irbnb is a popular service that lets people rent out empty rooms or houses to travelers. It’s like vacation rentals on steroids. But with all the good comes some bad. For example, Airbnb has been accused of fueling gentrification and even racism because the company largely takes over neighborhoods where low-income residents can’t afford to live anymore.
Should you buy stock in Airbnb? Is it a wise investment? There are pros and cons of investing in this company, and we’re going to break them down for you right here.
What is Airbnb?
Airbnb is a platform where people can rent out their homes and apartments to short-term guests. It’s a pretty simple concept. Instead of having to find a hotel to stay at, travelers can use Airbnb to have a nice place to stay for the night for cheap.
While you could use Airbnb to sleep in a hammock on a hammock raft, the company operates more like a hotel chain, with hundreds of thousands of homes available to rent in 191 countries. That’s something that many people can’t quite wrap their heads around, and it’s probably why investors often steer clear of Airbnb.
Airbnb makes money from three main sources. First, people use Airbnb to earn money by selling their own spare rooms or entire homes to guests. The more money the guests pay, the more Airbnb makes.Â
Suppose someone finds a home in a great location, usually in an inner-city. They can fix up the property themselves and use it as an Airbnb. Or some owners that buy homes that are already in good shape and use these properties to rent out as an Airbnb. It can be more lucrative than finding a home and renting it out to long-term residents. When you have long-term residents, you get a fixed amount each month. With Airbnb, you can set the amount per night you charge the guest to make $1000 a month from renting out a three-bedroom home in a downtown city if you Airbnb the house instead of renting the property out. A person can charge 4 or 5 different guests that may stay in the home for 2 or 3 nights at a time $100 a night for their stay. The owner could essentially make $800 to $1500. In return, investing in Airbnb overusing the property as a rental could make more sense for the homeowner.
The Good
Airbnb does a lot to create a global community. Those who choose to rent out their property create a living space for visitors who can’t afford to rent a hotel room. It offers accommodations that traditional rental services like Hotels.com can’t find. It’s a convenient way for vacationers to find a place to stay when they travel.
The company’s Airbnb Plus program is a great example of how the company can help its community of travelers. Airbnb Plus is a certification program for properties that are spic and span, with clean sheets, proper ventilation, comfortable beds, and friendly hosts. This program is a great way to gain clients for hosts who want to earn a place in the AirBnB family.
Another great thing about Airbnb is the sheer number of people using its service.
The Bad
Just like any other company, there are some flaws in Airbnb’s business model. The biggest issue is that Airbnb’s service isn’t as good as it could be. Right now, you can only search for Airbnbs in certain cities. This isn’t ideal, as I’m currently searching for a place to rent in New York, and I can’t seem to find any decent options in my price range.
Another thing is that sometimes people find the best deal on Airbnbs, and they don’t need to charge you any more money. If this happens, the hosts get away with charging you a little more than what you’re expecting, which is fine, but I’m in a tight budget and I want to find the best possible deal.
Investing in Airbnb
First, you need to understand that Airbnb is a travel company. It does this by connecting people to other people looking for places to stay. This is done in a digital way by placing people looking to rent out their space with the places looking to rent it. You can go to Airbnb and search by a specific city or neighborhood in your area.
Some of the benefits of investing in Airbnb are that you don’t necessarily have to be on the ground to understand what’s going on. This means you can be part of the journey and help it grow into the mega-company that is to come. But it can also be a huge risk since this is still a relatively new company.
Plus, Airbnb can be slow in actually paying out the money they earn to people who rent out their homes and apartments.
Conclusions
When you buy a stock, you are buying a tiny piece of the overall company. That said, if you can find stocks that have some sort of fundamental moat, it can be worth buying them.
This is what I’m talking about when I say that Airbnb is like vacation rentals on steroids. There’s a ton of risk if Airbnb’s business model ever falls apart. But, even if that happens, Airbnb still has potential because there are many parts of the world where Airbnb can still exist because so many people want to use it. That makes Airbnb a cheap “moat” investment.
The real question, then, is whether Airbnb is worth buying at this point. I’d say it’s probably not a wise investment at this point.
