That was the message of a recent seminar touting the profitability of Airbnb for property investors debating whether to rent their houses and condos to long-term tenants or overnight guests.
“You will get more money for your rental if you have it on Airbnb,” said real estate data guru Francisco Mago, founder of BNBVestor. “Regular rentals are overrated.” Launched in 2017, BNBVestor offers seminars and a monthly subscription to a database of home-sharing trends based on data scraped from AirBnb and long-term rental sites like Zillow.
This day, the audience of 20 gathered in Doral included property managers, real estate investors and even a stand-up comedian. Each coughed up the $99 seminar fee as a way into the Airbnb business.
And why wouldn’t they want in? Business is booming.
Data provided by Airbnb indicates the number of entire homes listed on the site for Miami-Dade has jumped 33 percent since 2017, up to around 13,500 today. In the current market, Miami landlords and property managers can make an average of around 40 percent more renting entire homes or apartments to tourists on Airbnb than renting to locals on annual leases, according to BNBVestor. In areas like South Miami and North Miami Airbnb yields up to 62 percent and 51 percent, respectively, more per month with rates around $140 a night.
The problem for locals: More houses, apartments and condos available on home-sharing platforms translates into fewer options for those who live here full time. As Miami-Dade faces a crisis in housing affordability with a 130,000-unit deficit, as many as 13,500 existing units in good condition sit unavailable to the people who need them.
Mago said BNBVestor scrapes data from Airbnb and long-term rental sites such as Realtor.com and Zillow.com. Airbnb disputes the numbers, saying many of the listings on its site belong to live-in owners who make their homes available on Airbnb only when they are out of town. Half of the entire homes rented on Airbnb are rented for less than 60 days out of the year, according to the company. Some entire home listings are guesthouses, RVs, or boats.
“We’re proud that home sharing and short-term rentals help thousands of everyday Miamians better afford to stay in their homes and live in an increasingly expensive region,” said Tom Martinelli, Airbnb’s Florida policy director. “We support measures to protect affordable housing and target bad actors here in Miami-Dade and across the United States.”
Evidence about Airbnb’s impact on the local rental market varies. In March 2017, the not-for-profit fact-checking website Politifact rated then-Miami Beach mayor Philip Levine’s comment that Airbnb “decreases real estate values and increases costs for workforce housing” as mostly false, saying the market hadn’t been around long enough to get an accurate picture. But a 2019 Miami Herald analysis of Airbnb data available through new third party sites and interviews with Airbnb entrepreneurs suggests an increasing number of investors are converting Miami rentals into residential hotel rooms, leaving locals with fewer rental units.
Miami real estate entrepreneurs are picking up on the obvious economic incentives, and affordable housing experts say the practice is surely having an impact.
“At the top there’s an abundance of units, more high-end units than rich people,” said Jake Wegmann, an assistant professor at the University of Texas at Austin school of architecture. “Down the income scale, at the very bottom there’s a huge shortage. If Airbnb is eroding units that are in the middle, then almost certainly that would not be good, that would be tightening the pinch that people in that segment of the market are facing.”
A working paper recently summarized in the Harvard Business Review found that a 1 percent increase in Airbnb listings translates into a 0.018 percent increase in long-term rental rates and a decrease in the amount of long-term units on the market.
Airbnb’s origins are rooted in San Francisco’s affordable housing crisis.
In 2007, a pair of Silicon Valley roommates wedged three air mattresses into their loft and charged $80 for a night’s stay as a way to make their rent. They quickly launched the Air Bed and Breakfast website so that others could do the same. Amid the stress of the housing crash, the home-sharing concept caught fire. By 2011, one million nights had been booked on the Airbnb.com website. Today consumers can stay in an Airbnb in 191 countries — including more than 900,000 listings in the U.S. — and book via smaller short-term rental sites including VRBO, HomeAway, Expedia, Travelocity, Vacasa, SabaticalHomes, FlipKey and Turnkey. Tech analyst firm Juniper Research estimates the U.S. residential sharing economy is worth $13 billion. Forbes estimates privately held Airbnb is worth $38 billion.
During the same decade, Miami’s tourism market has expanded. More than 16.5 million overnight visitors came to Miami last year, a 36 percent increase over a decade ago. While demand for all types of accommodation has increased, millennials seeking cheaper digs and more authentic experiences have gravitated to home sharing.
For Miami-Dade, the boom in short-term rentals brought some benefits. In public statements Airbnb celebrates hosts’ earnings from Airbnb as “supplemental income” and touts the site as a tool that helps everyday Miamians make ends meet.
Airbnb hosts turned over $10 million in tax revenue to the county in 2018. Additionally, Airbnb entrepreneurs say they are upgrading housing stock when they renovate units before listing them. And Airbnbs in traditionally less-visited areas like Homestead — with around 110 entire homes listed on the Airbnb website — or Hialeah — with around 60 — bring tourist dollars to business owners who wouldn’t otherwise benefit.
But what originally began as a website enabling homeowners to run a viable side gig has morphed into a high-return real estate investment industry. Today, just 25 percent of Airbnbers in Miami rent out private rooms, according to BNBVestor.
The bulk of Airbnbs in Miami-Dade county — 75 percent — are entire homes or apartments.
Local seminars for budding Airbnb entrepreneurs show that for some listing on the site, this is their full-time job.
Some investors buy homes to list on Airbnb, others seek out rentals to re-rent on the site. The latter strategy requires far less capital and allows newbies to test out their hospitality skills without breaking the bank.
The best way to get started, Mago explained at a recent seminar, is to target a “tired landlord” — someone who has owned a property for more than four years — and offer to take a rental unit off their hands. The Airbnber pays the owner the same monthly rent as a long- term tenant, and then turns around and rents the apartment on Airbnb and pockets the difference. The Airbnber is responsible for furnishing the apartment and answering any guest complaints. Perks for the unit or homeowner include less wear and tear on the property, frequent professional cleanings and little use of appliances and water.
BNBVestor has emerged as a subscription data service for those deciding where and how to break into the market. The data can estimate which ZIP codes have the highest occupancy rate and average daily rate, then translate that information to estimated revenue by neighborhood. It can also forecast the kind of home — one-bedroom apartment vs. four-bedroom house — that will be most profitable in each area and compare estimated Airbnb revenue to estimated revenue for regular long-term rentals.
AirDNA, a competitor subscription service, provides similar data scraped from Airbnb and other smaller short-term rental sites. Its analysis reaches similar conclusions about the vacation rental market to BNBvestor.
Airbnb disputes the conclusions of scrapers like BNBVestor and AirDNA, saying those programs cannot differentiate when a unit is booked by a guest from when it is made unavailable by the host.
Representatives from both BNBvestor and AirDNA estimate that their margin of error for occupancy is less than five percent.
Neither local governments nor Airbnb track the number of Airbnbs rented by people who actually live in the unit and only make it available when they’re away, leaving regulators and the public blind to a surging corner of the hospitality industry.
But data scraped from Airbnb offers a hint: According to BNBVestor, more than two-thirds of entire home listings on Airbnb in Miami-Dade are managed by hosts with more than one property on the site.
European cities are more attuned to the impact. This month, 10 European cities sent a letter to the European Union demanding more help in pushing back against Airbnbs.
“European cities believe that homes should be used first and foremost for living in,” the letter said. “Many cities suffer from a serious housing shortage. Where homes can be used more lucratively for renting out to tourists, they disappear from the traditional housing market, prices are driven up even further and housing of citizens who live and work in our cities is hampered.”
The data highlights how ineffective some Miami municipalities have been in regulating short-term rentals and enforcing their existing laws.
Case in point: Short-term rentals in Coral Gables are illegal in all residential areas, encompassing 76 percent of the city, yet hundreds of entire Gables homes are available on Airbnb.
Like many other local municipalities, the City of Miami does not track the number of short-term rentals in its limits or require owners to register. Currently around 7,000 entire homes in the City of Miami are listed on Airbnb, more than in any other Miami-Dade municipality, according to BNBVestor.
In the 33127 ZIP code that includes parts of Little Haiti, Wynwood, Model City and Edgewater, the median household income for the 32,000 locals who live in the neighborhood is about $30,000, well below the county median of $50,000. Nearly one-third of those employed work in the service industry. Tenants in 60 percent of the rental units in the neighborhood are spending more than 35 percent of their income on rent. There are around 11,000 housing units in the ZIP code, according to the U.S. Census.
Yet the neighborhood is among the 10 most popular for Airbnb investors in the City of Miami. Some 370 entire homes in the ZIP code are listed on the site. Airbnbers can charge an average daily rate of $107, enabling them to earn 40 percent more renting homes there to tourists instead of locals. Thirty percent of hosts control 63 percent of Airbnbs in the area.
One investor is mortgage broker Nicholas Lara, 29, who said he runs 11 properties across the county. Four of his Wynwood units fill a 1960s apartment building. Real estate records show that in January, all four units were rented for $1,700 per month. They became available on Airbnb in February for around $150 per night and already have dozens of positive guest reviews. Lara said he expects he can make up to $400 per night on the units during big events like music festivals.
Lara said he got into the business when an Airbnb host approached him about renting one of his units out on the site. He agreed and accepted the $3,400 rent payment. When he saw that the host was making around $10,000 per month, he said he decided to give it a try. Slowly, he said, he converted all of his long-term lease apartments to Airbnbs.
“This is a home-run industry,” he said at a recent seminar in Broward titled “The Scoop on Airbnb.” He called the boom in Airbnbs in South Florida a phenomenon that only businesses would outlast. “This weeds out people who are riding the wave. If you’re a business — not just renting out a spare room — and working as a professional, you’re going to be fine.”
You can read the entire Miami Herald article here.