Podcast Summary
Increase in homeowners renting out properties in short-term market: Mortgage rates attract homeowners to rent out their homes in the short-term sector, offering opportunities for investors.
The short-term rental market is seeing an increase in people looking to rent out their existing homes due to attractive mortgage rates, and this trend is particularly noticeable in the short-term sector. Jamie Lane, Vice President of Research for AirDNA, shared this insight during an interview on the BiggerPockets podcast with Tony Robinson. The discussion also touched on their personal history and how they've grown in the real estate industry. A notable anecdote was about Tony's recent experience with a new construction property that came up short on bedrooms, leading to a delay in closing and some creative problem-solving. Overall, the podcast episode provided valuable insights into the current state of the short-term rental market and the opportunities it presents for investors.
Exploring Real Estate Investment Opportunities for Passive Income: Invest in private real estate funds, turnkey rental properties, or use seller financing for passive income in real estate. Stay informed to adapt to the market.
There are various investment opportunities in real estate that allow for passive income and minimal property management headaches. For instance, one can invest in a private real estate fund like PPR Capital Management to earn monthly income without dealing with tenants or maintenance. Another option is to buy a turnkey rental property for no money down through Rent to Retirement. Additionally, there's the strategy of seller financing, where one takes over an existing loan with a lower interest rate while the seller finances the remaining amount with a lower interest rate for a certain period. On the topic of short-term rentals, fears of a bust are understandable but data from experts like Jamie Lane, VP of research for AirDNA, can provide valuable insights and reassurance. It's essential for investors to stay informed and adapt to the ever-changing market.
Short-term rental market remains profitable despite challenges: Despite recent challenges, the short-term rental market, specifically Airbnb, continues to be a profitable investment opportunity. Occupancy rates exceed pre-pandemic levels, but expectations should be based on current and forecasted industry data. 1031 exchanges offer tax savings for investors looking to expand their portfolio.
The short-term rental market, specifically with Airbnb, remains a profitable investment opportunity despite some recent challenges. The industry has seen strong demand and growth, with occupancy rates continuing to exceed pre-pandemic levels. However, it's essential to understand historical data and not base expectations solely on the exceptional performance of 2021. New hosts should underwrite expectations based on current and forecasted industry occupancy rates, which are expected to remain above pre-pandemic levels but not reach the highs of 2021. Additionally, 1031 exchanges can help investors save on taxes, making it an attractive strategy for those looking to grow their short-term rental portfolio. Overall, the short-term rental market continues to be a viable investment option for those willing to do their due diligence and adapt to changing market conditions.
Short-term rental market growth and trends: Urban areas see decreased supply due to conversions, while small cities and rural areas have double the supply pre-pandemic with demand keeping up. Supply growth may slow due to higher interest rates and home acquisition costs, but existing homeowners entering the market may offset this. Market varies greatly across the country.
The short-term rental market experienced significant growth in 2020 and 2021 due to the pandemic, but it's returning to more normalized levels in 2022. Urban areas have seen a decrease in supply due to conversions to long-term rentals, while small cities and rural areas have seen double the supply pre-pandemic with demand keeping up. Supply growth is expected to slow down due to higher interest rates and the cost of acquiring homes, but existing homeowners entering the short-term rental market may offset this. The speakers also noted that the market varies greatly across the country, with some markets being hit harder than others.
Short-term rentals generating more revenue despite fewer bookings: Despite fewer bookings, short-term rentals generate more revenue due to increasing ADR and minimized utility costs. Professional hosting is crucial for long-term success.
While the supply of short-term rentals continues to grow, average revenue per listing (ARPU) remains positive due to increasing average daily rates (ADR) outpacing declines in occupancy. This means that less occupied properties can still generate more revenue due to reduced wear and tear and utility costs. However, the industry's future success depends on treating short-term rentals as a serious investment rather than a hobby. The record-low interest rates and relatively stable home pricing of recent years attracted many people to enter the market, but not all were prepared for the challenges that come with professional hosting. To maximize revenue and profitability, hosts should consider maintaining or increasing rates and minimizing occupancy declines. The long-term success of short-term rental investments requires dedication, effort, and a professional approach.
Professional and long-term investors dominate short-term rental market: Large-scale investors manage over 20 units, outpacing individual hosts. Attractive investment opportunities exist in markets with revenue gains and expanded seasons, while regulation poses a significant risk.
The short-term rental market is seeing a shift towards more professional and long-term investors, while individual hosts may be exiting the market due to regulatory challenges and the increased workload. According to data, the largest growth in the number of hosts comes from those managing over 20 units, either individually or through larger property management companies. Markets with revenue gains outpacing housing price gains and expanded seasons, such as Panama City, Northern Michigan coast, and Virginia Beach, are becoming attractive investment opportunities. Regulation is a significant risk for the industry, with long-term investors carefully considering regulations in their chosen markets, while some individual hosts may struggle to keep up. Overall, the trend is towards more professional and long-term investment in the short-term rental market.
Markets with stricter regulations on new listings may offer better returns: Consider regulations and potential changes when investing in short-term rentals, as markets with caps on supply and increasing demand may yield better returns.
While some markets have seen strong revenue growth and high demand in the past year, particularly in areas near national parks, others have experienced significant supply growth leading to decreased occupancy and lower revenues. Markets with stricter regulations on new listings, such as 29 Palms adjacent to Joshua Tree National Park, may offer better returns due to the cap on supply and increasing demand. It's crucial for investors to consider regulations and potential upcoming changes when making investment decisions, as some markets have outright banned short-term rentals, which can negatively impact investments. When it comes to hiring, using a platform like Indeed, which has over 350 million monthly visitors and a matching engine, can help find quality candidates efficiently.
Improve hiring with Indeed, Simplify real estate investing with Integra, and Secure homes with SimpliSafe: Indeed helps businesses hire faster and smarter, Integra simplifies real estate investing with built-in equity and appreciation, and SimpliSafe offers affordable home security with peace of mind
Using Indeed for hiring not only helps businesses connect with candidates faster but also delivers high-quality matches, according to 93% of employers. Indeed's matching engine constantly learns from your preferences, making the more you use it, the better it gets. For real estate investing, Integra Development Group simplifies the process by offering new construction single-family rent to own homes with tenants in place and built-in equity and appreciation. Meanwhile, SimpliSafe provides peace of mind with award-winning home security systems that can be self-installed and professionally monitored at an affordable price. Lastly, even if revenue decreases, a high return on investment can still make the investment worthwhile. A notable trend is the increase in last-minute bookings for vacation rentals. While it may seem concerning to have less revenue upfront, the strong return on investment ensures that the investment is paid back in the long run.
Determining the optimal pricing strategy for last-minute bookings: Understand market conditions and adjust pricing dynamically to maximize revenue in the vacation rental industry. High-demand seasons call for premium last-minute pricing, while less competitive markets or shoulder seasons may require discounts.
The optimal pricing strategy for last-minute bookings depends on the market and the specific circumstances of the property. In high-demand seasons, raising prices for last-minute stays can be effective, as there may be fewer listings available and travelers may be willing to pay a premium for a last-minute booking. However, in less competitive markets or during shoulder seasons, discounting prices to fill last-minute openings may be more effective. The decision should be based on factors such as the number of available listings, the property's rating, and the expected booking activity. Urban markets have seen a slower revival from the pandemic, with travelers avoiding densely populated areas. However, the strength of the dollar has made foreign travel more affordable, keeping some travelers from booking in the US. Overall, dynamic pricing strategies and a deep understanding of market conditions are key to maximizing revenue in the vacation rental industry.
Impact of Pandemic on Travel Industry: Expectations for 2023: Despite the decrease in international travelers to the US due to the pandemic, there's an expectation for a big increase in 2023, especially if China reopens its borders. Domestic travel has seen growth, but luxury market has shown weakness. Past recessions indicate the industry won't be as severely affected as feared.
The travel industry, particularly international travel, has been significantly impacted by the pandemic with a decrease in international travelers to the US, which was once the number 2 country for international visitors. However, there is an expectation for a big increase in international demand in 2023, especially if China reopens its borders for travel. Domestic travel within the US has seen growth during the pandemic, especially in luxury properties, but the luxury market has seen some weakness in recent months. Historically, the travel and hospitality industry has been more impacted by recessions than the rest of the economy, but the upcoming recession is expected to be more of a goods recession than a travel and hospitality recession. The data from past recessions suggests that the industry will not be as severely affected as some may fear.
Short-term rental market expected to remain resilient during recession: AirDNA data shows continued growth in travel and short-term rentals, investors advised to focus on pricing strategies and market trends, staying informed about local tourism and economic indicators can help make informed decisions.
Even during a recession, the demand for travel and short-term rentals is expected to continue growing, despite potential economic downturns. This is based on data from AirDNA, which tracks listings on Airbnb, Vrbo, and Booking.com, and collects data from individual hosts and partners. The company's goal is to have 95% accuracy in its data. For investors looking to remain competitive in the face of increasing supply, AirDNA advises focusing on pricing strategies and understanding market trends. With the abundance of data available, hosts can benchmark their properties against competitors and adjust pricing accordingly. Additionally, staying informed about local tourism trends and economic indicators can help investors make informed decisions. Overall, the short-term rental market is expected to remain resilient, despite economic challenges.
Stand Out on Airbnb: Unique Stays, Amenities, and Super Host Status: Focus on unique stays, desirable amenities, and achieving super host status to increase occupancy and revenue on Airbnb.
To ensure your Airbnb listing stands out and performs well, focus on unique stays, desirable amenities, and building a strong reputation through super host status and positive reviews. These factors can significantly increase occupancy and revenue. Unique stays cater to growing market trends, while amenities like pools or pickleball courts can attract guests. Super host status and high reviews provide comfort and credibility for first-time users, making it a crucial differentiator. Additionally, consider adding popular amenities such as themed units, game rooms, or creative spaces to appeal to various markets and Airbnb categories. Only 15% of hosts are super hosts, so this is a valuable opportunity to set yourself apart.
Identifying popular amenities for specific markets: Research competitors, check most booked listings, and focus on high-earning markets to identify popular amenities and themes that can increase bookings and revenue for Airbnb hosts.
Understanding the unique amenities and themes that appeal to specific markets can significantly increase bookings and revenue for Airbnb hosts. For instance, adding a pickleball court or a themed game room, like a Mario-themed one, can attract more guests in certain areas. In markets where certain amenities are expected, such as hot tubs in Gatlinburg, providing them can lead to higher additional revenue. Researching competitors and checking the most booked listings can help hosts identify popular amenities in their market. Additionally, focusing on high-earning markets and replicating successful amenities from them can lead to increased revenue. Overall, being creative and attentive to market trends and guest preferences can lead to a successful and profitable Airbnb business.
Using Data to Make Informed Decisions in the Short Term Rental Industry: Data and facts can help alleviate fears and misconceptions in the short term rental industry. AirDNA provides valuable insights using data to inform choices.
Instead of relying solely on emotions and headlines when making decisions about the short term rental industry, it's important to use data and facts to inform your choices. Jamie, from AirDNA, shared valuable insights about the current state of the industry and how data can help alleviate fears and misconceptions. To learn more about AirDNA and Jamie, visit their website at airDNA.co, follow Jamie on Twitter and LinkedIn, or tune in to their podcast, the STR Data Lab. For more real estate insights, check out the Real Estate Rookie podcast, and follow Tony on Instagram and YouTube at tonyjrobinson. Remember, finding an investor-friendly agent is crucial for navigating the market and achieving financial freedom. Use BiggerPockets Agent Finder to connect with local experts and get started on your real estate journey today. As always, past performance is not indicative of future results, and all opinions expressed are those of the hosts and participants. Invest wisely and consult with qualified advisors before making any investment decisions.
