This morning, I am contemplating my neighbor’s dilemma. They purchased a new home, minimally furnished it, and hoped to compete in the AirBNB market. I’m fairly certain their plan tanked. They are trying to market their place as a long-term rental now at way over the current rental cost.
In today’s seemingly economic downturn, it can be difficult to make a solid return on investments. One common mistake is investing in a furnished home and hoping to rent it out for more than what the rental market bares. The alternative many rely on is AirBnB – don’t get too caught up in the brand. There are many short-term rentals (STR) business models!
STR’s are increasingly popular among homeowners looking to maximize their investment potential. The assumption is by listing your property as an AirBnB, you can often achieve higher rental rates due to its unique advantages, such as flexibility and convenience, compared to long-term rentals. Also, AirBnB allows you to set different pricing levels depending on seasonality or special events in your area, which further helps capture maximum returns from your investment. But here’s the rub, the oversupply, which doesn’t seem to be dwindling, is cutting everyone’s profits. I just read some stats published by Airdna and written about in Bigger Pockets; it’s expected more people in 2023 will purchase second homes for short-term rentals.
I caution those who want to invest in an STR to know your hyper-local competition and the city politics surrounding the rules and regulations. And definitely, as in any business, ask yourself, how will you stand out among the crowd? People want to experience pleasure during their stay – how will you provide it? In this market, if you can’t stand out, you’ll fall out.
For those hoping the STR market fails, let’s not put those vibes out there. Many banks have lent money based on projected income, and the economic fallout for homeowners who took those loans and those who purchased during the frenzied market could be huge. If you’re one of those who purchased your primary home during the higher-priced market, don’t fret, you’ll recover in time — most do. In the meantime, do your basic home maintenance and keep paying your house payment.
No matter what, it’s always wise to have a long-term plan. Anything can happen in real estate, but if you think strategically and act smartly, you’ll come out ahead, recapturing your home equity in a big way.
Do you want to stay informed about your home’s market value? I can help you with knowledge and support, contact me today, and we’ll discuss a customized plan to maximize your home’s potential long-term value!