How Airbnb can be more profitable than renting

Othe last years, Airbnbit is (NASDAQ: ABNB) business has become more than just vacation rentals. In this video clip from “The Virtual Opportunities Show” on Motley Fool live, recorded on May 3Fool.com contributors Travis Hoium and Rachel Warren explain how guests could save money by renting an Airbnb rather than renting or owning a home.

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Travis Houm: The way I would see it is like a market. Let’s take Jose as an example, I live in Minneapolis, so if he can move from the east coast to Minneapolis and have lower costs, there will be progressively less demand for housing on the east coast and prices will adjust Consequently.

That’s, I think, the way to think about it, especially in Silicon Valley where housing has always been such an issue if you allow those tech workers to not have to be in Silicon Valley and ‘they can live anywhere in the world, you’re going to have gradually, maybe even a lot less demand in Silicon Valley, maybe housing prices will go down there.

That’s generally, I think, the way to think about it. If you want to do location arbitrage, I don’t think there’s a huge problem with that. Is it having your cake and eating too? Sure. But there are many people who do that in the world.

Rachel, maybe you can tell us if it really pays to rent and live in an Airbnb rather than renting or owning a house. I don’t know if cost would be the driving force here, wouldn’t it be experience and the ability to live somewhere for three months and then go somewhere else and pack your things in one evening rather than having to move in and out?

Rachel Warren: Yeah, absolutely. It may be more profitable. It depends on what you are looking for, what type of accommodation you choose, where you choose, how long you stay. These are all factors that determine whether it will be more profitable compared to, for example, a rental agreement that you sign for a year or a mortgage that you pay.

But there’s definitely a lot of that element of experience. There is also this possibility of having a certain amount of goods with you, you go somewhere for a few months and then without having to go through things like shipping a lot of goods or furniture, you pack your bags and you can move the next location with relative ease. So that kind of flexible aspect of what Airbnb offers, it’s also something very easy to do through Airbnb.

It can certainly be more profitable in the sense that if you move or even tend to choose a place where you can live longer. For example, Airbnb was saying that they partner with some of these local governments for some remote work visas. Let’s say someone gets one of these visas and then lives in an Airbnb that they rent out for a year.

It might still be more profitable because these Airbnbs are furnished, basically all costs should be included with Airbnb except maybe a local tax that you would pay. There are a lot of benefits depending on the lifestyle you want, I think that’s what matters.

Rachel Warren has no position in the stocks mentioned. Travis Hoium has positions in Airbnb, Inc. The Motley Fool has positions and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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