3 Big Fears that Stop Seniors from Renting their Home on Airbnb (and How to Deal with Them)
If you have been following me on Retire Different for a while, you already know that I am a BIG believer in passive income. Why? Because, in today’s low interest environment, $1 in yearly passive income can be worth $20 in retirement savings (or more!)
So, even if you have never thought of yourself as an entrepreneurial person, looking for ways to make a little extra cash in retirement is essential. And, if you can make extra money from your existing assets (rather than working) that’s even better!
Your House Isn’t an “Asset”… Until it is!
If you have read any of the “Rich Dad, Poor Dad” books, you will know that the author, Robert Kiyosaki, has a somewhat unconventional definition of asset. Rather than being “something of value,” to Kiyosaki, an asset is “something that puts money in your pocket every month.”
By this definition, for most of our lives, our houses aren’t assets. Oh sure, they can gain in value and, during good times, they help to multiply our profits when we sell them through the only use of investment leverage that most people will ever touch… their mortgage.
But, even when they are gaining in value, our houses usually aren’t putting money in our pockets on a monthly basis. Unless we rent our homes, which most of us don’t, they simply take money out of our wallets each month in the form of utility payments, mortgages and property taxes.
Then, after our kids leave the house, a new opportunity emerges; with more space and flexibility, we finally have the option of generating passive income from our properties, even if we still want to live in them!
Why Don’t More Older Adults Rent Their Homes on Airbnb… Fear!
In a previous article, I wrote about 3 reasons that retirees might want to consider renting their homes on Airbnb. I argued that, beyond the obvious financial benefits, renting your home in retirement can be an important source of social contact. It can also give you the flexibility to travel.
But, with so many reasons to consider renting on Airbnb, why do so few of us take the plunge? Is it because we aren’t comfortable with technology? Nope. Is it because we don’t need the money or just can’t be bothered to put in the effort to list our properties? No way!
Having talked with hundreds of men and women over 60 about their retirement dreams, I have come to the conclusion that the number one thing that prevents us from funding part of our retirement with Airbnb is our fears!
So, today, I thought that I would address a few of the fears that people in our community have about renting on Airbnb. Of course, I’m not claiming that Airbnb doesn’t have its problems… and each and every person should make their own risk/reward assessment. I’m simply saying that our fears are often worse than the reality.
I hope that the following offers some perspective as you consider whether to use Airbnb to generate passive income from your property.
What if Someone Damages My Property or Breaks Something?
This is probably the number 1 fear that holds people back from renting their home on Airbnb. Not only do we feel strange about having strangers in our homes under the best of circumstances, but, many of us still have horror stories stuck in our minds from the early days of Airbnb.
From a 100-person, sizzling hot, New Year’s party that caused $100s in damage to an apartment that quite literally burned down, there are plenty of Airbnb horror stories on the Internet.
The first thing to keep in mind here is that Airbnb is a huge service that serves 2-million customers a day. That’s right, on any particular day, 2-million guests are staying in an Airbnb. With this many guests staying in 191 countries around the world, is it any surprise that a few bad apples emerge? Of course not!
So, while you should always be careful, the perception that “If I rent my home on Airbnb, it’s definitely going to get trashed,” just isn’t based in reality. The vast majority of hosts never experience a nightmare renter.
Furthermore, even if an accident does happen, Airbnb provides financial protection for its hosts. For legal reasons, I’m not going to summarize it here, but, if you are considering renting your apartment, I encourage you to check it out here.
What if Someone Hurts Themselves on My Property?
On the flipside, many people worry about someone else getting injured on their property and suing them for damages.
I can actually totally understand this concern. Most of us have spent our entire lives saving for retirement. The last thing we want is for our financial castle to come crashing to the ground because someone slips in our bathroom and bumps their head.
The first thing to keep in mind here is that each and every one of us has a considerable amount of control over our properties. For a small investment, we can install anti-slip mats in the bathrooms and handrails on the stairs. We can lock up paints and other hazardous materials where children can’t get to them. And, we can make sure that our houses are well maintained.
But, what happens if something unexpected does happen. What happens when, despite our best efforts, someone does get hurt on our property?
Once again, Airbnb realizes that this is a genuine fear that many of us have and provides liability insurance for each of its hosts. I’m not going to summarize it here, but, you can read the description on the Airbnb site here.
At the end of the day, you probably have a good idea of how safe your property is… and whether it can be brought up to an acceptable standard. But, it’s also good to know that Airbnb has your back.
What if a Guest is Rude, Abusive or Dangerous?
Some people don’t worry so much for the safety of their property as they worry for their personal safety and the safety of their loved ones.
With 2-million people staying in an Airbnb property every night, there are bound to be a few bad apples out there. Even the minority of people who aren’t very nice usually aren’t dangerous. But, how can you avoid being one of the unlucky ones that gets a truly nightmare guest?
The first thing to keep in mind is that Airbnb is a community platform. Over the last few years, they have made significant progress in connecting their users to their real identities. They also have an AI system that tries to identify problems like fraud attempts before they happen. Is this system flawless? Of course not! But, Airbnb will only get better at this over time… and they’re already pretty good!
There are also things that you can do to reduce the chances that you will encounter someone who will cause problems. While discriminating based on race, gender, sexual orientation or other protected categories is not allowed, you can reject a host if their behavior is giving your red flags.
In Airbnb’s own words: “If you find that a guest is breaking one of the House Rules you’ve set or has made you feel unsafe through their actions, you can decline their reservation request or cancel the reservation.”
So, definitely do your homework and uses the tools provided by Airbnb, including their secure messaging system, to check out your potential renters before they join. Have a list of questions that you ask each potential guest and keep track of their answers in case someone accuses you of discrimination.
Finally, if you are planning on staying in your home at the same time as a guest, it makes sense to take basic precautions like having a locked door preventing access to your part of the house.
So, Should You Rent Your Home on Airbnb?
Only you can answer this question. At the end of the day, every activity in this crazy carousel we call “life” is risky in one way or another.
Is it possible that your property will be damaged? Sure. Could you get really unlucky and have to deal with an abusive renter… or someone who tries to throw a beach party in your living room? Probably.
But, the truth is that the great majority of Airbnb renters and hosts have a good experience and never encounter a major issue. And, when something does occur, there are systems in place (not to mention insurance) to address it.
The question is this… what is the bigger risk? The risk that something bad will happen if you host on Airbnb? Or, the risk that you won’t have enough money in retirement to have the lifestyle that you want? Only you can answer this question, but, I encourage you to get all the facts first!
Do you know anyone who rents their property on Airbnb? What has their experience been like? What are your biggest fears about renting your property on Airbnb? Let’s have a conversation!