Climate of Airbnb's?

Question

Hello,

I'm dabbling with the idea of airbnb-ing a future investment property, however I was curious if anyone had any insight on where they anticipate the airbnb market going? With the pandemic showing little to no signs of slowing, I'm wondering if there's any airbnber owners out there that could shed some light into how their business(es) is holding up.

Thanks!

Ellie

Joseph Bafia · Answer

I agree with @Ryan Howell but I'm probably biased as he's my realtor helping me close on my 3rd STR in the same area.  I'll add that my 2nd STR was purchased and made ready for rent as covid hit, so we pivoted and rented it as a LTR through next June.  Our first one was doing extremely well and that's why we bought the 2nd.  Covid shut us down  for 1 1/2 months and when it reopened (mid May), we've exceeded every expectation and forecast.  We are near 100% occupancy on the first one and getting great rates.  Hence the reason I'm buying my 3rd and already considering a 4th.

Location is critical.  Ours is located 45 mins north of Asheville.  Close enough to activites, but not so close to rick losing good STR regulations.  We are a "drive to" destination and located in a remote mountainous area.  I think those 2 things are causing our success.  People are not flying as much and maybe driving to their getaway place and they may not be visiting the Disneys or resort places, but rather going off grid.

I'd never try and sway someone either way in regards to STRs, but I can speak from experience that its been very good to us so far.

Steven Griffith · Answer

@Ellie Ryan

I guess like most of real estate, location matters. I've had a similar thought to you, and am focusing on Western NC or Eastern TN region. The investors I've talked to all said they had a big drop in bookings.....For one month.

Now, they say the are more full than they've ever been, and are on track to meet or beat previous years. They say demand has absolutely been through the roof, and one investor mentioned he picked up an additional property in June and is now looking for another.

I've also looked in the Outer Banks (NC coast) and the 1 investor I've talked to out there said there was an initial drop, but that he's now booked solid, even though this is usually part of his slow season. I'm not sure where you're considering doing a STR, but at least here in NC in the vacation areas that market seems to have bounced back

Ryan Howell · Answer

All the STR investors I've worked with in the greater Asheville area are telling me that since June the market has been great.  There are people from big cities working remotely that are taking 2-4 week vacations with the family while working.  In general, people tend to be gravitating toward STR's or camping and away from hotels/resorts.  I've mainly done LTR's but am now thinking about getting into STR's because I think it will continue to be a trend.

Ashlie Greising · Answer

@Ellie Ryan I can only respond based on my experience thus far, but I think location is probably the determining factor in how well peoples Airbnb’s are doing. The Airbnb I have is doing fantastic and constantly stays booked. At the beginning of the pandemic I did lower my rates a little, but now they’re back to normal. In my opinion, location and local policy is what will most likely affect how successful the Airbnb will be.

Ryan Riches · Answer

I agree with what has been said so far here - Location is a huge factor for this. It seems that people are trying to get away from dense city centers and are traveling to places that they can drive to instead of fly (hence the decrease in uber rides mentioned by @Jaron Walling). Our family has an STR just outside of Breckenridge, CO. April had zero bookings, then starting mid may they have been busier than ever. On track to have the highest performing year yet. Most people are booking full weeks at a time instead of just weekends, they have even had a few full month guests.

@Ryan Howell is right, there are a lot of people who are working remote right now who want to break up the routine and have the flexibility to work from anywhere. In my opinion this is a trend that we will continue to see moving into the future, with Covid not going away anytime soon, and many companies announcing that they will allow remote work permanently, it is changing the way people view vacation. I think that is going to have a positive impact on STR's moving forward. Especially those in good locations, and that are entire properties rather than just a bedroom.

Ellie Ryan · Answer

@Jaron Walling @Dan Heuschele @Dave Fairb @Ryan Howell- all great insight. Very interesting to hear different perspectives/experiences. @Steven Griffith I agree, I think it boils down to location, and if the pandemic has taught us anything, is that a prime location is subjective to environment we live in. I mean, just look at NYC now vs. 9 months ago.

Thank you everyone! Super, super helpful.

Dan H. · Answer

We have two STR units a block from the beach in San Diego.  San Diego shut down the STRs for around 2 months.  The rates fell modestly when STR allowed to resume as there was nothing to gain by a price war.  The bookings started to increase with time, but have not reached our usual near 100% booked.  We are down over $60K in rents and may hit $70K by the end of the year.  $70K is ~36% decline in rent this year.  Note about half of that was due to the 2 month ban but also note that it is not really a full year (we had over 2 months normal).  I suspect if nothing changes, 2021 will be down ~20% from our 2019 rent.

I have followed some STR threads on BP.  There are some locations where the pandemic did not result in any impact to STRs according to the posts.  I suspect this is not the usual.

I suspect the usual is likely somewhere between our 36% decline in rent and the 0% decline in rent (mostly because some areas did not shut down the STRs for 2 months).  I suspect my forecast for 2021 may be more indicative or the normal lost rent for 2020.

I do not believe it is a good time to get into STRs.  I believe in my market, there may be an upcoming price decline in units.   Many of the STR investors paid too high a price to be sustainable as LTR.  They have lost a lot of money in 2020 and are likely to lose more in 2021.  Add in that the hospitality industry and travel are very impacted from the pandemic.

Good luck

Jaron Walling · Answer

@Ellie Ryan Ahh dead?... I was lucky enough to take two short vacations this summer and based on the rates we paid (a steal) I'd assume the Airbnb investors are hurting big time. I spoke with a retired Uber driver and Airbnb investor in Asheville, NC and he told us his bookings dropped 75% compared to 19'. He was about to quit driving for Uber as well. Told us it wasn't worth it.

I have friend and Airbnb investor in my market. It's his primary home so he basically lives in the detached garage (fully converted ADU) and rents out the rest of the property. His bookings are down as well. He can afford the property without the additional income it's not a deal breaker.

I would tread lightly and connect with local investors in your area before dabbling into a STR investment.

Anthony Angotti · Answer

It will eventually come back, but for all of these properties I'd consider them first and foremost as a traditional rental property. That's how the properties should be being analyzed, and then use Air BnB as a value add where and while it is viable.

In Pittsburgh the people that I know that were heavy in Air BnB are taking a hit, but most of them were doing air bnb arbitrage and subletting leases (that they could get out of), or did what I mentioned above and because of that have been able to turn them into more traditional rentals.

William Robison · Answer

@Ellie Ryan anytime! If I can help you in anyway with your STR journey please let me know!

Climate of Airbnb's?

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