
The Rise of Airbnb's Full-Time Landlords - edtrudeau
http://www.bloomberg.com/news/articles/2015-11-10/how-airbnb-makes-property-investors-rich-despite-the-neighbors
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username223
> [Shatford] said a low-risk approach to investing in the industry is to build
> a portfolio by signing yearlong leases instead of buying the properties. The
> worst that can happen is a landlord who isn’t told about the operation can
> terminate a lease and keep the security deposit.

Wow, that's slimy. I assume the leases he's signing, like pretty much all
rental agreements, explicitly forbid unapproved sublets or guests staying more
than a few days a month. So his get-rich-quick scheme (or "business plan") is
to sign contracts he knows he will break, and hope he doesn't get caught until
after he has come out ahead.

~~~
imgabe
The contract outlines the penalty (or cost) for unapproved guests or sublets.
If the lessee is willing to pay the penalty, what's the problem? If the
penalty isn't sufficient to deter the unwanted behavior, increase it until it
is.

If we have an agreement that I give you $5000 or you can punch me in the face,
and I choose to take the punch in the face, that's not breaking the agreement.
You didn't get "cheated" out of $5000. I chose an option that was specifically
outlined in the agreement.

~~~
fra
In your sad, twisted world, only the lawyers win.

Rental agreements have already ballooned into legal tomes no first-time lessee
could ever understand. If they now have to spell out penalty for a variety of
different breaches, they will become much worse (why not a single, higher
penalty? That will get abused to extort tenants who commit minor
violations...)

IMO it should not be about contracts. You should enter agreements in good
faith and there should be _social_ consequences for doing otherwise
(reputation ruined, ... etc.). Be excellent to each other.

~~~
imgabe
By all means, if you want to depend on social consequences to enforce business
contracts, you are welcome to do so. Some people are able to operate that way
in areas where there are limited players and everyone's reputation is well
known or easily discoverable. Companies like Uber and AirBnB with reviews and
ratings systems actually bring us much closer to this being a reality.

If social consequences were sufficient, we wouldn't have invented this whole
legal system in the first place.

~~~
TeMPOraL
Rating system is actually the one thing that I _think_ is good about Uber
(though firing your emp^H^H^Hcontractor if he drops below 4.3/5 is not).

Social consequences are not good for everything, but there are _a lot_ of
areas when there are better than economic approach. The problem is that
economic incentives are much stronger than social, so the latter can be easily
destroyed by the former. The classic example would be the fact that you
absolutely, positively don't want to _pay_ people for donating blood - it
immediately leads to contamination of blood banks, as people replace the sense
of duty with an opportunity for free cash, and thus stop caring about things
like not donating blood when they are sick.

Since social incentives are fragile, you want to defend them in the areas they
work better than economic ones - hence the opposition to AirBnB.

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psaintla
This was inevitable and it is going to drive real estate sale and rental
prices up dramatically in tourist destinations. I have relatives who own
rental property in Key West, they used to sign year long leases and manage the
property year round. With Airbnb they rent the same property 1 week each month
and make more money than they did with the year long lease. Ultimately
landlords have little incentive to rent to locals. Airbnb means they never
worry about have to go to landlord/tenant court to evict and never have to
worry about getting paid monthly.

~~~
cauterized
Which is in turn extremely damaging to communities where real estate is at a
premium and even people who make a lot of money struggle to find housing they
can afford. There's a reason full-time AirBnBing is illegal in a lot of these
municipalities, and it's the same reason it should stay that way.

~~~
psaintla
There should be some limitations in place but how would you enforce them? If
your local government checks Airbnb regularly to find people breaking the law
then people will just use some other method to do the same thing as Airbnb.

~~~
EwanToo
If I was the person in charge of enforcing it, I would probably do something
like:

    
    
      1 - Make it illegal for Airbnb style services to operate in that area, including making a website available, advertising the service, taking listings in that region, etc
      2 - Threaten to jail or heavily fine senior employees if law broken
      3 - Offer a legal route which involves an audit trail of bookings being supplied to the local gov
      4 - Use audit trail to deal with rule-breaking landlords
    

Steps 1 and 2 are essentially how the US government deals with foreign
gambling websites.

~~~
psaintla
That's a lot to ask from a local government.

~~~
EwanToo
For New York state government (or equivalent) though?

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jboggan
Santa Monica resident here. The local increases in rent around here have been
astounding over the past 2 years and most of my friends who have had a life
event causing them to have to change apartments have been completely priced
out and forced to go to the Valley. I attribute much of this to AirBnB, having
known a few people here that operate business models much like what is
described in the article. We have the most expensive hotel rates in the state
and vacation rentals are extracting a lot of profit from the market because of
it.

I know a girl who rented three 1-bedroom apartments around Santa Monica. She
would live in whichever of the three was fetching the least interest on AirBnB
that month and put the other two up. Those two units were occupied about 10-15
days a month. After all expenses she netted about $1000 cash and free rent for
herself every month. In return there were two more units taken off the market
and the price of actual residential units driven up ridiculously.

L.A. Mayor Garcetti came to speak at our office last week and he said that
there is one housing unit west of the 405 (demarcation of west L.A.) for every
4 jobs west of the 405. Turning so many housing units into short term rentals
is making this far worse. I support Santa Monica's law even if it means that I
cannot rent my apartment out while I am traveling this December. I don't want
to live somewhere that only techies can afford.

~~~
Balgair
Used to live in Sawtelle. This poster is totally correct. When I left, we paid
1200 for our 1 bedroom just off Santa Monica Blvd. Our landlord raised the
rate to 3000 and it was off market in hours (we keep in contact with the
super). West LA is insane, almost at SoMa levels now. I never saw too much
about the AirBnB rentals, but boy did I hear about them from everyone. My
heart goes out to all those UCLA students trying to get by in that mess.

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motoboi
I can only say about my own experience, but in Brasília, Brazil, we now see
the rise of Uber fleets.

Asking around, people talk about one guy who own 50 cars.

At Airbnb, it's easy to find some hosts with 10+ properties.

That being said, I think this is a natural outcome. People will invest in Uber
and Airbnb and others, just as they invest in taxi licenses, hotels and
restaurants.

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swingbridge
I don't have a problem with someone that hosts a few guests in their home 2-3
times a month and having them around the dinner table (what Airbnb advertises
in PR that they do). I do have a problem with people running illegal hotels
and blatantly violating zoning laws (what the data says a lot of Airbnb folks
are actually doing).

Sorry, but people don't want to live next to a hotel. These laws exist for a
reason.

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ceejayoz
> Scott Shatford, 35, said he’s not concerned about a Santa Monica,
> California, home-sharing ordinance that took effect in June. It prohibits
> stays of less than 30 days in homes where the host isn’t living, with fines
> of as much as $500 per day. He said enforcing the ban will be difficult for
> the city because Airbnb listings don’t include addresses.

Shatford's going to be a bit upset when they subpoena AirBnB, I think.

~~~
acveilleux
Especially with an article in the press naming him, specifically point out
he's breaking the law and putting a serious dollar value on it...

They may want to wait a bit to enforce to really rack up a big bill since the
law only came into effect in June.

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benten10
Schadenfreude.

Where I am from, American (and other rich tourists) make simple things such as
groceries ridiculously expensive, and obviously the housing too. There's no
peace to be had at nights, with loud beer-addled tourists shouting around well
into the morning.

This will a) hopefully make clear to more people how such behavior is not cool
and make them understand that 'but your people make their LIVING off us, you
should thank us for that' is not really a good argument, and b) make more
programmers realize that we are not machines, and you cannot 'hack' law/people
like you can 'hack' into a machine. This will either end with people more
conscious about their externalities on other people, which would make life
better for everyone, or making life awful for everyone (if this continues)
which would eventually make more people realize that what they _really_ care
about is other people. The pure _homo economicus_ is a species you would
rather not have in your neighborhood.

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EwanToo
"The worst that can happen is a landlord who isn’t told about the operation
can terminate a lease and keep the security deposit."

I'm pretty sure the worst that can happen is an unsafe property leads to
someone's death, and then, hopefully, the people involved going to jail.

~~~
brianwawok
Why stop at 1 death?

The worst that could happen[0] is someone does an unauthorized rental to a
terrorist whom then uses a nuclear device to end all life on the planet.

0 - "The worst that can happen" is often used a little bit too freely ;)

~~~
sosborn
The difference is that one of these examples is outlandish, and the other is a
near certainty to happen within the next couple of years.

~~~
TeMPOraL
You mean we should pack our bags and get ready to board the International
Space Station Ark Complex? Because I don't see the "people involved going to
jail" lately in high profile cases, and if the nuke-wielding terrorist were to
look for an appartment, an illegal subletting (preferably without paper or
electronic trail) would be high on his list.

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gloves
I don't necessarily see the average user of AirBnB losing out in this
situation (happy to be corrected) - but more houses and options seem like a
good thing.

I think the big losers here, outside of hotels, are renters. As someone who is
trying to rent/buy in popular areas of the country (Cambridge, UK), I can see
how houses will no longer come up for rent - which sucks, as the article
points out.

I guess there could (hopefully) be a point where there are so many
professionally rented homes that it no longer represents such an attractive
proposition and the first movers enjoying these fat years of high revenues
eventually lose out.

Either that, or Airbnb will become the new way to rent, who knows...

~~~
adambard
As someone who has literally lived in AirBnB apartments for a bit over a year
now, these situations tend to work out well for me. Most of my stays have been
with people who manage a number of apartments on AirBnB to make their living,
whether via owning the building, or, more often, by subletting a bunch if
apartments (legally or illegally).

Making no comment on the effect of such operations on housing costs or other
such matters, AirBnB, like Uber, has succeeded by making a uniquely good user
experience, even as they flout regulations and the law in general.

~~~
JoeAltmaier
Well, good for you. Maybe not so good for the neighbors in those apartments.
They moved in not expecting a revolving door of strangers and late-night
partiers. There's rules for zoning things, for a reason.

~~~
pacnw
Why is it assumed that all Airbnb guests by definition must be late night
partiers, noisy and disruptive to the neighborhood? Seems like those types of
comments are made by parties that have a vested interest against Airbnb in
particular. I'll add my own one-point statistic: I rent an Airbnb while also
renting out my house on Airbnb in another city. My neighbors where I rent out
have not problems with my Airbnb guests, but ironically didn't like the folks
that rented my house via the traditional broker/lease setup. In the end, it's
just a marketplace for housing stock available to lease, both short term and
long term. The traditional way of filling tenancy is seriously broken, with
brokers taking a high up-front charge with no follow on service or help to
landlords. Just look at NYC with their hate towards Airbnb. The rental market
in that city is atrocious (exorbitant broker fees for tenants, poor
presentation, shady brokers, etc etc)

~~~
JoeAltmaier
No assumption by me. But what's the odds that _none_ of them are? Business
travelers - maybe not. But vacationers are there for that intended purpose,
right? And at least some of them will be annoying all-night partiers with no
interest in pacifying neighbors they've never met and will never see again.

