By Jennifer Castenson, Forbes contributor.
There is an age-old discussion about whether it is cheaper to buy or rent housing. Since Airbnb launched in 2008, homeowners have had the advantage of home sharing for an additional revenue stream, certainly tipping the profitability scale toward home ownership.
But now, renters can join in the riches.
Airbnb and the real estate software and analytics provider RealPage, announced an exclusive apartment home sharing solution that makes it easier for residents to share their space and make money, while at the same time giving property owners the opportunity to get a share.
The solution, called Migo, basically offers the technology to make it easier for the resident and the property owner, by integrating with service providers to make Airbnb work better in apartments. It also could possibly convert some of the residents who were already skirting the system to sublet or share their units without permission.
While many of us have been able to benefit from someone renting out a convenient downtown rental location on Airbnb, many times local regulation or owner policies ban home sharing. Migo is changing all of that by putting the permissions and transparencies in place and streamlining the online process. The technology’s value proposition is to allow residents to live more flexibly and affordably.
How? Migo provides an example of a renter in Miami who is a flight attendant. While they are away for work, they are able to home share their apartment that they rent for $1,965 a month. They home share six days per month at an average of $150 per night. By using the self-service model of Migo, they make the maximum of the booking revenue. In twelve months, they have made a total of $8,100 from home sharing, offsetting the rent by 34%.
Plus, the property owner takes a share. Following this example, the owner makes $1,836 from the home sharing activity.
Hosts on Airbnb, or residents, also found that the additional income was a great support during the pandemic. Jesse Stein, the global head of real estate at Airbnb, points to one of the company’s recent surveys that shows 30% of its hosts experienced pandemic-related pay cuts or reduced hours at work and more than 10% lost their job or were laid off.
Property Owners Benefit
First, as the example above shows, the property owner is getting a revenue share of every home share transaction.
However, as Christine Serlin reports for Multifamily Executive, owners had to overcome the fear of home sharing, just like getting over the fear of allowing pets. Which isn’t hard to do when you look at the numbers. Between March 2020 and March 2021, cumulatively new Airbnb Hosts with only one listing earned more than $1.2 billion on Airbnb. That’s a lot of cash that owners can now have access to.
For every booked night, the ownership groups get a percentage of that booking, so it’s additional net operating income.
Todd Butler, who serves as the vice president of home sharing at RealPage, says that property managers that offer home sharing as an amenity will see higher stabilized occupancies, faster lease ups, lower cost per lead for tenants, and increased prospect traffic. Plus, it may be an added incentive for real estate investors.
With Migo as a factor for investors and developers, home sharing as a renter amenity will be most desirable in urban core areas with high walkability and, of course, regulations that allow home sharing.
“There are a lot of fundamentals that make home sharing in apartments viable; this product isn’t for every community,” Butler said. “It’s typically best for an asset less than 10 years old with the right smart access control. And, if it is the right home sharing demographic – 24- to 35-year-olds – then having 40% of the building as active home sharing participants isn’t a stretch.”
By using these criteria and the estimated revenue potential calculator on the Migo website, a property in Philadelphia with 174 units that are rented on average 4 days per month, the home sharing would deliver $46,479 per year, or $267 per unit per year.
Migo predicts that the sweet spot for users will be between 24- to 35-years-old, have most likely already used Airbnb, and are young professionals without family. These renters can home share while they are traveling for work, or working remotely, to monetize the time when the space isn’t being used, and then use that income to offset rent or other housing expenses.
The risk for the property manager is mitigated since Migo works with Airbnb to do identity verification, requiring an uploaded ID that is then run through various criminal and background checks. Potential guests will only see Migo properties if they are “ID verified,” otherwise they will just see traditional Airbnb results.
If there was something to happen, damage to property, Airbnb bookings include $1M of damage protection and liability coverage.
In addition to home sharing insurance, the technology platform offers access control, criminal screening, and noise monitoring. Plus, for the guest, it offers room cleaning, automatic pricing, booking support and luggage management.
Inspiring New Development
The Migo team is excited to see how this new product helps influence how and where communities are developed, because home sharing revenue can now be factored into financial modeling, possibly moving the needle for a project that might not have been attractive previously.
“Because Migo has such a substantial revenue opportunity that can easily be modeled for owners, adding Migo into a financial projection might lead developers and owners to build a property that otherwise may not have hit a certain ROI threshold – thus potentially allowing for more housing stock,” Butler said.
He doesn’t anticipate that this new technology will negatively impact housing stock. Migo centers its offering around resident-based home sharing, which means residents share units that they live in, as opposed to master leasing furnished units, which would actually take away from housing stock.
Residents pay the property owners market rent and sign a 12-month lease just as they would at any other community. Airbnb collects the same host service fee that they have on any Airbnb booking, which can be as low as 3%. There are no other fees collected by Airbnb from residents, guests, or owners.
Stein shares that the pandemic caused a shift in the way people live, work and travel - they are less tethered and more flexible, so they are going to more places than they did before and staying longer.
The recently released Airbnb Report on Travel and Living analyzes Airbnb booking data and consumer research and shows that there has been a transition in travel. Travelers that were traveling at all the same times to all the same places are now living anywhere at any time, for different amounts of time.
Stein says they also are seeing people start to return to cities for longer periods of time.
“The top-three destinations for long-term stays on Airbnb are all cities,” Stein said. “As of April 30, 2021, in New York, 62% of summer nights booked in the city are for long-term stays, and in Seattle and Los Angeles, long term stays are at 40 and 43%, respectively, this summer.”
The urban trend should be a good kick start for Migo. Plus, Butler points out that with more people working remotely now, renters can travel more and not risk losing as much money on rent. It could increase listings on the site quite substantially, with close to 50 million rental units in the U.S. alone.
Check out the original article at: Forbes.