Why Airbnb is the Future of Real Estate

What to Expect from your first 100 nights on Airbnb as a host. We became cash flow positive in 90 days renting out Luxury Apartments in Johor Bahru (Malaysia) and so can you.

There are massive opportunities in the changing rental landscape, and I want to show you how to build a small business with minimum investment and maximum return.

It was 2003 when I made the best real estate deal of my life.  I rented a small studio apartment from a friend across from Carnegie Hall on 5th. Avenue in Manhattan. It was tiny and a little bit run down but I could use it to put up guests for my first real start-up organizing auditions in New York City for International Opera Houses. 

I stumbled across a little business. I rented the apartment monthly, saving massively on hotel bills and then rented the place out when I did not need it. Back then, Craigslist was my platform, and I am not sure I abided by all condo or New York Housing Regulations. Probably not, but so be it. Spending the first weeks trying to figure out a corporate apartment rental fee structure, I figured I could rent the place for a week to a businessperson for the same price I paid per month. 

Real Estate and the stock market are the only two ways of passive income creation I have at least ever tried. After spending hundreds of thousands of US Dollars, British Pounds and Euro´s as well as a few additional currencies, stop paying rent without having to settle down has become a personal mission for me. 
My New York Experience stayed with me even working in Real Estate in the Luxury market in the most exclusive part of Italy years later. What we offered as a luxury real estate brand was access to customers in foreign markets. If you were looking for a fantastic property in Costa Smeralda you might go to our showroom in Munich or London and get some expert advice. I am sure that business still works today, but you don´t need it anymore.
Along comes Airbnb giving you free global market access to rent out your property, other platforms like booking.com and the entire Expedia network works very similar. 
Here you are judged by your property, price, and recommendations. That sounds fair to me as this is the same criteria I use for the last 3000 hotel nights I have booked. What I find interesting is how it levels the playing field, how much money and time has Hilton spent to build a recognizable brand for building credibility, and having people even consider staying in the hotels? Airbnb gives you the attention and opportunity from day one. Airbnb is an opportunity, and I was eager to try it out for a while.

Our First Luxury Rental Apartment in Johor Bahru, Malaysia

The day to start this exploratory side venture for my wife was when we moved to Malaysia over Christmas, with a new baby almost ready to be born, we needed a home and ended up on the Singapore border, a place called Johor Bahru. If you have never heard of it, welcome to the club. What attracted us the location was Airbnb because search results would show up searching for Singapore but were 10 x nicer at a much lower price. While we paid 120 USD per night for a studio, supposedly I could rent a 3 Bedroom luxury apartment for 60 USD per night. We had to go and check it out. How bad could it be? Turn out not bad at all!

Like many places in Asia, there is a vast amount of Chinese money, used to build brand new cities at a pace that is unimaginable in Europe and the US. Looking out of my window, I estimate 50.000 apartments are under construction right now. The growth is insane. Because of the large number of flats under construction, investors have a super hard time selling their apartments, so it is a great rental market. Just as a reference, JB would need about 10% of the population from Singapore to move across the border to fill all of the apartments along the straits alone, still leaving enough new developments for the growing Malaysian middle-class.

Becoming a Family Vacation Host

So I rented three luxury apartments with 220m2 each in probably to most stunning residential development in Malaysia. Since I need most of the nights to host staff anyway, the risk was zero from day one. I added a hosting account to my well-used Airbnb account and started uploading the first pictures and descriptions. Always advertising two apartments I was able to test two different approaches. One is offering a discount on a super luxury property while one being very exclusive. Ultimately the price is set by Airbnb and is the same for both apartments, but I wanted to see the reactions.

The feedback was positive, and three days later, I had my first booking giving a massive discount to build credibility. My strategy was to fill the house and optimize, but since I had no reviews as a host, I felt that I had to invest in reliability first and learn what it takes. My mission was clear, become a super host first, and make money later.

View Over the Straits with Singapore on the Right

What I underestimated was the cost to prepare three large apartments for living. With each place holding a maximum of six guests, I needed at least 18 good towels and ten sets of sheets, pots, pans, and so on. Even though the apartments come fully furnished, it is a cost also if you happen to have an IKEA around like us. The first renters arrived for the weekend when it is widespread to travel from Singapore to Johor Bahru to go shopping and for the great cheap food. My total for the first weekend were six nights at an average of 75 EUR per night. Everyone was happy; my guests got a large luxury apartment for the price of a standard hotel room, my staff could spend the weekend in Bali without wasting money on, and we made a little profit from day one. Also, our guests turned out to be super lovely and exciting; we even went out and had dinner with one of our guests.

Offering Different Designs with Different Descriptions

Over the weeks we met digital nomads featuring our place on youtube, making us famous in Sweden (https://youtu.be/MTuVXOIxphg?t=395) or made new friends from Germany building Industrial Drones. We try to live the spirit of sharing that comes with Airbnb, making people feel at home and unique, and the reviews show that guests appreciate it. It will not always be possible to keep this level of personal care, but we will try.

Recommendations keep coming in and more, and more guests are booking with us. After three months and 100 nights of renting, we have become cash flow positive and are excited to grow the side business in the future. As the only draw-backs, I see the customer is always in the right issue, which works Ok for me but drives my wife insane, and it limits us to go away as we love to travel. So far, we had no significant issues that could not be cleaned up in a day. To optimize income, we started doing the cleaning yourself as we charge 30 USD per booking just for the cleanup, which can be the difference between making and losing money. I believe that investing in the rental or owned Airbnb properties is becoming a low-entry and high return investment opportunity as we build a small business from nothing. The benefits of Automatic pricing and a leveled marketing playing field is a gift to every entrepreneur looking for new Real Estate Investment Opportunities.

So what can you expect from your first 100 rentals on Airbnb? From a technical perspective, expect an idiot proof setup process on the Airbnb app. Get used to following the market! If you are not renting out your price is too high. Maybe your description does not match the perceived value because your pictures are for example to low quality but probably your price it too high. The algorithm does not care about your mortgage payment or how much you would like to make- if you are not in Manhattan where every hole finds a tenant, you are probably offering to high. My recommendation, get in the game and then try to optimize later by for example providing your place late during significant events and holidays which entails the risk of staying empty but also offers the potential upside of getting a late booker willing to pay a premium.

Expect to be dealing will all kinds of people, age groups, from you-tubers to retires. Expect to cover your cost with about 50% occupancy; you might be able to drive that up if you can make a margin on the cleaning which can be over 30% of your income.

For Contact: https://www.facebook.com/julienuhlig/