AirBNB has indeed been a massive boon to me. It has allowed to me increase my income, and it has taught me a lot about running a business, being a great host, and even how to maximize the use of my properties. In this day in age, where costs are running rampant and traditional rentals aren’t as profitable, it’s good to know that services like AirBNB provide better value.
My Usage of AirBNB
I have a few different properties ranging from an agricultural holding to a one bedroom apartment. Each of these has offered me unique experiences with owning property. And the one thing that I have really come to appreciate about property is Freedom. Some property types constrain your flexibility, for example body corporates try to limit your usage and movements. As such they make using AirBNB very cumbersome. Yet others give you maximum freedom to do whatever you want, but the there’s a lot of effort in having these types of properties. For example, the agricultural holding, you can do pretty much anything you want, but it’s a lot of work to get it to looking great. Because of this, I still don’t have this property completely ready for AirBNB.
The reason why I love using AirBNB so much, is that it gives me the freedom to rent a space when I want, and then to use it when I feel like it. You can almost have your cake and eat it 🙂
The existing traditional rental systems are restrictive and unwittingly predatory in my opinion. I often noticed that they inadvertently morph you into being an absentee landlord in way. On the property that I rent out long term, I don’t think I’ve met my tenants longer for than a hour in total. It just seems to be the way that system plays out. However with AirBNB, you’re compelled to be a great host and to meet the guests. And I must say, broadly speaking I have been very pleased with the great guests I’ve had the pleasure of meeting. I really try to be a good host, and I think that’s led to my having very good ratings with repeat customers.
The Good and the Bad
AirBNB is really an Awesome service. I can’t say that I’ve experienced anything bad with it. When you’re starting out you might get some dodgy guests, but after your first few bookings you get the hang of it, and things are just upward from there on.
It’s also very important to explain things thoroughly with first time guests, as they may have incorrect notions of how processes work. AirBNB regulars are without a doubt easy to host; they’re chilled, they don’t cause hassles and communication is always good.
Another massive advantage of AirBNB over traditional rentals, is that the guests tend to take much better care of the property, which I absolutely love. You’ve also got the added advantage of running it like a business, which has got tax advantages, more diligence on your part and starts the process starts changing your thinking from that of a rentier to a business person.
I was hoping to acquire more property once I got the last one paid off. This was the plan at least. However, I messed up in one regard, and certain contextual factors have changed. These combination of factors have put me off the idea of getting more property.
Separate Business entity
In South Africa your personal tax rate can go up to 41% which I think is ridiculous given the lack of service delivery. The lowest tax rate is 18%, and tax rate for a business can be as low as 21%. I wish I had known this type of information as a kid. Early on, I was focused on making my career successful, and didn’t stop to consider that personal tax rates are punitive for individuals. In hindsight, I should have been acquiring assets through a company instead. Although admittedly, I do find the bureaucracy and legalities of business, tax and property quite confusing. Hence why I LOVE Bitcoin!! But anyway, I messed up here with property and business is this regard. I should have found a way to buy these properties on a business entity.
Infrastructure Challenges reducing profits
In South Africa, we are facing challenges of deteriorating infrastructure like broken water systems, sewerage systems and electricity supply challenges inter alia. This has resulted in costs of these going up drastically which has dropped property earnings. Over and above that, new building developments do not include meaningful sustainability solutions like integrated solar, heating and water savings mechanisms, which is absolutely crazy! I was considering purchasing a great property deal, but I declined in the end because I worry that costs will blow out in the next few years and there’s no sustainability mechanisms to contain those costs.
For now, I’m going to continue as is with my properties trying to leverage AirBNB because as it provides more value. I’m going to hold off acquiring more property until we as nation get things under control. If by some good fortunate, I get the last property paid off I’ll try the snowball effect and see if all the existing properties can be be used to acquire more property. And clearly AirBNB will play a meaningful part in all of this.
I love that services like AirBNB provide better value for the assets we own. I for one, welcome the disruption it brings, and sense of opportunity provides. Not only do I get to more money, maintain better control over my assets, but I also get the superb pleasure of meeting some wonderful people from all over the world. All in all, its a great way to leverage your assets to bring about more freedom.