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A couple of weeks ago, AirBnB announced its Friendly Building program. By applying to join, multifamily owners can control which units are eligible for short-term rentals as well as terms such as lengths of stay, number of nights, etc. And the landlord will earn 5 to 15% of the tenant’s revenue on any rentals.

Then last week, at the MFE Conference in Las Vegas, I met an owner from Kansas City who was testing renting two units to a small business that placed units on AirBnB. This business was paying a 60% premium for those units on a 12-month lease.

With all of this new activity, I thought it might be a good time to discuss the opportunities and potential challenges with AirBnB in multifamily. There are three ways in which apartment owners can participate in the sharing economy:

1. Allow residents to sub-lease through sites like AirBnB. This is what the Friendly Building program is all about.

2. Allow businesses or individuals who have no intention of living at your community to lease apartments (at a premium) that they will then sell on sharing sites.

3. Participate directly by furnishing one or more units and marketing them for short-stay through AirBnB.

These options each come with their own set of considerations. I’ve sat in on at least four industry conference panels or presentations, and here’s a summary of the concerns that I’ve heard.

So why, you may ask, do I think it’s a good idea to at least experiment with the sharing economy? As a demand management and pricing strategist, I am attracted by the opportunity to segment and optimize a high-yield demand stream, especially given how hard it is to move the revenue needle in our business. This could help us increase average rents and, in some cases, even occupancy for challenged communities.

The math can be compelling. Take the case of the Kansas City community mentioned earlier. Assuming a $1200 average rent and a 6.5% cap rate, that’s $17,280 in incremental revenue and a valuation increase north of $265,000 (on an urban or luxury property with $2000 plus rents, this could be a half a million or more dollars in increased value). Assume a 250-unit community, and that’s the same as a 5bps increase in rent on the entire property coming from just two units.

Lastly, I would argue that this is happening right now anyway. Whether you realize it or not, chances are residents of yours are listing units on these sites today, and have been doing so for a while. While I’m sure something can go wrong (things go wrong every day with our “normal” residents), if the practice created many problems, we’d be deluged with complaints already.

One final note: you may have noticed I left off local laws and regulations as an objection. I did this intentionally as I would never advocate breaking local laws to try this out. So this entire discussion presumes we would implement options only where allowed by local rules.

I’m sure many people in the industry will disagree; but I would encourage you to think about the opportunities. We talk about wanting to be innovative. Here’s a chance to be exactly that!