Arecent multifamily construction boom has created stiff competition for some property owners and managers. Savvy landlords are taking a two-pronged approach to staying competitive: On one hand, they’re beefing up their amenity packages to lure (and retain) residents. On the other hand, they’re tasking property managers with finding new, creative ways to generate better returns.
That’s where Airbnb comes in. Increasingly, multifamily property owners are finding that partnering with Airbnb can be a one-two punch for staying competitive in today’s market.
Operating Short-Term Rental Properties
Over the past decade, Airbnb has grown its home-sharing platform to more than 65,000 cities and 191 countries. While some landlords view Airbnb as a nuisance or a threat, others see the opportunities that the platform has created.
For example: Instead of signing traditional, long-term leases on all of the units in a 12-unit property, a landlord might opt to convert two of those units into short-term rentals. Those units, when listed on Airbnb, can generate significantly higher returns than a landlord might be able to realize through long-term leases. A unit that typically leases for $1500 per month may instead be able to generate twice as much if rented for $200 per night, just 15 days out of the month.
Of course, there are tradeoffs. Traditional leases typically provide more stable tenants and cash flow, and they’re less difficult to manage. It’s also easier to build a sense of community when residents are there for the long-haul.
Short-term rentals require a lot of leg-work. You’re constantly marketing the unit and responding to inquiries; and there needs to be someone at the ready to turn the unit over each time a new guest arrives.
But again—the headaches are worth it for some landlords, particularly those with an on-site property manager who can take care of the daily Airbnb duties. Landlords might even consider offering the Airbnb rentals to the building’s other residents as an amenity: “Have family staying in town? Have them stay with you! 50% off all in-building Airbnb rentals for residents!”
Working with Residents to Rent Out Units
Though Airbnb can seem daunting at first, there’s a whole cottage industry that has popped up in recent years to streamline the Airbnb rental process. There are even companies that specialize in servicing Airbnb rentals: Pillow and AirHandy are just two. Landlords can also partner with a local, independent “co-host” directly through the Airbnb platform.
In addition, there are many high-tech tools that make it easier to rent units on Airbnb—from smart locks to software programs that assist with pricing, invoicing, and guest screening.
If renting an entire apartment building on Airbnb seems too burdensome, another strategy is to adopt a flexible Airbnb policy that allows residents to list their units on the home-sharing platform.
Airbnb is trying to make this as easy as possible. In September 2016, Airbnb rolled out a “Friendly Buildings” program. The program is targeted at landlords, property managers, and homeowners’ associations. In exchange for letting people in their building host on Airbnb, they’ll receive a cut of the profits—anywhere between 5 and 15 percent of what the tenant earns each stay.
Through the Friendly Buildings program, Airbnb collaborates with hosts and building owners to:
- Create specific hosting rules that apply to all residents equally
- Update leases and other agreements to allow residents to host
- Help landlords, residents, and HOAs share portions of the reservation income
This program is appealing for several reasons. The most obvious is the ability for landlords, property managers, and HOAs to generate additional revenue. But in addition, the program is designed to be super flexible. Building owners can define the terms of home-sharing, from blackout dates to pet policies. They also have access to a customized dashboard that allows them to monitor the hosting activity of participating hosts. For instance, if you have a policy that only allows residents to rent their unit on Airbnb for a certain number of days per month (or per year), you can easily track that using the Friendly Buildings platform.
For residents, the ability to rent their unit on Airbnb can be a valuable amenity. Those who know they can list their unit on Airbnb without being in violation of their lease agreement may be more inclined to rent (or stay in) an apartment that is perhaps a bit above their price range. Renting their apartment for one or two nights a month might make or break their ability to afford rent each month. With the influx of new, more expensive apartments coming online in many cities—this is an amenity that could very well appeal to prospective residents.
And by all indications, people like this flexibility. An estimated 10,000 units were registered through the Friendly Buildings program in its first year alone.
Some property owners are taking this approach to the extreme, by building new multifamily properties that are specifically designed to be Airbnb-friendly.
Airbnb-Friendly Rental Properties
For example, Miami-based Newgard Development Group announced last fall that it had partnered with Airbnb to support home sharing in all of its new apartment buildings. Newgard is intentionally designing its new project as Airbnb-friendly properties. Its first project, a 324-unit building in Kissimmee, FL, will be branded as “Niido Powered by Airbnb.”
Niido residents will sign traditional leases, but will then be allowed to sublet their units on Airbnb for up to 180 days per year in exchange for 25 percent of revenue generated. They will have access to the Niido app, which is easily integrated with Airbnb to manage their guest calendar, amenity bookings, and keyless entry. Similar to a hotel, the Niido property will have a “Master Host” who acts as a concierge for travelers. The building will also have a variety of communal and business spaces, similar to what guests would find in a traditional hotel.
This strategy—the intentional branding of a property as being in partnership with Airbnb—ensures that nobody is surprised by the potentially rotating door of short-term guests. Landlords, property managers, and HOAs can adopt a similar approach as a marketing tool: “Frequent flier? Live with us. We’ll put your home to work while you’re away!”
We expect the Airbnb marketplace will continue to evolve in the years to come. Cities are starting to clarify rules and regulations around short-term rentals, which should provide some clarity for landlords, property managers, and HOAs who were once tepid toward Airbnb. While Airbnb might not be a good fit for everyone, it’s certainly an option to explore. In today’s increasingly competitive multifamily rental market, partnering with Airbnb can open a breadth of opportunities for those looking to generate additional income.