Coronavirus and Airbnb – Policy Changes Hurting Hosts?

In response to the coronavirus and resulting changes to travel plans, conferences, etc. Airbnb made a decision to override host cancellation policies (previously set individually by property per preference) and issue full refunds to all guests during a certain period impacted by the coronavirus. From the Airbnb coronavirus FAQ page:

” Reservations made on or before March 14, 2020 for stays and Airbnb Experiences, with a check-in date between March 14, 2020 and April 14, 2020, are covered by the policy and may be cancelled before check-in. Guests who cancel will receive a full refund, and hosts can cancel without charge or impact to their Superhost status. Airbnb will refund all service fees for covered cancellations. “

This policy change has angered a number of hosts that are now left without revenue and with mortgage payments and other costs to cover. I find the policy change acceptable given the circumstances, and that it may reduce pressure on guests to travel when not ideal to do so. Although my properties are all essentially empty for the foreseeable future it seems the right thing to do and I’m happy to refund guests for changes in plans, as is my typical stance. I would guess most other hosts feel the same.

A separate change to Airbnb policies that I haven’t seen disclosed to hosts / owners is that Airbnb has apparently put a 2 week block on any new bookings. I learned of this when a repeat guest attempted to book my property for the next month and was denied the ability, receiving the following message (apologies for the poor image quality):

In case you can’t read the image message it states: “Choose another place to stay. As part of our commitment to your safety, certain last-minute bookings of entire homes are restricted right now. You can still book a hotel or private room for your stay.”

After receiving this message, a call to Airbnb resulted in the information that a “last-minute booking” was any booking starting within 2 weeks. In my experience 2 weeks is not last-minute, which I would generally assume to be 24-48 hours in advance of a stay. It also sheds some light on why my properties were receiving a similar amount of views per week as in the past, but no booking inquiries or messages. I can only guess how many potential guests I (and the millions of other hosts, if this policy is global) have lost on revenue and bookings. Additionally, Airbnb steering customers / guests to hotels, their primary competition, and private rooms, in a time of contagion, seems odd and a bit suspect. Perhaps this advice is to cater to guests that are less likely to cancel or to offload guests in a time of trouble to hotels to deal with?

The combination of overriding host refund policies and then apparently blocking new bookings for the upcoming 2 weeks seems likely to hurt hosts, and potentially guests that are looking for bookings after being removed from college campuses, or other removals due to the coronavirus. Sudden policy changes may also weaken confidence and trust in the platform – a major issue for a marketplace for connecting people.

I wanted to share my experience with other hosts as I was surprised by the block on new bookings and don’t think this information is currently publicly available.

I very much enjoy being an Airbnb host and use the platform almost exclusively when our family is traveling. However, making major changes like these without informing hosts (before or after the changes are enacted) is a problem, and not the only one that Airbnb seems to make without remorse. To my knowledge, over-charging Airbnb guests to San Diego continues years after being informed by multiple hosts the hotel tax calculations are incorrect. Apparently, a world-wide technology company valued in billions of dollars is unable to calculate local hotel taxes they voluntarily offered to pay. All of these aspects don’t make a good look for the “live like a local” ethos of Airbnb.

Friday Reading (and Listening) Roundup – 1/24/20

A short post with some articles and podcasts I enjoyed this week.  Hope you do too. Cheers!

  • Afford Anything (Episode 236) – The FIRE movement continues to gain popularity as a topic to enjoy, detest, or debate.  The Afford Anything podcast and host Paula Pant are generally enjoyable and I really liked this episode.  A pair of early retirees, now more than 3 years into “retirement” and with an immigrant background  from little money.  Well worth a listen and the guests have some non-typical ideas about how to structure investments for early retirees.
  • Animal Spirits (Episode 120) – Not picking this particular episode over another, but wanted to give a shout out to this podcast.  Really enjoy the host banter and these episodes are enjoyable, smart, and bring in a variety of articles and surveys with funny input.
  • “Globally, roads are deadlier than HIV or murder” , The Economist – I’m an advocate for bike infrastructure and generally safer, more enjoyable places to live.  It’s sad that the US lacks nearly every peer country (on wealth basis) in fatalities per capita.  This is a good, short read about the body count from our car culture globally with an interesting breakdown between countries on country economic status lines.

Oak trees are amazing – from Mission Trails Regional Park in San Diego

I hope you will be rooting for the Chiefs of Kansas City in the Super Bowl as Mac Lethal surely is.

Latte Investing (Becoming an Everyday Investor)

The term “Latte Factor” was popularized by David Bach in his best-selling book, The Automatic Millionaire. The concept highlights how small purchases everyday add up to big money over time – in this case exemplified by a daily $5 latte. It’s a specific example of how opportunity costs work. When you use your resources for one thing you are giving up alternative uses for that money. Per Webster Merriam the formal definition follows.


Opportunity Cost

the added cost of using resources (as for production or speculative investment) that is the difference between the actual value resulting from such use and that of an alternative (such as another use of the same resources or an investment of equal risk but greater return)

https://www.merriam-webster.com/dictionary/opportunity%20cost

Bach’s book popularized the art of slamming Starbucks purchases as extravagances for spendthrift millennials that have no long-term financial sense. It’s a good concept, and the math works. If you take the $5 a day and instead put it into low-cost index funds or other investments the accumulation over time is enormous.

Here’s a July 2018 example post, using the $5 latte example, from US News. Over 50 years, $5 a day invested across the stock market would yield you an $800,000 portfolio balance. It’s a great, powerful example of how returns compounded over years can add up to big money. The big missing piece of getting these returns, however, rests upon actually investing the $5 a day. Opportunity costs only really matter if the alternative uses are uses that one will actually take. You may not like Starbucks at all so you never spend $5 a day on coffee, or you may have incredible willpower and forego your treasured cup of mocha java daily for years on end. Unless you take those individual $5 savings and everyday invest them you will not see the $800k pot of gold at the end of the 50-year rainbow. If the money sits in your checking account and is then used for a trip to Disneyland, or a shopping trip, or the monthly dozen streaming service bills it has not been saved, nor invested. It’s been spent on a different consumption use. Unless one is very diligent or budget-focused it is hard to monitor each dollar and actively redirect from spending to investing.

I had the Latte Factor in mind when I was considering how to be a better, more consistent investor about a year ago. It was shortly after the New Year and resolutions were on my mind. I decided to use the idea of the Latte Factor in reverse – by starting with investing and making a daily investment the priority. My thinking was that if I made the $5 investment a priority each day, and automated it I would be embracing the investing side of the Latte Factor which is the most important part. Getting your money to work for you is the goal, not self denial at the coffee counter. They are both part of the equation, flip sides of the coin, since we all deal with finite time and money. Although they are related, I view the investment side of the coin as more important than the saving side. And knowing myself, giving up my daily coffee just isn’t in the cards.

I used my existing Vanguard account to create a recurring weekly investment for each day of the week. (Since you can’t create an automatic investment on a weekend day I doubled up on a couple of week days to have 7 total investments a week.) Here’s my current latte investing setup – there’s an additional 8th weekly transfer to a money market fund as an emergency savings additional goal.

I’ve blanked out the amounts above as I don’t think it’s relevant and will depend on each person. For you, the $5 a day may be a great start. Perhaps you earn a lot more money than I and $500 a day would be a better fit. The important bit is to start, and automate, your investing so that you remove the need for active attention and willpower to ensure it happens. This is likely already the case if you have a 401k or other employer investment plan – you set it up once and rarely think about it again. Adding an investment plan for yourself individually can be a great complement and remind you that your financial future is ultimately in your hands, and needs to be on your mind.

In addition to the power of compounding, I’ve enjoyed the psychological element of having a daily investment habit. When I’m winding down at the end of the day I can tally a small win, every day, that even if I did go out for coffee, or dinner, or booked an expensive trip I was also investing for the long-term. That little bit of positive reinforcement and encouragement has been meaningful to me. My wife and I both set up our own daily investments in this vein. It’d be a bit cleaner and simpler to just lump the investment dollars together and do it once a day instead of twice. However, just as you can’t have another person eat well for you, or do your daily exercise routine I find it important for us each to be invested in the process and have a daily win.

Our first year of latte investing went well, and with the calendar turning over we took a few minutes to discuss and update our daily investments. Things have been going pretty well, so we were able to increase our daily amounts a bit. Maybe in the future we’ll need to decrease the amounts. Either way, I plan on continuing this daily habit to have our small daily money wins and to remind ourselves that everyday we are going to be investors. Hopefully, as the years go by, the returns will grow and our balances will accumulate.

Bean counter by trade, bean lover by nature, bean stacker by choice

I hope sharing this daily habit is helpful to you, and if you have ideas to share about building wealth for the long-term I’d love to hear them. Cheers.

The 80-80 Rule (Incremental Goals)

A friend recently described some dietary goals – eating less meat, being more conscious of food provenance, etc. – and added that he was “only aiming to hit 64% compliance”. Interesting. He added that he had got the idea from a friend and he was aiming to pursue his new food rules by following 80% of the rules 80% of the time. 80% x 80% = 64%.

I really like this idea and am dubbing it “The 80-80 Rule”. (Apologies if this already exists but after some cursory searching I couldn’t locate so am staking the JPA flag on this moniker.)

It seems human nature to lean toward binary outcomes when it comes to goals and habits – we win or lose, are good or bad, succeed or fail. This makes it hard to stick to ideals or goals we want to pursue. January 15th and after a night out we eat a Big Mac and boom – our resolution to avoid fast food in the new year is gone. I broke the rule, failed, and so may as well eat whatever for the rest of the year since I can’t stick to even a simple goal. Perhaps a more lenient take can allow us to incrementally pursue our goals and feel good about progress, even if it’s 64% instead of 100% compliance. After all 64% of 365 days is 234 days we’ve improved in whatever way matters to us.

Short-Term Rental Properties – A Few Useful Tools

So you want to operate a short-term rental for your vacation home, in-law flat, previous home, or other property? Sites like Airbnb and VRBO have made the idea of second home or investment property a reality for many. These sites make the marketing and management of a property much easier than in the past. However, there are a number of additional tools and considerations to take into account.

We recently stayed at an Airbnb in South Lake Tahoe. It was great and a day at Angora Lakes was a highlight of our trip. (Photo is of Fallen Leaf Lake.)

Here a few recommendations for getting your short-term rental up and running smoothly.

Open a Checking Account (and potentially Credit Card) – If you are running a rental property, you are operating a business and will need to report the earnings and expenses on your tax return. Open up a checking account at a minimum to make tracking your net income easier. You may also want to open a credit card to earn rewards or cash back, depending on the amount of activity you have.

Check (And Modify As Needed) Your Insurance Policy – You may need to get an additional or different insurance policy for the property. There are a number of insurance providers that offer policies for short-term rentals, I use Foremost. Additionally, you may want to add an umbrella policy or consider setting up an LLC to address liability exposure.

Utilize Additional Tools – I currently use the following add-on tools for my Airbnb listings.

  • BeyondPricing – This tool adjusts the nightly rate to account for prices in the area, occupancy rate, seasonal factors, etc. There are a number of similar tools but I’ve been happy with BeyondPricing. The company charges 1% of gross for the service but I’ve found that just being able to pick up higher rates for large events like Comic-Con or conventions pays for itself.
  • Smartbnb – I really like this tool for managing multiple properties and team members. You can set up automated messages for check-in, check-out, etc. You can also set up text reminders for your housekeeper, manager, or other service providers.

Utilize Service Providers – Depending on your situation and goals, it may be well worth it to hire a property manager for your short-term rental, especially if you don’t live in the area. Guests often need in-person assistance for various needs, repairs, or other reasons. You may also want to consider a housekeeper unless you’re typically in town and have a flexible schedule to clean yourself.

Hosting on Airbnb for over a decade has been a great financial help for my family. I hope these suggestions are helpful to you and if you’re looking for more specific advice please contact me and let me know. Cheers!

A sample of Airbnb listings on the website

Kimball Elementary – Great School Crosswalk Example

This crosswalk at the entrance to Kimball Elementary School in National City has a lot of elements that make it great.

  • Marked (painted) crosswalk – many crossings don’t have even the basic painted lines that indicate pedestrians will likely be present and crossing
  • Raised crosswalk with additional markings – The raised crosswalk functions as a speed bump, reducing through traffic speed, and on the raised portion includes additional markings to highlight the presence of a painted crosswalk.
  • Bike lanes – reduces the vehicle lane width, and creates a space for kids arriving at the school or riders passing through
  • Extended parkway – Street parking has been removed adjacent to the crossing and replaced with trees and grass. The reduced width reduces through speeds, and the removal of parked vehicles increases visibility – particularly important for children that are generally shorter in stature.

Would love to see the sort of improvements present at this intersection become a standard at all schools in the area. Nice work, National City.

Saturday Reading Roundup

Yeehaw!

Wanted to share a few articles and podcasts I enjoyed this week. If you’re looking for some informational content over the weekend check it out.

  • Same sex sexual behavior in the animal kingdom (Economist article) – I found this short article very interesting, especially the angle of human bias in the research world skewing prior studies.
  • Investing advice for new investors (Stacking Benjamins podcast) – I really enjoy the Stacking Benjamins podcast and this episode had good, functional advice and included one of my favorite panel members on the show – Paula Pant. Recommend subscribing if you have a general interest in investing.
  • Capitalism is a blessing debate (Intelligence Squared podcast) – This podcast is debate style, typically with four participants. I enjoyed this episode although (spoiler alert) capitalism loses because Marx is way cool. I was on team capitalism and thought their arguments were much better but maybe I’m not a real millennial snake person.

To close off this brief post, here’s my favorite photo I took this week. It’s an Oak tree in Balboa Park, part of the Bennington Memorial Oak Grove adjacent to Golden Hill. Oaks are awesome and palm trees, though associated with California due to sketch tourism marketing over the last century suck. They’re not even actually trees.

Have a great weekend!

10 Years Riding The Bus = $84,000 Saved

Sitting on the couch last night was chatting with the spousal equivalent (“SE”) about how NextDoor is awful. Cue a recent bus rider shaming post that really bothered me:

I had to remove the screenshot from Nextdoor as it was posted against Nextdoor rules. I wasn’t aware and apologize for the error. The remainder of this post has been unchanged.

We talked a bit and then realized SE has been riding the bus to work, or biking, for the last 10 years. Wow, time flies. Somehow, neither lice nor French whore encounters have been a problem. #praise

There are a number of reasons that transit SE likes to support and use transit:

  • Traffic congestion reduction (buses move far more people than the typically single occupant cars common in the US)
  • Cost savings
  • Reduced environmental impact
  • Social unity / exposure
  • Etc

On the cost savings front we estimated that over the last 10 years we saw approximately $84,000 of savings for our family.

  • $200 per month parking x 10 years = $24,000 (Comparison from co-workers)
  • $6000 per year vehicle cost x 10 = $60,000 (About 1/3 less than the average cost per year from AAA since Cali is hella expensive but we’re cheap. Results may vary.)

SE bus cost is covered by employer so if paying the $72 monthly out of pocket would reduce the savings by $8,640 for a total 10 year savings of roughly $75,360.

We took the savings and went on a fat family trip to Vegas and Hawaii which was awesome. Just kidding. We put most of it into index fund investments to grow and throw off dividends until the end of our days.

Wanted to share our public transit savings story in case you’re also interested in saving the better part of $100k every 10 years and putting it to work for you instead of sending it out the exhaust pipe.

Bikes and scooters are fun.

Free Rides with Jump (Uber) Bikes and Scooters – New Yellow Icon Drop Zones

Jump is a company owned by Uber that operates dockless electric scooter and bicycle rentals in a number of cities. I’ve been riding their electric bikes regularly for the past few months and they are the best dockless bicycles I’ve tried. If you are in a city they operate in I highly recommend trying them out – they’re fun, easy, and fast.

A couple of weeks ago I noticed a new feature on the Uber app (which is the app used to rent the Jump bikes and scooters). The map that shows available bicycles (red) and scooters (green) now had yellow icons as well. The below map of San Diego shows this:

When I clicked on the Yellow Icon for more information I was greeted with a message that any trip completed in this “drop zone” would be free and potentially also credit my account with reward points. I was skeptical but took a regular trip and parked it in a drop zone. When my billing receipt for the trip came the total cost was $0.00 instead of the current pricing of $.15 (15 cents) per minute. Awesome! I haven’t been able to figure out if I’m also accruing reward points, or what those points are, to date.

The information in the app is worded a little confusing but based on my experience of about eight trips ending in drop zones over the past two weeks they have all been free. The drop zone locations have remained in the same places as far as I can tell, which is convenient since there’s one a few blocks from my home.

Hope this information is helpful and that you can check out a (free) Jump ride soon. Cheers!

Real Estate Liability Protection – “The Protection Pyramid”

I wanted to share some thoughts about liability protection in real estate. It’s a frequent topic if you’re interested in investing in real estate and is often centered about how best to hold property – in an LLC, corporation, etc. This is certainly a point to consider but there are many other ways to go about addressing liability and working to reduce your risk. Following is a summary of the biggest areas I’d consider.


I’ve tried to build this pyramid model with the base being the broadest type of liability protection and getting more specific going up. Not every piece of the pyramid will make sense for every property or situation – the intent is to have a comprehensive set of options to consider.

  • Legal
    • Entity Form – Holding a property in an LLC, S Corporation, or other entity form can be considered to separate assets from other assets or investment assets from personal ones. Creating an entity will likely include annual fees and filings with the state. There are different tax and legal elements to consider when selecting a form.
    • Revocable Trust or Will – As part of estate planning a revocable trust can be considered in addition to holding property in an entity or directly.
  • Insurance
    • Property Insurance – Property insurance is typically required if property is purchased with debt and is likely a good idea in case of accidents.
    • Umbrella Insurance – Umbrella insurance goes “on top of” property insurance to provide additional liability for incidents not covered by property insurance or exceeding the insurance coverages.
    • Specialty Insurance – Earthquake, flood, or other insurance policies that may make sense depending on the property location.
  • Operations
    • Property Management – Hiring a professional property manager may be a good idea to make management less time intensive and to have a professional on your team. Additionally, this may reduce your liability related to tenant relations and selection.
    • Diligence
      • Due diligence (before purchase) – Inspections of the property before purchasing can identify potential issues in advance to address or avoid. A general inspection as well as specific inspections for foundation, roof, termites, radon, and other areas can be considered.
      • Ongoing diligence – Annual inspections of the property with an eye to potential water damage (roof, plumbing), safety equipment (smoke detectors, CO detectors, fire extinguishers) can identify current or future concerns to address and avoid ongoing damage.
      • Tenant screening – Considering criminal background, credit history, and other criteria when screening tenants can reduce liability.
  • Equity
    • Equity Stripping – To reduce the amount of value that is potentially at risk in a property you can “strip out” the equity in the property by refinancing the property and taking cash out or through other means.

I hope this set of liability considerations is helpful to you and best wishes in your real estate investing!

A property currently for sale in San Diego (from Redfin.com)

Note: The content of this post is for informational and discussion purposes and is not financial or tax advice. Consult with an advisor before relying on this or any information.