The New Way of Investing That’s Making Airbnb Hosts a Fortune

by Thomas Herd

Presented by T1

In the past, there has really only been one mainstream way of making money from the investment in your property — long term leasing. What does this mean? It means buying a property or having a separate property that you don’t live in and rent for an extended period of time (typically one year). While this is a tried and true model that has made more millionaires than any other type of investing, there’s one BIG problem. You need to own a second home or own a home that you don’t live in, requiring you to have a decent amount of extra cash to buy or rent that second home.

That was until now.  Like many other industries, technology has given people the ability to have side hustles or full time jobs that didn’t exist a few years ago. You have Task Rabbit for handymen, Wag for dog walkers, Bambino for babysitters, as well as Uber and Lyft for rideshare. And now for homeowners, Airbnb.

Airbnb hasn’t just changed the hotel industry, recently beating Hilton in consumer spending. It has also given its hosts the opportunity to cover their expenses, pay for their mortgage or simply earn passive income. And the best part– you don’t have to own a second home. You can rent out a room in your home, rent a section of your home, or you can go stay at your friend’s home and rent out your entire home. But Airbnb has done something else that no one saw coming.

They created a brand new way of investing — short term real estate investing.

Welcome to the world of Airbnb investing.  Now you find people buying homes with one of their top priorities being income-generating potential. You even have people who are buying investment specific full time airbnb properties. Chris Kiros, a realtor with Coldwell Banker in Beverly Hills, told us, “Short-term airbnb investment properties have become extremely popular. One of my best friends just bought a property so that when he travels for work he can Airbnb the place out to help cover the mortgage and then some. People love that their home doubles as an investment property.’’

Bill Herb, a realtor with Charles Rutenberg Realty in Orlando, Florida, explained “It all started one fine day with a roommate letting me know he would be leaving for two months and saying he couldn’t afford the rent while he was gone. He suggested that I try to rent his room on Airbnb while he was away. So I did just that.  After doing a couple of rentals and only making $50 or so a night, I decided to put my whole house on there, giving me an excuse to take a vacation.  Before I knew it, I kept getting booking after booking and I kept raising the price day after day. One day I started running the numbers and I said OMG, I can go buy three to four houses with this type of income.  Well that was in August of 2017,  and since then I did buy my next house with an attached guest suite so that now I get to actually meet my guests and exchange Ideas and culture. Short term rental properties are officially my favorite income stream!

There are all sorts of Airbnb investment properties — a single family home, a condo, a multi-unit building such as a duplex or triplex where the owner lives in one and rents out the other units. Some are buying homes with ADU’s (Accessory Dwelling Units), or detached structures from the home that are commonly similar to a one-bedroom apartment with a separate entrance. Michael Fitzgerald, a realtor with Compass in Sherman Oaks, told us,  “I’ve  seen a huge increase in existing homebuyer opportunities in purchasing homes with rental potential, mainly in the form of ADUs (accessory dwelling units) for short/long term rental. Many people in California would like to rent versus purchase. Why not take advantage of making extra income?”

No matter the real estate type, Airbnb investing is becoming increasingly popular, especially among millennials, a generation that grew up watching and partaking in the rise of the giga economy. They were also the early adopters of the company.  Jeb Carty, Co-Founder and CEO of Zumbly, an online real estate search platform where the search starts with how much money you want to make from Airbnb quotes. “It’s no wonder Millennials want to make extra money from their homes. After watching their friends and family get financially destroyed by the crisis of 2008 and all the student debt they’ve acquired, it’s no wonder they want to de-risk their investment. A home is the most expensive purchase the average person will make in their lifetime.  Whether they realize it or not, every home buyer is a real estate investor”.

 To learn more, Thomas Herd sat down with Joel Glenny to discuss how he sees technology continuing to change the way we buy real estate.

Tell us a little about Zumbly. 
Zumbly’s algorithm leverages data and machine learning to instantly take users to homes that makes the most financial sense. The idea of Zumbly started in 2017 when my Co-Founder and real estate investor Jeb Carty was in Vegas looking to purchase his next investment property but had no luck because he couldn’t find cash flow positive properties. He and his realtor spent multiple days running financial models on numerous properties only to be unsuccessful which made Jeb come to the realization that he needed to create an app that would instantly show him the best investment properties in any given market. When I teamed up with Jeb this was the problem we were tackling when during our beta we learned that it wasn’t only investors that were interested in what we were doing. We quickly learned that young first-time homebuyers were using Zumbly to take them to homes that would make money on Airbnb as well as give them the peace of mind that their purchase is a great investment. We now see Zumbly’s technology empowering any homebuyer or investor to buy as if they were the most seasoned investor.

How does Zumbly sit in the market with solutions like Zillow and Redfin? 
Every home searching portal out there is focused on similar solutions — give users as many options as possible, keep them looking at homes as long as possible and create a one-stop, push-button experience: search, get approved, talk to realtor in their brokerage, title, close. Everything in one place — A true closed loop experience. We see a lot of value in what they are doing and are excited to see how their solutions will help us in the future, but where we see a lot of opportunity is Zumlby telling users which home or investment property to buy. Older generations want the Walmart or unlimited option experience, where young buyers want technology to make decisions for them. We see Zumbly being the place people go to be told which home or investment property they should buy.

Where are you guys at in the process? 
We are still very early stage. We have spent the last two and a half  years developing the technology that will get us to our end goal but still have a long way to go. Now that we have clarity on what the market wants, we are maturing the product. To this point we have self funded, but are looking to raise a seed round in February 2020 so we can continue to build a team that can take Zumbly national and international.

How do you guys make money? 
Originally we were leading with a straight forward SaaS subscription model that we planned on selling to real estate investors. We saw an opportunity to give users a better experience while charging them half the price ($29/mo) of similar tools in the market as well as using a traditional lead selling and advertising model that Zillow and others use. Now with a bigger vision and more clarity, we are playing with much more creative models where users pay a low fee to have the best homes picked for them as well as in-app communications with real estate agents and contractors without users having to send contact information which is shared/sold to multiple agents that call them and leads to a bad user experience. Until we build these solutions into Zumbly we are running monetization experiments where users can buy a day pass or monthly subscription to find the best deals and investment scenarios – we call this Zumbly Pro.

What markets is Zumbly currently available in? 
During our beta we launched in LA and Chicago. We wanted to see how two drastically different markets would respond to a solution like Zumbly. As we assumed Chicago adopted Zumbly much quicker and better than LA and we are looking to roll out another 10 markets the first half of 2020 that have similar buying trends. We look for cities that have affordable homes, the majority of buyers being under 35 and a large population. Our next city to launch will be Philadelphia in December 2019 and we’ll announce the following nine markets in Jan 2020.

Where do you see things going in real estate? 
Home buyers being able to say “Alexa ask Zumbly what home should I buy.” With where tech is going and data that is available and will be available in the future, I see technology making buying decisions based on user behaviors  and that experience becoming sharable and social. Although a lot of thought leaders see multifamily and renting being more likely in the future rather than owning, our research is telling us that home ownership will top the list once again in life goals. Technology just needs to make it easier, more affordable and attainable — which is what’s currently taking place.

Outside of Zumbly what are you personally excited about? 
I love learning. The most exciting part about being a Co-Founder rather than an employee is that it forces me to learn as much as possible so we don’t fail – it’s ultimate responsibility. So, to answer your question I am most excited about learning more than ever before. Getting invited to speak or partake in calls with some of the smartest people doing the coolest stuff has been such an exciting opportunity and has led me to start my own podcast —  licensetopodcast.com that covers subjects ranging from tech to spirituality. I am stoked on how many new things I will be learning in 2020 .

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