I Bought a House With Money I Made From Airbnb
I spoke to “Jackson White” (nee Anonymous) a year ago about his experience renting out his San Francisco apartment on Airbnb. He was charging $200/night and paying $1,900/mo. in rent, staying with his girlfriend whenever the apartment was rented out. We spoke again this week about the status of his rental. Turns out he’s become a bit of an Airbnb real estate tycoon.
LS: Hi Jackson. Give me an update. Are you still renting your apartment?
JW: I still have my original apartment in the city. It’s a full-time rental now—my girlfriend and I live together permanently now, in the East Bay actually.
LS: Priced out of the city!
JW: I mean, yeah, but we live in a big house with a yard and a guest room. We couldn’t have had that in San Francisco at any time, really.
LS: So what do you charge for your apartment now?
JW: I’m charging $250 a night now. It comes in between $5,000 and $6,000 a month, in reality.
LS: When we spoke last, you were flying under the radar of your landlord because your lease said no sublets. Does your landlord know now? After a year, he must?
JW: He knows, but we don’t talk about it. It’s sort of an unspoken understanding now. So long as there’s no issues, he doesn’t have an issue.
LS: Were you really stressed about him finding out?
JW: No. I’ve had friends whose landlords found out they do this, too. They simply say, “Don’t do it anymore.” It’s pretty rare to have someone freak out over renting it out, and I knew that.
LS: How did he find out?
JW: He came by to fix something when someone was staying there. He didn’t ask any questions of the people who answered the door, but that’s happened a couple times since then, all with lovely people. Airbnb is largely a self-policed community. There are a couple of exceptions, sure, but a psychopath could move in next to you anyway. Landlords largely don’t care so long as you have good credit and pay rent. That’s all they check. I do more background checks than they do.
LS: Wait, what kind of checks do you do?
JW: You talk to them on the phone, see reviews that other hosts have left them. You have their Facebook info, and Airbnb keeps all their credit card info and their identity has been verified by sending in scans of government IDs. Your worst case scenario is getting a group of young kids in there who make too much noise. But my walls are sound proof.
LS: What about neighbors? Have you had any complaints about people coming and going?
JW: It’s a big building—the layout offers a lot of anonymity. I haven’t had any complaints. One of my neighbors even cleans the place for me, so I’m kind of hands off. Getting paid for that helped him pay his rent for a couple months.
LS: So tell me about the money. What are you doing with it, where does it go?
JW: I set up a business account and all of the money gets deposited in there. I saved every penny and a few months ago I bought a house with the money I saved. It’s outside of the city in area with a lot of tourists.
LS: You bought a house with your Airbnb money. Wow. Did you buy the house to live in?
JW: Nope! Maybe one day. But I bought it as an investment property, to rent on Airbnb. All above the board. Legally. I’ll make more per night, for only a little bit more per monthly payment. Except this is not throwing money away in rent. It’s building equity.
LS: How much money did you save?
JW: $50,000—all of which I used as my down payment.
LS: Was this just from renting out your apartment? I remember you also had talked about renting another apartment just to rent out.
JW: Yeah. We picked one up, and had it for six months, but it wasn’t making money like we wanted, so we broke the lease. We only made about $5K or $6K total off that. It was a 300 square-foot studio and we were paying $2,100 a month for it. The market was really just too high already. To rent my apartment now, you’d pay nearly $3,500. It almost doesn’t make sense at that point.
LS: Have your feelings changed at all about whether renting out your apartment is morally ok?
JW: I don’t lose sleep over it, if that’s what you’re asking. Other than the profit, the biggest take away has been meeting a lot of really cool people and making friends all over the world. The truth is, these are cool world travelers, or a couple on their honeymoon and just people excited to see the city. That’s what this community is all about. It’s not perfect.
I looked at buying in the city, and it’s appealing, but I’m not willing to take a risk with $500K on the line.
LS: What do you mean risk?
JW: Yeah. There’s a risk with this. And in the city I’d be buying a place in a building with a HOA [homeowner’s association]. So even if I bought outright, I’m still spending $1,000 a month in fees. And those are financing a group that actually police the place I would own. If you get caught, you get a warning, but get caught again and you get fined.
LS: Was the plan to buy all along?
JW: Yeah, once we saw how much we were bringing in. At first we did go on vacation—we spent about $3,000 on that. But after that, it was all saving for the house.
LS: So all of the money went in savings? Really?
JW: I make enough at my job that I didn’t need the extra money. It sped up the saving process. Since I moved in with my girlfriend, rent now comes out of the money that we earn. It’s all structured that way for tax reasons, which we have completely in line.
LS: Are your friends jealous?
JW: Oh … I’m sure they are. I don’t go around flaunting it though.
LS: I mean, I’m jealous. It seems like free money, which, I know it’s a job to arrange and think about it. But it, yeah. It feels like free money, which makes me feel pouty.
JW: Oh yeah. It is free money. I’m essentially talking to a couple people a month, and they are giving me thousands of dollars. Time invested:income is insane. I make $5 to $6K a month and work about 3 or 4 hours a month for it. And once I get the new place up and running, I’m expecting that to more than double. And it’ll be legal.
LS: You said that earlier. Is renting your current apartment on Airbnb no longer legal?
JW: It’s not that it was illegal. It’s a gray area. Should I be doing it? It depends on whom you ask. Neighbors know and don’t care. Landlord is aware of it. I pay all taxes on it that I need to. But the lease says “no subletting.” Who’s the victim? The city?
LS: Well higher rents mean people are priced out of the city.
JW: And pricing people out? Complain about the exceptional job market and the tech companies overpaying graduates for that. Airbnb is great for local economies. It’s hardly the reason it’s driving rent up.
LS: So what’s next for you?
JW: We’re furnishing this house right now so we can get it up and listed on Airbnb and other vacation rental sites. We’ll save everything we make from it. The idea is to get another one. And do the same thing. And another.
LS: Are you worried about being not being able to rent those houses out? What if the laws change?
JW: It’s a big fight both ways. At the crux of it, you have hotel chains spending big money trying to keep these companies from growing. Cities like Seoul, and Berlin have made it straight up legal. Along with Amsterdam. If people are renting, I see the conflict. But if you own a place, I don’t see any reason why you shouldn’t be able to rent a room, or rent it out if you can. But, at the same time, if you rent and you can mitigate that conflict the way I have, and it’s a victimless crime, and I’m doing well financially … is it really because people are just jealous they are mad? The way I see it, if you had a chance to rent your place out, have it pay your rent, and have all your debt paid off in eight months or so, and you get a little extra cash every month … but there’s a little risk in it. You wouldn’t at least consider it? At the same time, meeting some pretty awesome people from around the world? Is there anyone who wouldn’t at least THINK about it? I was lucky to have a situation that allowed me to take the risk and do it. It worked out. And hopefully it will continue to work out.