Airbnbs and short-term rentals appear to continue trending upward. Could this be the next best investment sector for you?
According to Google Trends data, internet searches for “Airbnb” and “short-term rentals” have been hitting new highs. They are only gaining more and more interest.
Millions of properties are now being offered via short-term rental sites, and more travelers seem to be trying them out. One analysis found that in some cities, renting out a room can pay for as much as 90% of the total monthly apartment rent.
Going Public
Airbnb is expected to go public in late 2019 or 2020, with a valuation of roughly $38 billion. That’s nearly double the value of Expedia, and $10 billion more than Hilton is worth. We don’t know whether Airbnb is running for an IPO to cash out at its peak or to scale even further by bringing in more public funds from stock traders, though we’ll probably see some interesting fluctuations as the share prices bounce after being released.
Some might see this space having already peaked for this cycle. Airbnb units certainly seem to be more expensive than regular rentals and hotels in some areas. There are a variety of at least temporary risks to this model: changes in trendy destinations, or a lull in travel and tourism as a result of danger factors or an economy in recession, or simply rental rates peaking and softening. Regulations can also be a threat.
At the same time, we are seeing people becoming more mobile. They seem to love travel more than settling down. High housing prices and taxes are keeping many out of the long-term rental and homebuying markets. Whether the economy stays on fire or fails, these can be reasons for ongoing growth in short-term rentals.
Are Short-Term Rental Property Investments For You?
Short-term rentals can be an attractive investment strategy for all stages of life. It can give you extra money and help you afford your own place as a college student. It can help offset the cost of renting an apartment or buying your first house. It can become a real business to create a high level of income while building wealth in equity in your real estate assets. In my observation, seniors, who can benefit from surplus income in retirement years, are one of the fastest-growing types of Airbnb hosts.
The Pros Of Short-Term Rental Investments
Some of the great advantages include:
1. Passive income.
2. The ability to leverage large amounts of property and cash flow.
3. Scalability.
4. Equity appreciation over the long term.
5. Far higher rents than long-term rentals from the same units.
6. Tangible assets.
7. Potential tax advantages.
8. People will always need a place to stay.
The Cons of Short-Term Rental Investments
For every advantage, it is also important to be aware of any risks or cons, even if they are temporary. Currently in the short-term rental space, these may include:
1. Lower occupancy rates.
2. High levels of competition.
3. Relying on peak rents to make deals profitable.
4. The volatility of short-term rentals.
5. Economic risks.
6. Risk of new regulations.
7. Short-term renting not legal or allowed everywhere.
8. Higher maintenance and property management burden.
What Can You Rent Out?
One of the beautiful things about this real estate investment strategy is that there are so many ways to do it. If you’ve got a place where people can sleep, you can get cash for it on a short-term rental site.
Just some of these options include:
1. Air mattresses and couches.
2. Spare rooms.
3. Mother-in-law suites and guest houses.
4. Single-family homes.
5. Condos and townhouses.
6. Tents.
7. Luxury condos and vacation homes.
8. Basement apartments and built-out attics.
9. RVs and mobile homes.
10. Tiny houses.
11. Manufactured homes.
12. Castles.
13. Beach cottages.
14. Treehouses and yurts.
Summary
Short-term rentals continue to be hot. Airbnb’s sizzling run seems to be headed for a big IPO, and there appear to be many reasons why this upward trend will continue to last. There are pros and cons to this as a real estate investing niche, so be sure to understand them before you get in. No matter what you are starting with or what stage of life you are in, there appear to be great ways to leverage this trend, and many types of property that can be converted to new income streams. What will you do with it?
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