread dumping.
Not saying these companies only had negative effects (Uber in particular was key into pushing renters to move their ass - the taxi situation in France being the poster child of this), but I think overall, these companies have been net negatives to society.

*and thus do not include car deprectiation in their costs, which make them operate at a loss without really being aware of it

ajcoleman22
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Re: The AirBnB and house hacking bubbles

Post by ajcoleman22 »

I love Uber and AirBnB. They have their downsides but, in my opinion, are way better than the highly regulated industries they are displacing.

The Old Man
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Re: The AirBnB and house hacking bubbles

Post by The Old Man »

@ Seppia and @ajcoleman22: Concur with ajcoleman22.

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Ego
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Re: The AirBnB and house hacking bubbles

Post by Ego »

The model is here to stay. The next incarnation will be decentralized so that there is no central agent for municipalities to subpoena. Smart hosts had already figured out ways to avoid detection. The price/quality differential between hosts and hotels is just too large. The fact that they are disappearing so quickly shows the efficiency of the market.

Polp
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Re: The AirBnB and house hacking bubbles

Post by Polp »

CS wrote:
Wed Mar 25, 2020 4:37 pm
I can't help but think this is good for the local neighborhoods. The rental stock is already low without losing so many to tourists.
Where I live lots of flats for more or less reasonable prices popped up all of a sudden (there is a shortage of rental flat here and prices were becoming ridiculous). However, they are trying to rent those just until Juli when they think that the tourists will come back.

Campitor
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Re: The AirBnB and house hacking bubbles

Post by Campitor »

Failures in the markets are necessary to flush out bad business decisions. And I have no problem with anyone starting an airbnb or uber service that competes with highly regulated markets.

Companies like Airbnb, Uber, etc., should be a signal that people want these types of services at the prices being offered. And Anyone going bankrupt because they have a string of Airbnb's or lost money driving Uber is a signpost that a particular service or occupation should be scrutinized carefully to avoid a loss of time/money. Owning a home is expensive. Providing a rental unit is even more expensive.

That individuals provide a hotel type service instead of a long term rental should be a signal to governments that perhaps housing construction is needed to bring the price of housing/rentals down and to lessen the tax burden/regulations on hotels so they remain competitive. You'll never get equilibrium if someone is always putting a finger on the scales.

Seppia
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Re: The AirBnB and house hacking bubbles

Post by Seppia »

Ego wrote:
Thu Mar 26, 2020 12:25 pm
The price/quality differential between hosts and hotels is just too large.
Strongly disagree.
Hotels are, similarly to supermarkets, businesses that operate on razor-thin margins and often sell rooms below cost.
Hotels pay much lower prices than the average person running an Airbnb for just about every conceivable product and service.
Airbnb takes a much bigger cut than say Four Seasons or Marriott get paid by their franchisees.
Well managed hotels (not now obviously) have occupancy rates north of 90% most of the time.

A cheaper Airbnb offering less stuff that is irrelevant to you may be a better fit for your needs, but in terms of pure value for money, the math suggests hotels have to be better.

Uber is a different story, as they have been selling for $7 a product that cost them $11, so in terms of value for money for the consumer they are pretty much unbeatable.

The Old Man
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Re: The AirBnB and house hacking bubbles

Post by The Old Man »

@Seppia and @Ego

AirBnB is not directly comparable to hotels. It is best to think of AirBnB as a type of accommodation in its own right. Hotels are best for a stay of a few nights. AirBnB's come into their own when the stay is a week or longer.

Jin+Guice
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Re: The AirBnB and house hacking bubbles

Post by Jin+Guice »

I agree with @TheOldMan that air bnb is its own type of accomodation, but for different reasons. Air bnbs are unique to their hosts. There are some air bnb companies that really do engage in arbitrage, building hotels, but skirting fees, regulations and, to a certain degree, expectations by being air bnbs (check out Sonder for an example of this). But air bnbs are still largely run by individual people and are still largely located in spaces that are or were meant to be homes. When I travel for business I want to stay in a hotel. When I travel for pleasure, if I pay for accomodations, I want to stay in an air bnb.

Hotels offer a very specific service and benefit from consistency and tradition. Air bnbs can offer multiple services, from luxury houses to apartments to cramped rooms in shared houses. Air bnbs can operate where it would be illegal or unprofitable to have hotels. In my neighborhood you can air bnb an entire house for around the price of a luxury suite and a room in someone's house for less than a room at the holiday inn in the suburbs. You can also air bnb a literal sex mansion for your bachelor party or orgy for not much more than an upscale suite. There are no hotels in my neighborhood, except for one actual bed and breakfast with six rooms. It's walking distance to the french quarter, hipper and quieter.

I know it seems like hotels would have some sort of professional/ economy of scale advantage, but just think of how much more you could get for renting a room for 80% of hotel prices instead of renting to a roommate or how much more you could get for a house/ apartment when you're renting nightly at top end hotel room rates instead of monthly to tenants. Averaged over several years, air bnb guests complain a lot less, pay in advance and never require eviction. You can also use your property for a couple of nights for yourself without sacrificing too much cash. I can flip my air bnb room in less than ten minutes and I air dry my sheets and check in guests personally. Basically air bnb is the guerilla warfare of the hospitality industry.

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