For those not familiar with Airbnb, it’s one of those new disruptive apps that allows you to list your spare bedroom or entire house for holiday rent on its platform.
The concept started when three struggling flat mates wanted to see if anyone would pay to sleep on an air mattress in their lounge room floor less than a decade ago. It turned out, someone was willing to pay $80 a night to do so and the concept was born.
Thus, the ‘Air’ in Airbnb was from the air mattress. Today Airbnb has over 3 million homes listed around the world and growing rapidly with a value of over $30 billion dollars. Although, most people are making some part-time income generally from a few thousand up to $15,000 p.a., there are numerous people making six-figure incomes and a few making seven figure incomes.
We recently interviewed Jamie McIntyre- a leading educator and bestselling author who on the side built up a million dollar plus income from Airbnb in a short period of time. We asked him about what it takes to make the big bucks on Airbnb. Here’s what he had to say:
When did you start using Airbnb?
JM: One of my internal company analysts put me onto it 3-4 years ago. I tested it on one of my holiday homes and nearly a quarter of a million-p.a. extra income later from one home, I started to take it more seriously.
When did you discover how to make $1 million plus from Airbnb part time?
JM: I was living in New York last year. It was hard to get an apartment to lease short term because to get a lease in the US without a Social Security number is harder than getting a bank loan in Australia. I was paying about $4500 USD for a nice one bedroom apartment in the Financial District. When I wasn’t using it, I put it on Airbnb, thus generating $9000 USD during many months.
This got me thinking, I don’t just have to own property to put it on Airbnb, why can’t I lease them and put them on Airbnb?
What happened then?
JM: I started taking on leases in different parts of the world such as New York, L.A, Queenstown New Zealand and Australia. I chose places I often travel to so I could have holiday homes that I could put on Airbnb when not using them.
I rented a mansion in LA and it made $70,000 AUD in its first month, and the rent was only $30,000. It was amazing to see how much extra rent could be made by using Airbnb.
I had another one in Noosa, Australia where I received $22,000 for just one month, yet my rent was only $720 AUD per week. Of course, not all homes are so successful, but many double their rental costs.
I started to see this had potential to effectively arbitrage between the gap between long term leased properties and holiday let leasing prices. One could arbitrage this gap and make significant profits if done correctly.
I eventually ended up with about 40 leases around the world, plus my own investment portfolio on Airbnb.
What sort of returns were you targeting?
JM: My target is generally 8-12% p.a. rental return. Considering in Australia rental yields are only 3-4%, I don’t understand why any property investor would accept a long term tenant instead of Airbnb these days.
Do you think it’s because they don’t have the skill set that perhaps you developed from having over 40 properties on Airbnb and the fact that they perhaps don’t even have the time or confidence to execute it correctly?
JM: Yes, that maybe the case. There is certainly an expertise to maximising the returns per house that can generate higher returns. For example, I outsourced one of my LA homes (formerly Elton John’s home in West Hollywood) to an Airbnb Manager. They achieved less than 60% of the revenue I got per booking and generated losses every month they managed it. After sacking them, I was able to instantly make it profitable. With some simple changes on the profile that literally took me 15 minutes, I took this mansion from getting $2500 USD per weekend to $4500-$7000 USD per weekend.
That’s a massive difference over a year. So, having a good Airbnb Manager is critical or get expert training on how to do it yourself.
Is this why you created an Airbnb Management Company and an Airbnb training and consultancy?
JM: Yes. I effectively had an Airbnb Management Company for managing my own portfolio, so we expanded to take on other clients’ homes and it’s continuing to grow.
Plus, as an educator I made a promise to my earliest millionaire mentor that I would always share what worked for me with others rather than keep the IP to myself.
So, I created some home study courses sharing how I maximise the Airbnb incomes on homes and criteria of homes I select that most likely will work on Airbnb.
I also consult for clients who send me properties they wish to buy or lease to give them my opinion on whether I think they’d perform or not, or source for them properties to buy that are ideal for Airbnb.
We heard that you have been approached to help with managing Airbnb Property Funds being set up to take advantage of this growing trend for investors.
JM: Yes, I have received several approaches. They need someone with experience to select the most suitable properties to acquire for the Funds and to manage the properties to get the 8-12% p.a. gross returns and most importantly, the target 7-10% capital growth.
As there are very few people that have made $1 million plus p.a. from Airbnb, they eventually find a way to track you down.
I’ve also shared the concept with some Goldman Sachs Investment Bankers who also see major value in such funds. Especially, since returns on secured assets are so low elsewhere, therefore Airbnb on a real estate portfolio can lower the risk on property from higher cash flow. So, even if interest rates rise, they’ll remain cash positive.
You’ve also taught individuals how to become Airbnb consultants to earn $5000-$10,000 per month part time. How is this possible?
JM: Yes, I created a home study on it to show how by mastering Airbnb you can help others boost their incomes and/or manage their homes on Airbnb for them.
It doesn’t require many clients to achieve a part or fulltime income, as Airbnb Managers generally charge 15-25% of gross revenue and most home owners simply don’t want to do it themselves. With 3 million homes and growing on Airbnb, the demand for Airbnb Managers is increasing.