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.”
Wheatley is just one of a new crop of investors who are hoping to cash in on Airbnb’s success. Residential real estate is a hot ticket these days, with the market once again approaching the same level of home values and pricing we saw before the housing collapse. As a leading real estate crowdfunding platform, the move toward residential investments by individual investors is something we’ve experienced firsthand here at RealtyShares.
With talk of Airbnb possibly moving toward an IPO in 2016, we were curious about how this could affect real estate investors and the housing market as a whole. We partnered with Priceonomics, a company that specializes in analyzing and structuring web data, to investigate what the future may hold for this latest real estate investing trend.
Airbnb Draws Mixed Reception in the Real Estate Market
In only eight 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 company with a $25 billion valuation. 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 can 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.
At RealtyShares, while we don’t currently list Airbnb investments on our platform, we recognize that there’s a strong and definite interest in this sector. If that interest continues, we believe it could signal the advent of an entirely new category of real estate investment.
From an investor standpoint, Airbnb’s inclusion as part of the real estate investing landscape has its upsides. While Zillow is predicting that rental rates will begin to slow sometime later this year, demand for rental properties is still strong. For an investor who has a rental property in a market where rental properties are at a premium, Airbnb could unlock the door to a steady stream of returns.
This latest development hasn’t been met with a positive reaction, all around however. 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.
Apartment photo by Whether they are right will determine if Airbnb potentially becomes a gold rush for investors, remains a moneymaker for millions of homeowners and renters, or does a bit of both.
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