
The Rise of the Professional Airbnb Investor - paulpauper
https://priceonomics.com/will-real-estate-investors-take-over-airbnb/
======
expertentipp
Airbnb and its clones, although initially introduced positive disruption, are
turning entire city districts into alien tourists traps. The range of
"services" and prices there make long term inhabitants to stay away. Barely
anyone with local salary can live there. So we end up with attractive
historical districts with predominantly temporary rentals which are completely
empty out of the season, and dull residential districts where people earning
local salaries can afford to live. I'm talking from my observations in various
EU cities (Berlin, Prague, Barcelona).

~~~
jstanley
You say that like it's a bad thing, but if that is the most productive use of
property (i.e. the use that people are willing to pay most for), then I think
that is what should happen, and I don't see any issue with AirBnB facilitating
this.

~~~
timthelion
Yes, it is a good thing when the rich enjoy the best quality real estate and
normal working people live in slums on the outskirts of the city and commute
for hours into the city. Normal people deserve to live on the outskirts,
because they aren't smart and hard working like the rich.

~~~
mafribe
How empirically adequate is the claim implicit in your criticism that Airbnb
is primarily used by the rich?

Au contraire, Airbnb is primarily used by the young and (comparatively poor),
students and young adults. The kind of person who comes to Berlin, Praha and
Barcelona by Ryanair and Easyjet.

It is precisely the low-cost nature of Airbnb that has made it so popular: in
order to save money you can fit multiple people into a small Airbnb if you
really want, you cannot easily do that with a hotel. The wealthy (usually
older) stay in posh hotels.

Airbnb, like low-cost airlines, has made travelling to major cities _more_
affordable to the masses.

    
    
            *  *  *
    

A more general point: I don't see why having zones dedicated to short-term
lodging and entertainment on one hand, and zones for long-term lodging is
necessarily a bad thing. Such zones allows for more specialisation, hence
better offerings for either. E.g. dwellings suitable for short-term dwelling
probably have somewhat different characteristics than dwellings suitable for
long-term dwelling. Another example, nightlife comes with noise pollution, so
nightlife isn't really all ideal in residental areas (and typically subject to
severe legal restriction). Restricting nightlife to small zones with a dense
stocking of nightlife is one way of getting around this problem. Moreover, the
entertainment value of a city increases dramatically with increasing tourism,
and that's good for long-term inhabitants too. I would like to up the ante:
great party zones is one of the key things that make cities livable.

~~~
timthelion
In the US, the question of whether the "center" of the city is a tourist trap
or a place where people live is irrelavent. Everyone goes everywhere by car,
and the real center can move. However, in Europe, where we have REAL
infrustructure, train stations, subways, tram lines. And we, the citizens,
have invested TWO CENTURIES of tax money to build that incredible
infrustructure, taking that center and saying "this part of the city is going
to be too expensive for normal people to live there, is nothing short of
theft. Normal people paid, with real money, taken out of their sallaries,
which they earned with real work in order to build that subway system that
they can no longer effectively use, because they live on the outskirts now. So
any new zoning has to take that into account.

As for who is rich. Young, healthy, students who can afford to take time off
and travel ARE RICH! You can say what you want about Ryan air being cheep and
only €50 a flight. But the minimum wage in the Czech Republic is 11 000CZK or
just €400 a month! Poor people have trouble paying for rent, and there is no
chance they will be taking time off to take that ryan air flight to Brussels
to spend the weekend in an AirBNB.

And those people don't benefit from AirBNB at all, given that they have no
assets to invest in real estate.

~~~
mafribe

       this part of the city is going 
       to be too expensive for normal
       people to live there, is nothing 
       short of theft.
    

I'd recommend not using terms like "theft" here, as it is factually
inaccurate, and goes back to the unfortunate tradition of Leninist agitation
which gave the world Stalin, Mao and Pol Pot ... and despite all the violence,
didn't even manage to produce housing of a quality that came close to anything
the modern western democracies had to offer to their masses. And in case of
the Soviet Union didn't even manage to feed its own population.

Anyway, let me remind you that I don't believe your claim that Airbnb has a
substantial influence on property prices. As far as I can see, the dominant
factor in property prices is distance from center, and proximity to amenities,
in particular public transport -- all that regardless of Airbnb.

    
    
       because they live on the outskirts
    

The main purpose of public transport is to enable those living in the
outskirts to get to the center in the morning, and go back in the evening. The
drive to separate out work from living quarters goes back to the industrial
revolution when work suddenly became noisy, dangerous and polluting, so the
old model (working and living in the same place) had to go. This required mass
transport, be it cars or public transport Anyway, there is nothing wrong with
living in the outskirts. Many prefer it, especially those with children. There
is no human right to live in Manhattan or in Mayfair or in Charlottenburg in a
150 m^2 loft that costs only €200 per month. That would be an extremely
inefficient use of dense urban space. Second, tourists use public transport
_more_ than the normal population, because the latter spends most of their day
working, while tourists explore and move around. If you are interested in the
utilisation of public transport, attracting more tourism is a god-sent. Note
also that increased tourism generates additional local employment, because
tourists spend quite a bit of money.

    
    
       students who can afford to take 
       time off and travel ARE RICH!
    

This is deeply misleading. In any given country, students are near the bottom
in terms of _average_ spending power, and that's because they typically live
on their parents money and / or government grants. Their peers who dropped out
of school at 16 and learned a trade (e.g. welding or carpentry or plumbing)
will out-earn the average student at that age (a few years after graduation
this will change). Note also that in most western countries, nowadays the
majority of the population goes to university (for some definition of
university). Another way of seeing that students are essentially at the bottom
of each society in terms of spending power is to look how they live (eg.
sharing), and to look at the population's average income trajectory: just
about anyone's overall available income increases considerably after
graduation.

Of course you can compare the average student in Denmark with the average
worker in Malawi, and find that the former is wealthy vis-a-vis the latter,
but this is not an interesting comparison.

    
    
       Czech Republic is 11 000CZK
    

Yes, and why is this interesting? The minimum wage in Malawi is ... what $1
per year? The cost of accomodation always correlates strongly with the average
income

    
    
       Poor people have trouble paying for rent
    

Not in a meaningful sense in the western world. For essentially everybody by
the richest, say for 98% of the population, rent/mortgage is the single
biggest cost they have in life. The average person spends between 25% and 50%
of their income (after taxes) on accomodation. This feels painful for
everybody, but is managable in practise. Another way of looking at this is to
see who is homeless, and why. In practise in Wester Europe, there is little/no
homelessness apart from those with serious drugs problems and / or mental
illness. This is a pretty strong indication that housing is affordable for
everybody. Yes, it would be better if there was no homelessness, but the
problem is one of drug-addition and mental illness, and that's something that
as of 2017 we don't really know how to solve.

    
    
       And those people don't benefit 
       from AirBNB 
    

They benefit in several ways: I already mentioned the economic boost that
cities get from additional tourism. But they also benefit from the economies
of scale that you get from streamlined tourism, like cheaper flights, cheaper
holidays, more interesting cities. Easier travelling because large companies
like Airbnb can develop apps that make booking easier.

~~~
timthelion
You warn me not to claim that taxes are theft by using examples of failed
socialist utopias. My argument was that once people have paid their taxes,
they deserve something in return, like the ability to take advantage of the
infrastructure that they paid to build. If you simply take peoples money, and
use it to subsidize the rich, then that is theft. This is a very different
argument than that of Proudhon, who says that "property is theft", or of
Thomas Paine who claims that:

>Every proprietor, therefore, of cultivated lands, owes to the community
ground-rent (for I know of no better term to express the idea) for the land
which he holds; and it is from this ground-rent that the fund prod in this
plan is to issue.

[http://rationalrevolution0.tripod.com/articles/capital_distr...](http://rationalrevolution0.tripod.com/articles/capital_distribution.htm)

Though I agree with both authors in general, my claim of theft was not the
same as theirs at all.

> The main purpose of public transport is to enable those living in the
> outskirts to get to the center in the morning, and go back in the evening.
> The drive to separate out work from living quarters goes back to the
> industrial revolution when work suddenly became noisy, dangerous and
> polluting, so the old model (working and living in the same place) had to
> go. This required mass transport, be it cars or public transport Anyway,
> there is nothing wrong with living in the outskirts. Many prefer it,
> especially those with children.

In Prague, most people don't work in the center, so the commuting to the
center argument is a mute point. The center is literally only for tourists.

> Yes, and why is this interesting? The minimum wage in Malawi is ... what $1
> per year? The cost of accomodation always correlates strongly with the
> average income

The reason why it is interesting, is that a €50 flight to Brussels, and a €8O
AirBnB stay for two nights, would be a third of a months salary at Czech
minimum wage. So it is totally unrealistic for people on the east who make
that kind of money to travel west. However, westerners have no trouble
traveling east. (Some eastern students are able to travel west, but they are
among the wealthy).

> economies of scale

Economies of scale do not exist in the urban housing market, because supply is
pretty much fixed. The more demand, the higher the price.

I'm not %100 against AirBnB. But I feel that the use of AirBnB to rent out
whole apartments is unfair in cities where taxpayers heavily subsidize
infrastructure and common spaces. Especially when the investor is a foreign
one. Then the money from the west flows east and then flows right back out
again.

~~~
mafribe

       Economies of scale do not exist in 
       the urban housing market, because 
       supply is pretty much fixed. The 
       more demand, the higher the price.
    

This is not the case, and the issue has been discussed many times here on HN
with respect to San Francisco.

There is no technical reason that prevent increase of supply. You could
flatten the old town and build Dubai-style 100 floor skyscrapers, creating
>20k new flats. The _only_ reason why this doesn't happen is legislation,
zoning laws, building codes etc, which in turn reflect the will of the
majority of the population who don't want radical change of cities.

~~~
timthelion
In Prague it would suffice to start walking around throwing paint at tourists
and smashing 14th century statues. That would get the demand down enough that
normal people could move back to the center.

Edit: My point being, that buldozing the center and building high rises would
solve the problem, not due to incresed supply, but due to decreased demand.
There's a reason why Frankfurt and London are the only cities in Europe with
high rise centers and its not the price of steel. There are pleanty of sky
scrapers in Europe, but they always end up being some dead part of town that
nobody visits for any reason other than work or sleep. I guess that just
returns to my point about "real infrustructure". I think that in the US, you
can't even really talk about the "center of the city" because people don't "go
to the center" as a thing to do. People stay at home, or drive to the gym, or
go to the movies. They don't "go to the center, stop to watch a movie, get
out, walk around a bit, have dinner in the center." While all the time
thinking of their activity as "spending time in the center" rather than "going
somewhere".

------
IkmoIkmo
Here in Amsterdam I find that the rates of short-term tourist rent to long-
term citizen rent is about 3:1.

i.e., an apartment which costs $1000 a month, could be rented out for about
$100 a day, or $3000 a month.

That does mean you need to be there managing the thing, handling listing and
bookings, doing a hand-over of the keys and a brief tour, and cleaning up
after. I know a friend of a friend of a friend has been providing a service
for 2 years now where he does all that for 20% of the profit on other people's
properties.

Amsterdam has set up rules that limit Airbnb to 60 days a year. I think that's
sensible. It allows people to make some money while traveling two months of
the year, lowers costs of housing because in the up to 60 days the home owner
is gone, the space is not wasted but instead utilised. But it prevents
investors from arbitraging the 3:1 ratio between short-term subletting income
vs costs of holding the property long-term, which turns your city into a
tourist paradise at the expense of raises prices for actual citizens too much
(because all the investors push up prices) for my taste. This 60d rule is a
good balance. (it's just yet to be enforced)

~~~
yummyfajitas
If the highest value use of apartments is short term rentals, why is it
"sensible" to limit that use?

I understand why rent seeking locals would favor this. But how is this any
different from, e.g., Austin cabbies ripping off the tourists and getting Uber
banned?

~~~
consz
Negative externalities. It's easy to imagine global utility decreasing (e.g.
from the permanent resident's dissatisfaction with living next to short term
rentals) despite it being marginally profitable for the property owner.

~~~
yummyfajitas
The negative externality is, from what I can tell, "I don't like it when my
neighbor engages in activities in the privacy of his own home that don't
affect me".

When did this become a valid reason to regulate an activity? Can I use this as
a reason to regulate other private activities as well? If not, why not?

~~~
wkrause
I guess for the same reason home owners associations exist. Personal choices
that are visible in the communal space can affect property values and people's
enjoyment of the area.

For many living next to a constant stream of strangers is undesirable.

~~~
yummyfajitas
There are lots of things people don't want to live next to. For example, lots
of folks don't want to live near the wrong type of people.

Typically we consider those desires morally invalid and not something to be
supported. Why is "short term" a morally valid way to characterize the "wrong
type of people"?

------
Spooky23
Well, duh.

Hotels are pretty profitable too. If you take a hotel and remove the
requirements for safety regulation, taxes, use of commercial real estate and
provision of amenities, it will be more profitable.

Airbnb is great because the company turns a blind eye to many things and makes
it easy.

~~~
yummyfajitas
Given that there don't seem to be any major harms caused by the lack of safety
regulation and amenities on AirBnB, it seems like we can conclude that the
hotel regulations are unnecessary.

Surely, as people who favor _good_ governance rather than just arbitrary
governance, we can all favor eliminating those costly and pointless
regulations now? Or do we just favor arbitrary regulations just because we
like regulations?

~~~
Spooky23
That's right... nobody gets raped in airbnb rooms
([http://www.airbnbhell.com/i-was-gang-raped-in-budapest-
and-a...](http://www.airbnbhell.com/i-was-gang-raped-in-budapest-and-airbnb-
ignored-me-then-insulted-me/)), or watched by creepy host
([http://www.apartmenttherapy.com/this-is-terrifying-your-
airb...](http://www.apartmenttherapy.com/this-is-terrifying-your-airbnb-host-
can-legally-film-you-216361)), or bait and switched
([https://news.ycombinator.com/item?id=8063313](https://news.ycombinator.com/item?id=8063313)),
of firetraps ([http://www.dailydot.com/via/things-i-learned-airbnb-
caught-f...](http://www.dailydot.com/via/things-i-learned-airbnb-caught-
fire/)).

The regulatory model around hotels is good governance.

~~~
Sacho
Ehh...you'd need to prove that the regulations on hotels reduce the amount of
these incidents, and then also make an argument that reducing these incidents
is worth the amount of regulation. Anecdotes don't cover 1) (unless you want
me to show counter-anecdotes of people being raped in hotels, etc..), but
let's assume you've provided statistical information that hotel regulations
provide a 50% decrease in such incidents. You still haven't articulated why
you think the regulations are worth the extra safety. As a counter-argument,
here's a reductio ad absurdum - it would make hotels even safer if they
installed cameras in each room and hired enough security to monitor all video
feeds.

~~~
Spooky23
Your ignorance doesn't put a burden on me. Spend 15 minutes to do some
googling.

Fire safety is the most obvious example. A modern hotel is engineered to slow
down the spread of fire and preserve life. Sprinklers, fire resistant doors
and walls, etc.

Airbnb is an awesome thing when it does what it initially did -- handle house
rentals. When that business model failed to provide growth, they pivoted to
the current model where they've become the eBay of real estate by turning a
blind eye to obvious fraud and abuse.

~~~
yummyfajitas
I'm confused, why do short term rentals require a higher level of fire safety
than long term ones? Is a long term renter burning to death acceptable for
some reason?

~~~
Spooky23
Your home is your castle and you cannot force someone to fix their house,
absent a modification.

If you legally convert your property to a hotel, that use change triggers a
need to become code compliant.

Also, accidents are more likely to happen with short term rentals. People tend
to take care of their stuff better than someone else's.

~~~
yummyfajitas
_Your home is your castle and you cannot force someone to fix their house,
absent a modification._

That's what the law currently says. Since you are so worried that people might
burn to death, why shouldn't we change this law?

------
adgasf
Property is a fascinating asset-class. Is there anything else where amateur
investors are so encouraged to take the plunge? Just look at TV shows about
it:
[https://www.google.co.uk/search?q=tv+show+house+renovation](https://www.google.co.uk/search?q=tv+show+house+renovation)

~~~
paulpauper
Real estate is one of the best ways to make long-term wealth. Homes in many
regions of California have increased 3-4x since 1996. Unless you bought at a
really bad time (2005-2007) almost anyone who holds real estate comes out
ahead in 10 years vs. renting. Renting is a really lousy deal in the long-run
and as possibly the short-run due to the very high deposits required on some
properties, which lock the renter for very long periods and the rent increase
always exceeds inflation.

Avoid foreign real estate though unless you are very careful

~~~
pg314
It is a bit more nuanced than that. Buying a house is a highly leveraged (if
you have a mortgage), undiversified and relatively illiquid investment.

House prices have indeed gone up, but there is no guarantee that they will
continue to climb. There is a limit to how high they can climb relative to
income. You also picked one of the hottest real estates markets as a point of
reference. The returns in many other places are much lower. As a comparison,
the S&P 500 with dividends reinvested over that same period (january 1996 to
january 2017) has returned 440%.

When buying a house, timing is crucial for the return. Renting and monthly
investing in the stock market has the advantage that your investment is spread
out in time.

For most people, the biggest advantage of buying a house with a mortgage is
that it imposes a discipline: you have to pay off the monthly instalment. If
you rent you might be tempted to spend the rest of your income instead of
investing it.

[1] [https://dqydj.com/sp-500-return-
calculator/](https://dqydj.com/sp-500-return-calculator/)

~~~
paulpauper
assuming you buy the home outright, the returns can be boosted by renting it-
or-on the money you saved by not renting. If you put all your $ in stocks, you
still need somewhere to live.

~~~
pg314
Sure. And taxes complicate the situation further (lots of countries have tax
incentives for home owners). But as a homeowner you're on the hook for
maintenance and repairs. You're also a lot less flexible: when you rent, it is
easier to move for a job or if your family expands/contracts.

Both have advantages and drawbacks. I just don't think it is the no-brainer
you make it out to be.

------
user5994461
> In 2012, Jon Wheatley bought a $40,000 apartment in Las Vegas so that he
> could rent it out on Airbnb.

Investment advice: Get something for a fraction of the actual price.

Doesn't matter what happens next, you are already making a profit.

~~~
branchless
The American dream: something for almost nothing. Is this "business"? Who is
doing the actual work once we set aside our paper heroes?

~~~
sokoloff
Buying something for a dollar and selling it for two is the second oldest
business model in the world. Most businesses boil down to one or the other.

Rental property is buy an asset, break it into manageable and consumable
chunks (nights, months, or a year of tenancy) and sell those chunks for more
than you paid for them.

Airlines buy (or lease) entire airplanes and sell individual seat-routes.
They're somewhat less successful at turning a profit than real estate, though.

------
gkoberger
Here's the original article by Jon Wheatley: [http://needwant.com/p/buying-
apartment-airbnb/](http://needwant.com/p/buying-apartment-airbnb/)

I wouldn't consider him a "professional Airbnb Investor"; he just did it once.

------
kumarski
I love AirBNB, but as one of my friends who owns 8 properties tells me, the
returns are higher on VRBO and HomeAway.

------
throwaway_374
Sorry, I have a vile hatred of AirBNB. Housing is a basic human right. Call me
a dangerous socialist if you like. Can any of its employees rationally
convince me it provides economic value to ALL of my city including the lower
end of workers as opposed to funneling out profits to multiple owners and HQ?

~~~
paulpauper
Housing is a service, and landlords, who provide this service, take principal
risk as well as pay for maintenance, taxes, and other costs. Why should those
who provide such a service, such as housing, not earn rent for their efforts
and risk? Developers buy properties in bad neighborhoods in the hope of
improving and renting them, but without profit, where is the incentive to
invest? It's a two sided-equation: for services to exist, there must be an
incentive for the other side to provide said service, and that incentive is
profit.

Regular apartment rentals often lock renters for multi-month contracts (due to
difficulty, length, and expense of the eviction process, in which landlords
lose money during the lengthy eviction process, when a renter rents for a
single month and does not leave after not paying); air BNB, although it's more
expensive per night, doesn't have such long time commitments for renters.

~~~
idiot_stick
> _Housing is a service, and landlords, who provide this service, take
> principal risk as well as pay for maintenance, taxes, and other costs._

You gloss over "other costs". Many anti-AirBnB people's concerns are precisely
about those other costs.

It's evident in this discussion who are the people pushing the externalities
onto others, and who are the people having to deal with them.

~~~
Sacho
Can you give an example of an externality unique to AirBnB landlords that is
pushed onto others and the others are unable to force the landlord into
accepting responsibility for it?

