{"id":143209,"date":"2022-05-24T12:12:58","date_gmt":"2022-05-24T18:12:58","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=143209"},"modified":"2023-08-07T15:17:23","modified_gmt":"2023-08-07T21:17:23","slug":"reasons-not-to-invest-in-airbnb","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/reasons-not-to-invest-in-airbnb","title":{"rendered":"5 Reasons For Why You Should Not Invest in Airbnb Properties"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC6493446450&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Airbnb&#8217;s are all the rage in investing right now. For a good reason too.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Short-term rentals cash flow beyond belief and make the numbers work in just about any market. I&#8217;ll admit that I own five myself and have a few in the works.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">So why am I telling you not to buy them?<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Airbnb&#8217;s are fantastic as long as all the variables work and you know exactly <a href=\"https:\/\/www.biggerpockets.com\/blog\/how-much-does-airbnb-take\" target=\"_blank\" rel=\"noreferrer noopener\">how much Airbnb takes<\/a> from your earnings. I have opinions about properly mitigating risk and lived through 2008, so I speak from experience. Many real estate investors have become extremely wealthy over the past 10 years and cannot fathom a recession.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Recessions aren\u2019t pretty, and many newer investors have a hard time believing that the real estate market could be upended and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/is-the-housing-market-about-to-collapse\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">crash<\/span><\/a><span data-preserver-spaces=\"true\">, but it\u2019s possible.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Airbnb properties are an excellent investment given the right circumstances. In this article, I&#8217;ll give you five reasons not to invest in Airbnb properties.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Reason #1: The Numbers Only Work As An Airbnb<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As a seasoned investor, I\u2019m a huge fan of having various strategies to pivot in every market.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If I buy a property for $400k and can make $6,000 per month with Airbnb but only $1,200 per month as a long-term renter, I open myself up to some risk.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">When times are great, I&#8217;m cash-flowing and loving life. However, if the regulations on short-term rentals become restricted as they did in&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.nashville.gov\/departments\/codes\/short-term-rentals\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Nashville<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.austintexas.gov\/page\/types-short-term-rentals\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Austin<\/span><\/a><span data-preserver-spaces=\"true\">, I need to pivot. My best option is to find a long-term tenant, but $1,200 or even $1,500 each month won\u2019t cover the bills. If I decide to sell and the market goes down, or the pressure mounts because I am out of cash reserves, I\u2019ll need to exit at a loss. These scenarios give real estate investing the reputation with some folks as being &#8220;risky&#8221;.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">You need to strategize ahead of time. If that means you lose a deal, it is better than losing your shirt.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">I recently had this situation occur with a lakehouse in Arkansas. I was denied the right to own an Airbnb rental unexpectedly by the city. Luckily, I planned well and was able to place a tenant that more than covered the mortgage and expenses.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Reason #2: Not Enough Cash In Reserve<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Like I&#8217;ve said, when Airbnb&#8217;s are good, they are perfect for cash flow!&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">It&#8217;s an expensive proposition, though. Furnishing a home can cost thousands. Even if you buy a furnished house, no one could have predicted COVID-19 or even a slow month!&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you earn $7k per month on a property and pocket half, you have $3,500. Say, however, you only gross $3,500 one month for no apparent reason. Suddenly, you\u2019re not making money.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Short-term rentals offer no guarantees. Most vacation rental owners anticipate slow months based on seasonal conditions. But, in one of my own cases, my Airbnb in a residential neighborhood saw a slow month, and there were no factors to predict the decline in revenue.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Case in point, you need ample cash reserves. Having cash on hand to pay for unforeseen expenses or slow months is a must, especially when playing with high overhead.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If your home is costly to run, a decline in revenue for a few months could create a hardship if you are running lean on cash. If you get caught in this situation, I recommend taking on a partner and cutting them into the profit. Or, if you have enough equity, sell the property. Hopefully, you can offset any sizeable tax gains.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Reason #3: Luxury Rentals Are The First Sacrifice During Poor Economies<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">It feels like I&#8217;m that bearer of bad news, but someone has to say it. Real estate is not always a winning game and Airbnb has higher stakes for higher rewards. I want to make sure you are considering these variables.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">These days, a very popular strategy is buying a huge home and renting it out for sizeable short-term profits. Luxury vacation homes are the first thing people stop going to in a slow market or a recession.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you are banking on luxury short-term rent payments every month, you might have to sell at a loss because you simply cannot cover the bills.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Remember, with short-term rentals, you are responsible for the cable bill, gardener, pool or spa maintenance, utilities, and water. You are responsible for that bill regardless of whether or not a guest is occupying the place.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Reason #4: Overhead Expenses and Property Management<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">You can easily manage your Airbnbs even if they are out of state. However, you may not have time to handle the booking inquiries and manage the cleaners and repairs.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">In this case, you&#8217;ll want to hire a property manager. Many do a great job but charge 25-30% of gross revenue. At that point, your numbers might not look too good.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">This means you\u2019ll have to be fully prepared to self-manage or find deals that will allow you to hire a property manager for the right price and still net enough income each month.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Also, because your Airbnb is a business, you may have incidental expenses.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">I once had a guest spill red wine on my table, a $300 replacement. I filed a claim for reimbursement with Airbnb, and I&#8217;m still waiting six weeks later. I also had a cleaner forget to clean a bathroom. Seriously.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Yes. I offered the guests a free night and prayed they did not post the photos (they didn\u2019t!). The incident set me back $350 for the night, and getting the new cleaning crew set up was another day that needed to be blocked out.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">With quick turnovers and wacky schedules, the world of Airbnb leaves room for all sorts of scenarios that cost money. Sometimes, a lot of money.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Reason #5: You Don&#8217;t Have High Stress Tolerance<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The stories and reasons above are all part of being an Airbnb owner.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you fall into the category of &#8220;life is too short,&#8221; or you despise managing these sorts of situations, or don&#8217;t need the money that badly. Then pass on it. There are many other ways to make money in real estate that doesn&#8217;t involve the madness of an Airbnb.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">All that said, I do have Airbnb properties that have never had any major issues. The easiest ones tend to be for longer rental terms, such as out-of-state workers or traveling nurses.&nbsp;Not allowing pets alleviates other obvious issues but does lessen the booking pool.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Closing Thoughts<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you still think Airbnb is for you, always do the following.<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Make sure the numbers work straight out of the gate with all real estate.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Budget the furniture expense as part of the money out of pocket.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Make sure you track&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.airdna.co\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">AirDNA<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/data.rabbu.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">data.rabbu.com<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;to get a realistic amount of income you can expect monthly.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Estimate the lowest amount to ensure my worst-case scenario works.&nbsp;<\/span><\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Don&#8217;t feel like you have to follow the herd. Follow the numbers and your sanity. If Airbnb doesn&#8217;t feel right to you, find another strategy in real estate to make money.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Whatever you do, don&#8217;t walk away from real estate investing altogether if one course of action does not work for you. There is a way in for everyone. Airbnb may not be the investment for you, and now you can justify the reasons why.&nbsp;<\/span><\/p>\n\n\n\n<div id=\"hero-block_62ee867235a1c\" class=\"first:mt-0 hero-block py-4    has-background has-slate-300-background-color has-text-color has-slate-800-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-slate-color has-text-color has-large-font-size wp-block-paragraph\" style=\"font-style:normal;font-weight:800\">Prepare for a market shift<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color wp-block-paragraph\" style=\"font-size:16px\">Modify your investing tactics\u2014not only to survive an economic downturn, but to also thrive! Take any recession in stride and never be intimidated by a market shift again with <em><a class=\"rank-math-link\" href=\"https:\/\/store.biggerpockets.com\/products\/recession-proof-real-estate-investing?utm_source=blog&amp;utm_medium=blog%20banner\" target=\"_blank\">Recession-Proof Real Estate Investing<\/a><\/em>.<\/p>\n\n\n\n<div id=button-custom-event-block_64138705d4d27 class='button-custom-event'>\n      <a href=\"https:\/\/store.biggerpockets.com\/products\/recession-proof-real-estate-investing?utm_source=blog&#038;utm_medium=marketing_block\" x-on:click=\"window.analytics.track(&#039;Blog Block | Publishing: Recession Proof Book&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/reasons-not-to-invest-in-airbnb&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/04\/recession-proof.png\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Airbnb&#8217;s are all the rage in investing right now. For a good reason too.&nbsp; Short-term rentals cash flow beyond belief and make the numbers work in just about any market. [&hellip;]<\/p>\n","protected":false},"author":612543,"featured_media":143210,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7271,7119],"tags":[5732],"class_list":["post-143209","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-short-term-rentals","category-biggerpockets-daily","tag-airbnb"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/143209","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/612543"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=143209"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/143209\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/143210"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=143209"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=143209"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=143209"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}