3 Reasons Why You Don’t Want to Ban Airbnb from Your Building

I understand as a homeowner that there are many reasons for you to want Airbnb to be banned in your building with the main reasons being privacy and safety.

I’m just going to go over some reasons why these fears are not actually warranted and that besides you not having to worry about your safety or privacy being threatened, giving in to these baseless fears might actually result in you losing money and even the quality of your building that you call home.

As someone who has been involved in the industry for around 3 years, I can totally agree with you that we have had bad guests come stay at our units under our management.

These guests have been few and far between though.

And also when we say bad guests, at their worst, that the most that they have done is make a mess and cause damage inside the apartment and have been agents of noise pollution into the after-hours.

In all our years of operation, across all our units, we have not had a single case where these ‘bad guests’ have caused trouble to neighbours or have caused damage to common areas of the development.

We have had absolutely zero instances of neighbour complaints that guests are getting up to illegal activities, threatening them or attempting to break into other units.

I know that there have been such cases reported in the newspapers.

But I feel this uncertainty and fear of having guests come and go from the apartment is hugely overstated and has been perpetuated by a misinformed public.

I also would not say that we have been lucky to not have faced such guests because across our entire network of operators, the experience has been the same for all of us across the board.

I am also NOT saying that this is NOT a possibility.

But it’s the same as saying that, it is possible to get robbed when you’re walking in the street or for you to have an accident while driving your car.

Both of which are probably much more likely to occur than for you to face problems from unruly or criminal guests who happen to be staying in an Airbnb unit in your development.

Compared to the number of bookings that have been made and the number of such incidents, it would be akin to refusing to fly because sometimes planes have crashed.

Despite this fact, there are regulations that are being developed that will quash these fears of safety.

The Malaysian Government is already working on these and will make it such that Airbnb operators and guests will both have to register themselves. This means that if the operator is not handling the guests well or if guests are to misbehave, legal recourse can be taken.

[Find Out What Airbnb Regulations Have Already Been Proposed by The Government Here]

Just as Grab and Uber was strongly rejected upon their rapid expansion across the country, so has the same been for Airbnb.

And… just like Grab and Uber became widely accepted once regulations came into place, the same it will be for Airbnb.

It will become the duty of operators to work hand-in-hand on developing solutions with Condo Management or JMBs so that all owners can have peace of mind.

Neighbour complaints will be directed to operators and swift action will be able to be taken.

There will be a no-nonsense approach as operators will not want to face legal action or jeopardise their businesses.

The entire industry will evolve, be legitimised and the stigma that surrounds home-sharing will be a distant thing of the past.

I can understand that some of you may not be totally convinced that regulations will change everything as there’s always the question of enforcement but I am an idealist and I’d like to believe that this will be the case.

So, for those of you who don’t trust the implementation and enforcement of regulations in Malaysia, perhaps you will see more sense in basic economics.

Here are 3 reasons why you don’t want to ban Airbnb in your building…

 

1. Your Property Could Lose Value

It might come as a surprise but buildings that ban Airbnb could see their value adversely affected.

A lot of people don’t really consider that by rejecting property investors from seeing a unit in your building as a potential investment property, you are drastically reducing your buyer pool and hence its desirability.

When something becomes less desirable, its inherent worth will go down. This translates directly into poorer capital appreciation.

Despite property not being an investment vehicle for all, it is often seen as a nest egg for owners to pass down to their children as an inheritance.

This inheritance that you hand down to your children may not reach its full value if you choose to stand firm against Airbnbs being operated in your building.

Yes, it’s true that this is not the case for all buildings.

Especially for those low density condominiums.

But how many of us are actually staying in low density developments?

I would think the majority of us are not.

[Find Out Why Freehold Properties Might Be Better Investments Compared to Leasehold Properties]

I’m sure there are many people that buy their property to live in and are not looking at selling it off at any point in the near future but when it comes to property, you can never look at it over the short term.

Even if you do not see yourself as a property investor, you should always buy with the thought in mind that you will be selling it off or renting it out later down the road.

Because eventually you will…

And despite not being a property investor, money should still have the same value to you as anyone else.

 

2. Your Rental Income Could be Reduced

This might be the second unpleasant surprise for you, but yes, it’s possible that banning Airbnb in your building can result in your rental income coming down.

I’m sure you’ll already be telling me off in your head and saying that there’s simply no way this could be true.

This has actually already happened in Canada.

But bear with me a minute and let me explain how and why this can happen in a more local context.

Normally, most buildings upon Vacant Possesion or VP, (when new owners are given their keys) will not have any specific by-laws that state that short term rental is banned.

This will mean that in the entire first year, when the management of the condominium is under the developer’s management, people will be operating Airbnbs freely, as many people have already jumped aboard the staycation train.

On a side note, it’s also important to remember that with Malaysia’s current oversupply of housing units that many agents and developers also pitch the sales of these units as investment properties that will use short-term accommodation as its primary form of generating returns.

Taking these two facts into consideration, you’ll need to remember that, for a year, there will be many units that will be operating as Airbnbs in the development, as until the first Joint Management Body (JMB) Annual General Meeting (AGM), the condo will be unable to pass any by-laws prohibiting the operation of Airbnbs.

So, what will happen when you do vote for these new by-laws?

It will mean that upon implementation, that there will be a huge influx of vacant units that will be put on the long-term rental market.

We all know what happens when there is a sudden surge of supply with limited demand don’t we?

That’s right.

Rental rates will come down.

Other owners who were previously getting rental from their Airbnb will now be forced to secure some other form of rental and this often results in a rental price war.

The only winners from this war are the tenants and the biggest losers are the investors.

I’ve heard of owners having to accept up to a 40% reduction once a price war begins.

 

3. Your Condo Maintenance Will Suffer

To further compound upon this loss of capital appreciation and reduced rental rate, you could see your condo facilities deteriorate.

Just how in the world could your facilities deteriorate?

Especially when there are less guests making use of the condo facilities reducing wear and tear!?

This inadvertently occurs after the dust from rental price war settles.

There will be many owners who will accumulate huge amounts of unpaid maintenance fees.

There will also be some owners who will be unable to pay back their loans, either from being unable to secure tenants or having poorly planned their investment property purchase.

When you get owners who are facing issues paying back their loans, they are certainly not able to pay back their maintenance.

Depending on how long they are able to drag things out before the bank repossesses their unit, there is going to be a non-payment of maintenance.

This period will even extend far into the future up until someone actually wins the bid at the auction. This could be even further delayed as the new owner might be surprised to discover the huge maintenance sum owed and take some time to clear the payments himself.

How do all these non-paying owners cause the condo facilities to deteriorate?

Well, this lack of fees means that there will not be enough from the existing pool of owners to pay for maintenance of the facilities.

The JMB will have to make sacrifices and choose where to spend the funds focusing on only the most important areas first.

What exacerbate the problem is, if the development already has a large number of unsold units.

This will mean that during the AGM, the developer will have a large number of votes to cast against raising maintenance fees (which they will most certainly do) so they don’t have to pay more.

And yes, this will result in the slow but inevitable deterioration of your condo facilities.

Conclusion

The 3 main reasons that you do not want to ban Airbnb from your building are:
1. Your Property Could Lose Value
2. Your Rental Income Could be Reduced
3. Your Condo Maintenance will suffer

Surely these are not things that will definitely occur but you should bear in mind that these are possible consequences that could take place.

It’s simply a matter of weighing the consequences and the probabilities of what it is that you actually are afraid of.

As an investor, I can say that I’m interested in ensuring that my property is at the best odds of appreciating in value and that my rental rate is as high as possible.

As a human being, I can understand that we often fear what is new and different but it’s important that we also look at the fundamentals of what is changing and if there should really be a cause for concern.

Just like it was was absolute insanity to wait for a stranger you’ve never met before to pick you up in his car and then drop you where you need to go only a few years ago, it has become the norm today.

So too, shall having different strangers live next door to you every other day, become the norm tomorrow.