Everyone and their mom is on Airbnb

[Ryan Thomson]

Everyone and their mom is doing Short Term Rentals. In fact, my mom (and dad) and I just went 50/50 on an Airbnb (my 4th). It seems like these days that EVERYONE I talk to is excited about Airbnb and STRs. Even people previously uninterested in real estate investing are putting their houses on Airbnb. The cashflow is crazy and investors are going all in.

So what's my question?

I'm getting there. 

I love the cashflow of an STR. I have an exit plan that will more than cover the mortgage. However, I'm considering if I should buy another one. Not looking for advice on my specific situation. I'm looking for your musings/predictions about how STR profits will change, the risks you see in investing in STRs, if STRs are contributing to housing shortages and rising home prices, and/or if you think there is lots of demand still around to soak up supply. What say you? Muse away please.

[Katrina Razavi]

Love this thread @Ryan Thomson, and funny that your mom just got into Airbnb b/c my parents recently did too! I've been advising them to do this for years btw. I have STR's in San Francisco and San Diego, so take my insights with a grain of salt given CA as a state tends to be pretty anti-landlord. Some thoughts:

-When this many people get into STR's, the likelihood of increasing regulations gets higher -- as we've seen. My prediction is that more regulations are to come at the municipal level along with more fees and taxes to operate one if you're lucky enough to get a license. In San Diego, they'll be limiting the # of Airbnb licenses to 1% of the housing supply at the end of the year via a lottery system. It has been a contentious issue for years.

-Due to these regulations, I think many landlords who bought with the sole purpose of STR'ing their property will be in for a big surprise when they realize they didn't underwrite the scenario of having to rent to a long-term tenant. There were a lot of rookie investors who saw STR as "quick money" and likely didn't run various scenarios to ensure their investment will be safe if things change. This will likely mean these folks will be selling when they realize they need to sell b/c they can't cash flow anymore

- I don't think the demand for STR-type properties will continue to increase at the rate it has b/c of all these new limitations and regulations

-I do agree that having a ton of STR's can make it hard for residents of cities to find LTR spots, that said, STR's are also important for local economies. Folks who vacation in these locations spend money at bars, restaurants, tourist attractions, etc. Hotels are expensive and don't have amenities that people may be looking for or can afford at a hotel vs. an outfitted Airbnb so potential tourists may select a different city to vacation. Having some sort of quota may make sense but in the example of SD, 1% seems way too low I think that percentage can be increased a bit or likely better ways to solve the problem, generally