Today’s hot topic I’d like to discuss is all about…you guessed it… Airbnb real estate investments.
Whether or not you’ve considered this as a viable investment opportunity for your business, many investors like you have. Many have succeeded. Some have failed.
Today, I’d like to discuss the how and the why and my thoughts on moving forward.
Let’s start from the beginning…
Airbnb Real Estate Investments: The Rise
Renting out your primary residence when you went on vacation or renting your second home on Airbnb used to be a terrific way to earn some additional cash.
However, as the platform grew in popularity, many investors recognized a chance to acquire real estate particularly and exclusively for Airbnb rentals.
This resulted in an influx of Airbnb properties to the marketplace, many of them low-quality homes with inexpensive furniture, which in turn caused occupancy rates to decline across the board.
Recent research into the state of Airbnb investments, revealed that many of these investors are currently facing challenging circumstances. The occupancy rate for airbnb properties is on a steady decline, and the airbnb investment properties that were added to the market are not renting for the high prices that were anticipated.
To compensate for the lack of demand, hosts have increased their cleaning fees rather than their rental rates.
Airbnb Real Estate Investments: The Fall
The problem with this strategy is that because of the higher cleaning fees, customers are now paying higher rates per night and when comparing the airbnb prices to that of nearby hotels, customers are choosing hotels over Airbnb properties.
Because the Airbnb properties’ quality has decreased, visitors are now paying more for a generally lower-quality experience.
Additionally, the amount of Airbnb units that can be owned in many communities is generally unrestricted, and there are already over 2.4 million of them in the US. This means, entire neighborhoods are now flooded with Airbnb homes, which in and of itself can cause property prices in the area to drop.
Where Do Airbnb Investors Go From Here?
A Dallas-based real estate analyst predicts that a significant number of these Airbnb real estate investments will likely enter the market soon.
The issue is that these properties will negatively affect the nearby properties and that it will become harder and harder to sell them for top dollar.
In addition, many of these Airbnb investors are already heavily indebted and owners may find it difficult to make their payments, particularly if their occupancy and rates continue to drop.
As an investor, you will likely begin seeing these houses selling at a steep discount and I suggest searching for absentee owners who have owned the property for three years or less and that are vacant to identify these properties because it is very likely that the house was being used as an Airbnb rental, especially if it’s empty now. The good news is as an investor you can get access to owners that fit these parameters for only $1 to start by using the Motivated Seller Data Feed.
Real estate investors will discover motivated sellers who are prepared to sell for less than market value by focusing on this emerging opportunity.
The Takeaway
In conclusion, unlike what many investors had hoped, the rise of Airbnb real estate investments has not led to the wealth-building outcomes most of them had anticipated.
A rise in the number of properties on the market, a decrease in property quality, and decreasing occupancy and rental rates are all contributing to this..
Real estate investors looking to buy these houses at a discount should exercise prudence and carefully analyze the local market and the quality of the property before making a purchase.
Have you, or are you investing in Airbnb properties? If so, let me know your experience in the comments below!
Regards,
Cameron Dunlap
We invested last August in our first investment property which is an air BNB. We bought a fully furnished, all remodeled condo in the Sevierville TN, in the smoky mountains, near Dollywood, a very touristy area. It had previously been losted as an air BNB, so it was set up and ready to rent. We did very well for just the first few months even though it’s a new listing. We live in Ca., bought it site unseen. We found a great management company to take care of it for us. We just took our first trip back at the end of January to stay there for a few days and make sure everything was kept up. So far we are happy with our investment and would buy again in the same area. I definitely believe it depends on where you’re air BNB is located.