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Thanks for PMing me your city. Based on a quick search for private rooms in your area, the cheapest room per night was $54 on a week night. So it would take 8 nights booked to break even with your rent increase. So that’s EVERY weekend booked basically to break even on your increased rent and very basic costs. So for you to be making any money at all you’d have to be 50% booked every month, once you factor in laundry, increased utilities, cleaning, etc. Your location looks fairly seasonal based on people’s vacation plans, so half of the time you could be sitting completely empty. Plus your landlord sounds unreasonable with a flat rent increase, so good luck getting them to cover basic wear and tear.
I wouldn’t do it. You’ll get more money with less involvement and invasiveness into your personal life tutoring, walking dogs, housecleaning, etc. And then it won’t be in your apartment so you won’t have to worry about cutting into your study time with waiting for a check-in or cleaning, you’ll be in more control of your schedule, and you won’t have to worry about keeping your place clean at all times. And then you don’t have to worry about all kinds of factors in your taxes. Because you can only deduct the % of your rent and utilities that directly corresponds to your guest space. So if your guest’s private space is only 20% of your apartment, best case scenario you can only deduct 20% of your rent and utilities. Because you can only deduct what is used 100% for business use unless you have a very creative accountant who knows of loopholes I don’t.
It’s not some get rich quick scheme. Yes, my “income” is enough to cover my mortgage each month, but when it comes to the dollars and cents come tax-time my true profit is negligible. You are in a higher rent area than I am though, so it might be worth it if you have a nice place that can charge $100/night. You don’t seem to have a lot of competition. But you also may not have a lot of demand.
I wouldn’t agree to a rent hike without a 3 month trial period. And a clear contract. A $400 rent increase in my area would be a 25-50% rent hike, but it may not be for you.
Thanks Sarah. All of what you said makes sense. My initial thought was $97/night or perhaps lower to get good reviews and traffic. I asked for a 4-5 month trial period, and she agreed to 1-2 months but still the same rent increase. This entire situation has made me literally sick. My stomach is in knots most of the time, and I’m not sleeping well. If I’d known she was going to raise the rent, I would have never considered it at all. I wanted to do things right, be transparent, and legal about it. Sometimes I make things harder on myself than need be.
I just searched your city, state into the AirBnB search and checked “private room” and tried several different dates. Check out your competition and see how many reviews they have, how long they’ve been listed, what kind of reviews they have, how similar they are, etc.
But as a tenant, I would not want to do AirBnB. You’re probably better off with just a roommate if rent is really that tight. For the amount of time involved to make actual money, there’s lots of other ideas to try first.
If your stomach is in knots now …imagine how you will feel when you have to make the higher rent and haven’t had enough bookings that month.
You had the right thought being transparent and open with your landlord but effectively your landlord has set you a ridiculous hurdle to jump over on a monthly basis. And I’m going to guess that s/he’s going to be keeping an eye on your listing and if it looks like you’re doing well will be back for a bigger slice of pie.
I’d forget Airbnb and, like others have suggested, explore other ways of making additional money.
Yeah, it’s your landlord that has me bothered. I am a Air host and a normal landlord. As a landlord, it’s very passive and typically easy income. Of course having your place be an Air adds a little risk on their end, but they’re doing nothing, you’ll be doing all the work, and they’re just piling on more profit with none of the added work. I have a friend who is thinking about turning his LTR into an Air property and I told him not to because of the work involved you end up making (at least in our market) the same amount of money once you factor in the added work and risk to the host.
Are they going to waive the added rent if you don’t get enough bookings that month? Are they going to help if you have a crisis or a bad guest or if you lost a resolution center request and don’t get a payout? There are so many balanced, fair, and equitable ways to set this up ($ amount/day or booking, a % of income, etc), and a flat $400 rent hike is none of the above. Trust your gut, this will not work in your favor You take on all the risk and expense in this scenario and will probably not have anything to show for it unless your market needs more listings to cover demand and you get consistently booked enough to make it worth the energy and risk. But your numbers wouldn’t work for me, or probably most of us at all.
Why not a % of income and you can set them as co hosts (so they can follow how much booking you are making or you are sending a paper every month). What is your normal rent per month? (to compare with the 400 dollars)
Or put another way; she’d have to be booked 50% of the time just to break even and cover the rent increase. Given the amount of work that goes into hosting and cleaning in order to prepare for guests; that’s a terrible deal.
It sounds like your landlord is extremely smart, albeit unscrupulous. Why should she profit so much from your business venture and her refusal to allow a trial of 4-5 months sounds like she knows more about Airbnb than you might think. She may know your listing gets a massive boost when you first start out and this may give you false hope of consistent guests at this rate.
I would not enter into the agreement without a capped % and not a capped percentage of bookings, unless it’s 7.5% or less as I would estimate that after breakfast, Internet, increase utilities (most guests use water, fans and heating like a hotel), wear and tear, linens, replacement guide books, furniture and dishes and glasses etc that 20% of my rental fee goes in ‘costs’. The rate should be a capped % AFTER costs. Then depending on your situation, tax. I don’t know how it works in your jurisdiction but usually if you are renting, and you are renting the spare room on Airbnb or to a regular flatmate, you don’t have to pay tax as they are simply paying part of the whole rent, it’s not income, it’s just reducing your expenses. It’s different if you own, it is income and there are the normal capital gains implications when you sell.
Of course you couldn’t be taking in more $ than your rent.
In my country it is illegal for a landlord to ‘unreasonably refuse’ your request for a flatmate and we have Tribunals you can go to for disputes and certainly, it would be illegal and exploitative to put the market rent up $400 just because someone wanted a flatmate.
Rather than getting yourself in knots, start being as smart as your landlord and know your rights. I would also start looking for another rental that is more open to you doing this or a smaller place you can afford on your own in case this is the demise of your landlord relationship. Easier said than done, moving is a major pain. It is her home and she has every right to say no and I think reasonable and smart to seek a small compensation but $400 sounds outrageous. It’s hard to be definitive as you have stated your area, house design and standard and what rent you pay now.
It could have it’s own entrance through a back gate/yard. Or, it could be through the main house. Yes, it has it’s own bathroom and an additional TV room… or I could make it into another bedroom. Occupancy of 4 possibly. It’s just more people coming/going but may increase income/bookings.
You take on all the risk and expense in this scenario and will probably not have anything to show for it unless your market needs more listings to cover demand and you get consistently booked enough to make it worth the energy and risk. But your numbers wouldn’t work for me, or probably most of us at all.