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Priced out of Paradise: City in Transition
Miami-Dade is the most expensive metro in the U.S. for renters and one of the costliest for home buyers. This series explains why that’s so and what it means for the region and its residents. Our interactive tool helps renters and buyers match their budgets to affordable neighborhoods. Future stories will explore solutions to South Florida’s housing crisis.
For landlords in Miami, the secret to profits rests with renting to visitors, not locals.
That was the message of a recent seminar touting the profitability of Airbnb for property investors debating whether to rent their houses and condos to long-term tenants or overnight guests.
“You will get more money for your rental if you have it on Airbnb,” said real estate data guru Francisco Mago, founder of BNBVestor. “Regular rentals are overrated.” Launched in 2017, BNBVestor offers seminars and a monthly subscription to a database of home-sharing trends based on data scraped from Airbnb and long-term rental sites like Zillow.
This day, the audience of 20 gathered in Doral included property managers, real estate investors and even a stand-up comedian. Each coughed up the $99 seminar fee as a way into the Airbnb business.
And why wouldn’t they want in? Business is booming.
Data provided by Airbnb indicates the number of entire homes listed on the site for Miami-Dade has jumped 33 percent since 2017, up to around 13,500 today. In the current market, Miami landlords and property managers can make an average of around 40 percent more renting entire homes or apartments to tourists on Airbnb than renting to locals on annual leases, according to BNBVestor. In areas like South Miami and North Miami Airbnb yields up to 62 percent and 51 percent, respectively, more per month with rates around $140 a night.
The problem for locals: More houses, apartments and condos available on home-sharing platforms translates into fewer options for those who live here full time. As Miami-Dade faces a crisis in housing affordability with a 130,000-unit deficit, as many as 13,500 existing units in good condition sit unavailable to the people who need them.
Mago said BNBVestor scrapes data from Airbnb and long-term rental sites such as Realtor.com and Zillow.com. Airbnb disputes the numbers, saying many of the listings on its site belong to live-in owners who make their homes available on Airbnb only when they are out of town. Half of the entire homes rented on Airbnb are rented for less than 60 days out of the year, according to the company. Some entire home listings are guesthouses, RVs, or boats.
“We’re proud that home sharing and short-term rentals help thousands of everyday Miamians better afford to stay in their homes and live in an increasingly expensive region,” said Tom Martinelli, Airbnb’s Florida policy director. “We support measures to protect affordable housing and target bad actors here in Miami-Dade and across the United States.”
Evidence about Airbnb’s impact on the local rental market varies. In March 2017, the not-for-profit fact-checking website Politifact rated then-Miami Beach mayor Philip Levine’s comment that Airbnb “decreases real estate values and increases costs for workforce housing” as mostly false, saying the market hadn’t been around long enough to get an accurate picture. But a 2019 Miami Herald analysis of Airbnb data available through new third party sites and interviews with Airbnb entrepreneurs suggests an increasing number of investors are converting Miami rentals into residential hotel rooms, leaving locals with fewer rental units.
Miami real estate entrepreneurs are picking up on the obvious economic incentives, and affordable housing experts say the practice is surely having an impact.
“At the top there’s an abundance of units, more high-end units than rich people,” said Jake Wegmann, an assistant professor at the University of Texas at Austin school of architecture. “Down the income scale, at the very bottom there’s a huge shortage. If Airbnb is eroding units that are in the middle, then almost certainly that would not be good, that would be tightening the pinch that people in that segment of the market are facing.”
A working paper recently summarized in the Harvard Business Review found that a 1 percent increase in Airbnb listings translates into a 0.018 percent increase in long-term rental rates and a decrease in the amount of long-term units on the market.
Airbnb’s origins are rooted in San Francisco’s affordable housing crisis.
In 2007, a pair of Silicon Valley roommates wedged three air mattresses into their loft and charged $80 for a night’s stay as a way to make their rent. They quickly launched the Air Bed and Breakfast website so that others could do the same. Amid the stress of the housing crash, the home-sharing concept caught fire. By 2011, one million nights had been booked on the Airbnb.com website. Today consumers can stay in an Airbnb in 191 countries — including more than 900,000 listings in the U.S. — and book via smaller short-term rental sites including VRBO, HomeAway, Expedia, Travelocity, Vacasa, SabaticalHomes, FlipKey and Turnkey. Tech analyst firm Juniper Research estimates the U.S. residential sharing economy is worth $13 billion. Forbes estimates privately held Airbnb is worth $38 billion.
During the same decade, Miami’s tourism market has expanded. More than 16.5 million overnight visitors came to Miami last year, a 36 percent increase over a decade ago. While demand for all types of accommodation has increased, millennials seeking cheaper digs and more authentic experiences have gravitated to home sharing.
For Miami-Dade, the boom in short-term rentals brought some benefits. In public statements Airbnb celebrates hosts’ earnings from Airbnb as “supplemental income” and touts the site as a tool that helps everyday Miamians make ends meet.
Airbnb hosts turned over $10 million in tax revenue to the county in 2018. Additionally, Airbnb entrepreneurs say they are upgrading housing stock when they renovate units before listing them. And Airbnbs in traditionally less-visited areas like Homestead — with around 110 entire homes listed on the Airbnb website — or Hialeah — with around 60 — bring tourist dollars to business owners who wouldn’t otherwise benefit.
But what originally began as a website enabling homeowners to run a viable side gig has morphed into a high-return real estate investment industry. Today, just 25 percent of Airbnbers in Miami rent out private rooms, according to BNBVestor.
The bulk of Airbnbs in Miami-Dade county — 75 percent — are entire homes or apartments.
Local seminars for budding Airbnb entrepreneurs show that for some listing on the site, this is their full-time job.
Some investors buy homes to list on Airbnb, others seek out rentals to re-rent on the site. The latter strategy requires far less capital and allows newbies to test out their hospitality skills without breaking the bank.
The best way to get started, Mago explained at a recent seminar, is to target a “tired landlord” — someone who has owned a property for more than four years — and offer to take a rental unit off their hands. The Airbnber pays the owner the same monthly rent as a long- term tenant, and then turns around and rents the apartment on Airbnb and pockets the difference. The Airbnber is responsible for furnishing the apartment and answering any guest complaints. Perks for the unit or homeowner include less wear and tear on the property, frequent professional cleanings and little use of appliances and water.
BNBVestor has emerged as a subscription data service for those deciding where and how to break into the market. The data can estimate which ZIP codes have the highest occupancy rate and average daily rate, then translate that information to estimated revenue by neighborhood. It can also forecast the kind of home — one-bedroom apartment vs. four-bedroom house — that will be most profitable in each area and compare estimated Airbnb revenue to estimated revenue for regular long-term rentals.
AirDNA, a competitor subscription service, provides similar data scraped from Airbnb and other smaller short-term rental sites. Its analysis reaches similar conclusions about the vacation rental market to BNBvestor.
Airbnb disputes the conclusions of scrapers like BNBVestor and AirDNA, saying those programs cannot differentiate when a unit is booked by a guest from when it is made unavailable by the host.
Representatives from both BNBvestor and AirDNA estimate that their margin of error for occupancy is less than five percent.
Neither local governments nor Airbnb track the number of Airbnbs rented by people who actually live in the unit and only make it available when they’re away, leaving regulators and the public blind to a surging corner of the hospitality industry.
But data scraped from Airbnb offers a hint: According to BNBVestor, more than two-thirds of entire home listings on Airbnb in Miami-Dade are managed by hosts with more than one property on the site.
European cities are more attuned to the impact. This month, 10 European cities sent a letter to the European Union demanding more help in pushing back against Airbnbs.
“European cities believe that homes should be used first and foremost for living in,” the letter said. “Many cities suffer from a serious housing shortage. Where homes can be used more lucratively for renting out to tourists, they disappear from the traditional housing market, prices are driven up even further and housing of citizens who live and work in our cities is hampered.”
The data highlights how ineffective some Miami municipalities have been in regulating short-term rentals and enforcing their existing laws.
Case in point: Short-term rentals in Coral Gables are illegal in all residential areas, encompassing 76 percent of the city, yet hundreds of entire Gables homes are available on Airbnb.
Like many other local municipalities, the City of Miami does not track the number of short-term rentals in its limits or require owners to register. Currently around 7,000 entire homes in the City of Miami are listed on Airbnb, more than in any other Miami-Dade municipality, according to BNBVestor.
In the 33127 ZIP code that includes parts of Little Haiti, Wynwood, Model City and Edgewater, the median household income for the 32,000 locals who live in the neighborhood is about $30,000, well below the county median of $50,000. Nearly one-third of those employed work in the service industry. Tenants in 60 percent of the rental units in the neighborhood are spending more than 35 percent of their income on rent. There are around 11,000 housing units in the ZIP code, according to the U.S. Census.
Yet the neighborhood is among the 10 most popular for Airbnb investors in the City of Miami. Some 370 entire homes in the ZIP code are listed on the site. Airbnbers can charge an average daily rate of $107, enabling them to earn 40 percent more renting homes there to tourists instead of locals. Thirty percent of hosts control 63 percent of Airbnbs in the area.
One investor is mortgage broker Nicholas Lara, 29, who said he runs 11 properties across the county. Four of his Wynwood units fill a 1960s apartment building. Real estate records show that in January, all four units were rented for $1,700 per month. They became available on Airbnb in February for around $150 per night and already have dozens of positive guest reviews. Lara said he expects he can make up to $400 per night on the units during big events like music festivals.
Lara said he got into the business when an Airbnb host approached him about renting one of his units out on the site. He agreed and accepted the $3,400 rent payment. When he saw that the host was making around $10,000 per month, he said he decided to give it a try. Slowly, he said, he converted all of his long-term lease apartments to Airbnbs.
“This is a home-run industry,” he said at a recent seminar in Broward titled “The Scoop on Airbnb.” He called the boom in Airbnbs in South Florida a phenomenon that only businesses would outlast. “This weeds out people who are riding the wave. If you’re a business — not just renting out a spare room — and working as a professional, you’re going to be fine.”
The Grove’s 33133 ZIP code encompasses the gated Grove Isle condo complex — where apartments start at $4,000 a month — and crosses U.S. 1 into Coral Gables. The ZIP code is the 9th most popular for Airbnbers with around 450 homes today. Twenty-six percent of hosts control 62 percent of the listings in Coconut Grove.
The median income among the 35,000 locals who live in the area is $65,000, above the county median. Still, more than half of people who rent in Coconut Grove spend more than 35 percent of their income on rent. There are around 17,000 housing units in the ZIP code.
Lara said he operates two homes in the historically black West Coconut Grove, which faces increasing gentrification. In Coconut Grove hosts can make around 16 percent more renting to tourists than locals, according to BNBVestor. Lara said he approached the owner of a 1960s three-bedroom house listed for rent for $2,700 per month and offered her $2,400 per month for two years. He said he invested $10,000 upgrading the property with renovations and furniture. The house is listed on Airbnb for around $170 per night and received five positive guest reviews since May. The 1930s duplex Lara said he manages a few blocks away debuted on Airbnb around the same time for around $100 a night and already has two positive reviews.
Outside the limits of Miami-Dade County’s 34 cities, county zoning rules govern short-term rentals.
At the recent seminar for aspiring Airbnb entrepreneurs in Doral, Mago suggested the county as the ideal place to break into the business.
“If you want to be safe...stick to unincorporated Miami-Dade,” he said.
And with good reason. The county’s rules are largely ignored, according to the numbers.
The county began requiring permits, known as “certificates of use,” when it passed regulations for Airbnb and its smaller competitors in the fall of 2017. But while at least 725 short-term vacation homes are listed on Airbnb in the county’s unincorporated area, Miami-Dade has only 58 required permits on file as of this spring.
County regulators are asking the San Francisco-based online booking giant for help in making its short-term renters obey the rules.
“We are communicating with Airbnb, because we’d like to have their assistance in fostering some greater compliance,” said Lourdes Gomez, deputy director of the county’s Regulatory and Economic Resources Department, which oversees zoning and permitting.
She said the county’s squad of code enforcers rely on complaints to start cases, and that suburban residents have mostly stayed silent on issues involving short-term rentals. Trash and parking dominate the calls, accounting for more than 11,000 complaints in the last 12 months. Vacation rentals accounted for 48.
If enforced, the 2017 legislation could be a significant hurdle to the practice of a host renting multiple units. For the low-density zoning areas, the county requires the person renting a short-term unit to also live there for at least six months out of the year. That zoning area holds about 250,000 residences, accounting for about 60 percent of all units in the unincorporated area.
Gomez noted the county rules restrict parking to the property being rented as a short-term rental, and require enough curbside pick-up bins to handle trash for the maximum occupancy allowed. She said those quality-of-life issues were the county’s priority for short-term rentals.
“As long as Airbnb can operate in a way that’s invisible to their neighbors, that’s the framework we wanted,” she said.
Sebastian Giraldo, 28, is one of the few with a certificate for his property, a single-family home near the University of Miami in a ZIP code shared by Coral Gables and unincorporated Miami-Dade with nearly 5,000 dwellings; 90 are listed as Airbnbs, according BNBVestor. The home is one of 15 Airbnbs he said he manages in Miami-Dade. Giraldo said he originally called the owner of the house about a different property of his — an apartment building in Edgewater — seeking to rent the units there through Airbnb. He said the owner wasn’t comfortable kicking out tenants who had lived in the building for decades but asked if he’d be interested in a 1940s three-bedroom house where his tenants paying around $2,400 a month would soon be moving out.
Giraldo said he invested $15,000 in renovating the house; he and the owner are splitting the Airbnb earnings. Now dubbed the Mango House for the tree in the backyard, the listing launched in May starting at around $110 a night and already has two positive reviews.
According to BNBvestor, owners can make 24 percent more renting to tourists in that neighborhood.
“Once football season starts, graduations — we’re going to be set,” Giraldo said. “There’s opportunity here; you just have to navigate the regulations.”
In Miami Beach, rentals of six months or less are illegal in most residential areas, but that hasn’t kept a large vacation rental market from flourishing. The city licenses fewer than 1,000 short-term rentals, but approximately 4,500 entire homes are advertised on Airbnb, according to BNBVestor data.
From March 2016, when Miami Beach first instituted its current fine structure — which starts at $20,000 — through March 2019, code compliance officers cited approximately 260 different units for violating short-term rental laws, records show.
The list of fines is full of addresses in historic South Beach buildings that once provided affordable housing for the waiters, bartenders and hotel workers who power the island’s tourism industry.
And the 260 units that have been cited — some of them multiple times — are just the tip of the iceberg.
Over the past five years, the number of short-term rental investigations in Miami Beach has nearly tripled, from roughly 600 during the 2013-14 fiscal year to more than 1,700 last year. To cite a property owner for operating a vacation rental, code enforcement officers must visit the property while it’s being rented and secure confirmation from guests. That isn’t always possible.
This year Airbnb agreed to prevent people from creating listings for homes in areas where Miami Beach doesn’t allow short-term rentals, but stopped short of requiring hosts to get permits from the city. Airbnb sued Miami Beach over its new ordinance mandating both things in January.
Illegal vacation rentals aren’t the only problem.
The city also allows short-term rentals in specific areas, including a swath of North Beach, which has traditionally been home to some of the island’s most affordable neighborhoods.
One of the less than 1,000 legal short-term rentals is 8040 Harding Avenue, a typical 1940s Miami Modern apartment building in North Beach with an exterior staircase. Carlos Dominguez and his wife Carmen bought the property in 1991 for $200,000 and rented the apartments to locals.
“There were people who worked in Miami Beach and people who were retired and others who worked in Miami,” Dominguez said. “Some of them worked in construction, others in a grocery store. They weren’t lawyers or doctors.”
But Dominguez and his wife sold the building in 2009 and the current owner, a company called Caurus LLC, operates all eight apartments as legal short-term rentals. The units are offered online on various rental platforms — currently not Airbnb — for $129-to-$142 a night. Caurus LLC’s representatives listed on the state’s official Sunbiz.org website are Matteo Soldatini and Gabriele Braha; one declined to comment and the other could not be reached.
Residents have noticed the strain on Miami Beach’s already-limited stock of reasonably priced apartments. The city’s Human Rights Committee has discussed the impact of the proliferation of short-term rentals, said chair Alan Fishman.
The problem, he said, is that “people have found it more lucrative to rent their apartments nightly” to tourists than to rent to residents for a year at a time. “We’re finding that workers that work here cannot find affordable housing to live here,” Fishman said.
Miami Beach hasn’t yet been able to collect all of the nearly $8 million in fines it has levied against property owners, but the city has pocketed more than $500,000 so far.
Initially, Miami Beach planned to spend the first $200,000 on homeless services and 80 percent of any additional fines on affordable and workforce housing needs. Commissioners later decided to set aside all $500,000 for homeless and domestic violence services. Commissioner John Elizabeth Alemán, who proposed the idea of using short-term rental fines for affordable housing, said she hopes future fines can be used for that purpose.
“I do hope we’re able to accumulate some serious funds in that account and actually put a dent in affordable housing,” she said.
Not all affordable housing advocates think vacation rentals should be painted with the same brush. Sarah Leddick, a Miami Beach resident who sits on the city’s affordable housing advisory committee, said that she and her colleagues have talked about the negative impact short-term rentals have had on affordable housing, particularly in North Beach. But Leddick said that when it comes to short-term rental regulations, “one size does not fit all.”
She wants to see the city lower the legal rental period to two weeks or a month in some areas to accommodate responsible visitors staying on the island for more than a few days. She said that would help house hunters who need somewhere to stay while they’re looking at properties on the island, for example.
In some cases, the existing fines do seem to be dissuading owners from renting illegally.
Neighbors of a two-story apartment building at 1518 Drexel Ave. in the heart of South Beach say the building once provided housing for young people who worked in the area. “Basically the residents were like most residents in the neighborhood area. The property didn’t stick out,” said one neighbor.
The building was converted to condominiums in 2015, according to county records, and the property became “a full-blown hotel,” said the neighbor, who asked that his name be withheld. A person associated with the short-term rental operation previously threatened residents in his building, he said.
Over the past three years, city records show, the owners or operators of 15 of the building’s 24 units have been cited for illegal short-term rentals, although the owners are appealing some of the fines. When the Miami Herald accompanied a code compliance officer on her rounds in February, the officer encountered out-of-town visitors staying in several apartments in the building and cited the owners.
Since then, the neighbor said, the units no longer appear to be short-term rentals. The building hasn’t been cited for vacation rentals since February, city records show.
On a recent Monday afternoon, the building showed signs of long-term tenants. There was a scooter parked in the interior patio under a rain tarp and shoes arranged near the window of a second-story apartment.
“How many other affordable residential properties are ‘missing’ because they are used as illegal hotel rooms in Miami Beach and SoBe in particular?” the neighbor said in an email. “If it is affordable housing the city is concerned about, then stop all the multi-family building units from being used as hotel rooms,” he added. “That is the quickest way to add the most affordable housing units in Miami Beach.”
The hotel experience
At the Airbnb seminar in Broward on a recent Thursday, Mago asked everyone in the audience of 50 to raise their hands if they already operate Airbnbs.
One Airbnb entrepreneur who declined to give her name said she began her short-term rental career five years ago, while she was on maternity leave in her Miami apartment. A neighbor moved out and the unit became vacant, so she said she asked the landlord if she could pay rent for it and then rent the apartment on Airbnb. Once she saw how lucrative it could be, she gobbled up four more units in the building. Now she said she manages 10 units in total and attends monthly meet-ups with Giraldo and other Airbnbers.
“Five years ago [landlords] didn’t know what Airbnb was,” she said. “I was able to take care of my child.”
The true number of people who have a stake in the Airbnb business is difficult to calculate. There are cleaning, communication and furniture companies entirely dedicated to facilitating short-term rentals — for a price. The more properties you have, the more money you can make, and the less maintenance you have to take care of yourself.
“The goal is not to have two properties, it’s to have 100 properties.,” said Mago.
One thing experienced Airbnbers made clear to those just starting out: as much as tourists say they want an authentic experience, they don’t actually want to stay in someone else’s home if they don’t have to.
“If you’re going to rent your own house, that’s not a business,” Mago said. “You need to give them the hotel experience.”
Often that comes down to the details: Leaving guests a bottle of wine, or securing them discounts at local restaurants and bars. Most importantly, though, is clearing out any personal belongings and making the entire property as Instagrammable as possible.
“I want people to come into my Airbnb to say look at this,” said Lara while raising his phone high in the air and pretending to pose for a selfie. “This gives us the opportunity as everyday people to break into the hospitality business without millions of money on a hotel.”
The end goal for these Airbnbers is to have guests book directly with them and cut out the platform altogether. Many promote their short-term rentals on social media and collect guests’ emails so they can send them discounts for future stays.
Giraldo said he recently secured a deal with the owner of an eight-unit apartment building in Wynwood to kick out each current long-term tenant when their leases come up for renewal. Asked if he was worried about the impact of the Airbnb business on affordable housing for locals, he responded like a true capitalist.
“It’s a free market, let the markets behave,” he said. “There’s always going to be the suburbs.”
Do you know of a formerly affordable property converted into an Airbnb? Get in touch: email@example.com
ABOUT THIS SERIES
Priced out of Paradise is an ongoing series about housing affordability in South Florida. Read previous installments at MiamiHerald.com/pricedoutofparadise.