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Airbnb Businesses Explained. Hosting, Cohosting and Rental Arbitrage business models - YouTube
Channel: Sean Rakidzich
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What is everybody doing on Airbnb
that's making so much money.
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We're going to talk about what Airbnb is.
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But more importantly,
what is an Airbnb business?
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We're going to give you a few more terms
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and definitions,
because by the end of this video,
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you're going to understand that there's
more than one business model in the Airbnb
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space so you can choose how you want
to get started if this is for you.
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So my name is Sean Rakidzich.
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This is Airbnb automated.
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And let's jump right in.
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Alright, welcome back, Airbnb family.
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So first of what is Airbnb?
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A lot of people think that they know,
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but simply Airbnb is not
what you think it is.
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It's not some hotel chain.
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It's not some big Empire.
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Airbnb is a software that is it.
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It is a peer to peer OnDemand software not
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much different than Uber or Wag or south
or all these other apps that Uber eats.
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You order some food to your house.
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Basically, it's connecting service
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providers with people
who want that service.
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And in this case, we're talking
about travel accommodations.
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So what Airbnb is done, though,
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is they've created a movement where
by lower lowering the barrier where a lot
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of people can put their home on Airbnb
and people can find it on Airbnb and then
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pay that person and then
they can stay there.
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So that leads to the new economy,
the Airbnb sharing economy.
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So what is an Airbnb business?
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Well, essentially, an Airbnb business is
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more of a layman's term for something
that's existed for a long time.
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It's a short term rental business or
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vacation business or a furnished
accommodations business.
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Or you could even say
a corporate housing company.
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All these companies and titles are pretty
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much the same, which is that they will
well put furniture in a home or furniture
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in a space and then somebody will live
there any number of dates with Airbnb.
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It can be as short as one day where
with corporate housing companies,
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typically, people would stay
three months or longer.
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And so an Airbnb business is taking
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advantage of Airbnb specifically as
a technology as one of the many
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technologies that you can use the market
at home by putting furniture in a space
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and then listing it for rent
per se by any number of days.
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Now, there's a few things that you need
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to understand here, because
that's not enough, right?
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That wasn't enough to get started.
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I you put furniture in a home and put
it up for sale or put it up for rent.
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Now, there's a few different types
of business models that circulate
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that evolve or orbit
around short term rentals.
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Well, what is specifically
a short term rental?
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See, a short term rental
varies state to state.
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In Philadelphia, a short term renter is
someone who stays shorter than 90 days.
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In Texas, it's somebody
who stays shorter than 30.
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In California, I think
it's shorter than 28.
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So a short term rental is a space could be
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a hotel, for example,
is a short term rental or a home that's
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been furnished to supply
what people need to stay.
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And you are allowing
people to stay short term.
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And that state to state city.
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The city will vary in length where a long
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term rental is typically an unfurnished
home that you sign a typical Leason,
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and you live there for six
months a year, two years.
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So that's the difference.
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Short term rental is simply designed
and allocated for daily or weekly use.
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Now, there's a very simple
way to get started.
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If you have a home that you own
homeowners, this is really where Airbnb
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really started out was renting out a spare
room or renting out your living room.
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Now, the owners, Brian Chesky,
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and his two buddies in San Francisco when
they first started this business,
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they were trying to rent out an air
mattress on their living room floor.
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And that's what the name Airbnb
is for is air bed and breakfast.
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Air standing for air mattress
is that interesting?
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So homeowners can list their entire space
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without much trouble at all
because they own the home.
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So that's one way to run
an Airbnb business.
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You could also rent out private rooms.
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So if you rent a two bedroom apartment
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somewhere like in New York,
you can Airbnb if you live in this space.
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Right?
So if you are a tenant of your home,
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you can rent out a spare room so you can
make money in an Airbnb business as
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a renter who is now, in a way, subletting
one of the rooms out that's one way.
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Now, my favorite business model
for Airbnb is called rental arbitrage.
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Essentially, what that is is you don't own
a home, you find somebody else who owns
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a home or you find an apartment
complex who has many, many rooms.
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And you convince that owner or
the property management that represents
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ownership to allow you to lease those
properties, you become the renter.
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But you then market that property after
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you furnish it and you find
other people to stay short term.
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So you're signing a longterm lease
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for a lower rate than you're
collecting by the night.
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Right?
So a 1500 a month lease to break even,
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you need to collect $50 a day
to break even on a 500 a month lease.
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But if you're charging $150 a day,
that's a $100 margin per night.
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Simply put.
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Now, rental arbitrage is my favorite
because we've managed to scale it.
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We have almost 60 properties right now.
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Actually, we signed three more leases
today, so we are over 60 properties.
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Now we're adding about 30 more.
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It's pretty scrappy.
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Now, there's new regulations.
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Now is the perfect time to talk about how
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La, starting November 1,
is changing the regulations.
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Now with cities that don't allow you
to do something like rental arbitrage.
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But you want to create a scalable Airbnb
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business and you don't want
to have to buy a lot of homes.
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You can do something called cohosting.
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What is cohosting?
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Well, cohosting is essentially where you
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find an owner of a property,
and you just facilitate their ability
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to put their own home and to manage
their own home on Airbnb.
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So you have a landlord who has a property,
and instead of them putting a regular
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tenant in there, you work
with them side by side.
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You guide them on furnishing the home,
making the space look good.
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And then you handle all
the guest interactions.
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The check ins, the checkouts,
managing the cleaners who clean the home.
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And you're like the operating
partner of the business model.
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And if a city says that every person can
have one Airbnb that they have to own,
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and you're a cohost,
you can partner with 20 different business
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or homeowners, and you can have
20 Airbnbs in your portfolio.
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As a cohost, where there's 20 different
owners, one for each home,
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that's a way to bypass kind of the city
regulations in a legit way.
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If you want to build an Airbnb business
in a city, they won't let you.
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Now, there's only about 8% of cities
that are kind of like anti Airbnb fully.
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That still leaves over 90% of the market,
which is kind of nice, isn't it?
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So with that said, that's Airbnb
in a nutshell, that's an Airbnb business.
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Short term rentals, corporate housing.
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And, of course,
my favorite rental arbitrage.
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If you want to learn more about rental
arbitrage, we've got two years worth
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of content on this channel, so I invite
you to watch as much as you please.
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Again, my name is Sean.
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Thank you for watching Airbnb automated
and I'll see you on the other side.
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