Yesterday (December 10th, 2020) was the IPO of Airbnb. As I heard the announcement of Airbnb going public, my brain said “no” while my heart said, “Let’s do this!”
Finally I jumped in. I bought at the opening price of $146.
I expect to make at least 100% profit on my investment in less than 5 years. I bought the shares on margin, that means I bought the shares with money that’s not mine. I am paying 2.5% interest per year. If I manage to sell at a profit, I will have done the magic trick of creating money from nothing.
As I shared the news with my social media community, I was asked why.
There are two reasons for every action. The right reason and the real reason.
The real reason for buying Airbnb was FOMO (fear of missing out) and the right reason I will explain below.
I already made $250,000 with Airbnb
I was an early adapter of Airbnb (Summer of 2009). As soon as I heard of the company I became obsessed with it. I borrowed money from friends and family at 10% interest to give a 20% down payment for the purchase of a property. I borrowed the other 80% from the bank at 3%, and I bought my first property to rent on the Airbnb platform.
The regular rent revenue on this property would have been $1,000/month, but by renting it through Airbnb, I was collecting bout $1,500 during the low season, $3,000/month during the shoulder season, and $6,000/month during the high season.
I was collecting about three times as much as a regular landlord.
The second-year I bought a second property, the third year I bought a third property, and the fourth year I leased two other properties to rent out on Airbnb. My highest-grossing year was about $200,000.
Of course, what I was doing was illegal. I wasn’t complying with the bylaws of the city and I was facing big fines every day that I was in operation.
After about six years, I was too afraid to continue operating illegally. I could have gotten properties in the new areas designated by the city, but I figured that I had a good run and decided to close shop. I sold two properties for a small profit, and I am still owner of another property which I rent out to a regular tenant.
It’s still possible to make lots of money hosting with Airbnb
The business model that I followed, it’s still possible today. I could start all over again if I wanted to. The only difference would be that I would have to get a property in the areas of city allowed by different municipalities. I could easily buy another property and put it for rent in Airbnb and instead of collecting $1,500 for rent (for a regular tenant) I would be collecting about $4,000.
Sure, the corona-virus could wipe out your business, but the same can be said about so many other businesses wiped out by the pandemic. That’s the nature of taking a business risk.
After collecting all my money
After selling my properties and closing down my Airbnb operation, I put all my money in index funds and became a blogger/podcaster.
I owe my laid back lifestyle to Airbnb, and yesterday I decided to roll the dices one more time. This time not as a host, but as an owner. Today I can say that together with Brian Chesky, Joe Gebbia, and Nate Blecharczyk (the founders of Airbnb), we are all owners of Airbnb.
Other reasons to buy Airbnb
Airbnb has the most recognizable hospitality brand in the world. People’s traveling habits have changed over the years and now, most people initial reaction is to check out Airbnb’s website when traveling somewhere.
Airbnb has more than 5.6 million listings worldwide — more than Marriott International, Hilton Worldwide, InterContinental Hotels Group, Wyndham Hotel Group, and Hyatt Hotels, combined.
In addition to being the largest player in the hospitality sector, it has one of the highest brand loyalty and the lowest operational cost. When a property is not being rented, it’s the owner of that property the one who assumes the risk and the fixed cost. Airbnb has more properties available for rent than all the hotels together and it has a lower operational cost than the most efficient hotel.
The Tesla Effect
Tesla is a sexy brand. Million of enthusiast have bought into the stock, giving it a higher valuation than all the other Detroit automakers put together.
I believe that Airbnb has the same sex appeal. I believe that millions of people will buy the stock because it’s a recognizable brand name. The added benefit, is that Airbnb will have the revenues to back up it’s valuation. As I mentioned before, it has 5.6 million units with almost no fix expenses.
I feel guilty breaking my habit of only buy Index Funds for my portfolio, but I felt seduced by the brand, by the positive experiences I had with the company (as a guest and as a host), and of course, I had fear of missing out.
The American dream is well and alive
Let’s not forget where Airbnb comes from. Brian Chesky, Joe Gebbia were so broke that they rented out an air mattress in their living room to some traveler, in order to make ends meet and be able to cover the rent.
They don’t come from a rich family, they don’t have a fancy degree, they don’t have connections in high places. No, they don’t have any of that. They were two dudes looking for business ideas to make a better life for themselves. They were two dudes no different than you and me.
North America is this beautiful place, where if you have an idea, a vision, and you are ready to fight for it, you can make it.
You don’t have to have an original idea. You could just copy someone else’s idea and become a good operator. I just told you that you can just simply become an Airbnb host and become a millionaire within 10 years. It’s there for the taking. All you have to do is to reach out and grab it.
The first five days of owning Airbnb
It was a frightening experience. As on the second day of trading, it started going down and it went down for a few more days until it finally started to move up.
I don’t believe this company is trading on fundamentals. I believe that it’s trading on the “sexiness” of the brand. I believe that this is the most recognized brand in hospitality and that people will continue buying the name “Airbnb” without knowing much of the fundamentals, which is pretty much the way that Tesla trades.
I will believe that I will be able to sell at a 100% profit in less than a year. I believe that once Covid-19 subdues, there will be an avalanche of travelers eager to get out of their house, and Airbnb as the most recognizable brand will continue to profit from the new trend.
I sold after 10 day
I admit it. Holding individual stocks is not for me.
I am constantly listening to the news, I am constantly checking the stock price, I am constantly thinking about the stock movements, so on and so forth.
After only 10 days of holding ABNB I sold it at $52.12. I made a nice 13% in 10 days. After I sold it, it went up another 10%
It’s good to know what kind of investor you are. If you are like me, who is constantly consumed by the stock movements, the best thing is to be an index investor.
I have acted the same way twice this year. At the beginning of the year I bought Beyond Meat, and now at the end of the year, I bought ABNB. I suffered from the same problem… Always checking my stock price. While, that doesn’t happen when I buy index funds.
Have you discovered what kind of investor you are?
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