I do not enjoy the idea of a stranger sleeping in my house. Given the choice of “stranger sleeps in your house, or stranger does not sleep in your house” I would choose “stranger does not sleep in my house” 100% of the time.
However, there are two things in life that we are not given a choice about, death and taxes. If you live in a major city where rent is high you can add one more things to that list:
Death, Taxes, and Rent.
My wife and I took our first foray into hosting on Airbnb during a vacation to Los Angeles to visit my brother. She was working to start her own company and we were beginning to experience the painful financial squeeze of idealism meeting reality. In other words, moving to a single-income household in the most expensive city in the country.
We were considering ways to make a little extra income to offset our costs—and given the popularity of Airbnb, we decided to try it. Earnest data shows that people earn a median of $440 per month on Airbnb.
We live in a two-bedroom, one and a half bathroom townhouse in Sausalito, just over the Golden Gate bridge from San Francisco. While the house itself is a bit out of date, we have two decks and the back of the house is adorned with 15-foot windows overlooking the Bay. For that reason, we thought we could command a decent price during the summer months.
Once we did some research on Airbnb, we realized we had a lot of control over whom we could choose to rent our house. This gave us the assurance we needed to give it a shot… for the right price.
We were going to be out of town for three days so we initially set the booking for a three-night minimum at nearly $360 per night and did not allow instant booking. This meant we had the ability to control who would book our house.
However, much like a ticket scalper hoping for a big score, the realization set in that we were sitting on an asset that would have exactly zero value once the weekend had passed.
Four days before we were set to leave we had no takers and only one inquiry on the house.
Airbnb suggested we price the house at around $180 per night given demand and similar options in the neighborhood. Uh oh, we were listed at almost double that. We decided to drop the price by about 30% to around $250 and allowed instant booking.
The house was booked within a matter of hours.
Upon returning the house was in pristine shape. The thing we did notice; our bank account. We had just made over $500 for an hour of cleaning and a sending a few texts back and forth to coordinate plans.
My wife and I both knew we had to find a way to utilize our asset more often, however, if we were not already leaving for the weekend it did not make sense for us to rent the house and stay in a hotel. The financial gain was not worth the time and stress.
But what if it was?
I would not uproot myself for a few bucks any weekend. However, there is a certain amount of money that if offered to me, it would be financially irresponsible to turn down for a weekend away from my house.
How much money is too much to turn down?
After some chatting, my wife and I agreed on a dollar amount that if offered to us, we would leave the house and make other arrangements for the weekend. We determined that if we could earn 25% of our monthly rent, it would be financially irresponsible to turn it down.
“We determined that if we could earn 25% of our monthly rent, it would be financially irresponsible to turn it down.”
We listed the house every weekend for a two-month stretch. We also turned off instant booking to give ourselves control to withhold the house if we deemed it was not a good weekend or were not comfortable with the potential occupants.
We knew it would not be rented often, or potentially ever, at this price. But when there was a weekend every so often, such as the Sausalito Art Festival, when the market dictated a higher price, we wanted to be ready to capitalize.
We rented out the house two times over the first six weeks. We crashed with friends on one occasion and took them to a nice dinner to thank them. The following time we drove down the coast, took a weekend vacation, and pocketed the extra money.
The money we earned from the three rentals was enough to pay for an anniversary trip to Monterrey. We rented out the house again during the trip.
For my wife and me, Airbnb is not about making a big score or getting rich. It’s about finding a way to make things work and using the resources we have to our best advantage. Ideally, there will be a time when there is no amount of money that would uproot my wife and me on the weekend.
But until then, we can be flexible for the right price.
By Jordan Nichols, a member of the New Business team at Stripe.