So What If Airbnb Is Crashing Right Now...

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So What If Airbnb Is Crashing Right Now...

Erin Spradlin
Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes

I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

  • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
  • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
  • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
  • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 
    14Reply
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    Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    6y
    Originally posted by @Erin Spradlin:

    I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

    • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
    • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
    • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
    • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

       Disclaimer: I'm not an Airbnb investor and I probably never will be.

      Remember that mainstream financial journalism is not exactly pro-real estate. Most of the Main stream news was saying it was "a bad time" to invest in real estate in the early 2010s, when in reality, that was one of the best times in the last 100 years to be a net buyer of real estate. We may not see a better time to buy real estate in the rest of our lifetimes, but they kept telling people to sit out.

      You're right to push back on them, but remember that internet journalism is all about getting clicks. They get the most clicks by getting people riled up enough to share it, which gets more clicks.

      I just opened WSJ's real estate section, and the top stories are all on celebrities' mansions. Great, I'm very happy for them. That has nothing to do with what most people need to know about the state of the real estate investing market. Just take articles like this one in perspective. 

      13Reply
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      • Joel W.
        Portland, OR · Member since 2019 · 45 posts · 32 votes
        6y

        @Erin Spradlin 

        Thanks to Erin and everyone else in this forum. Super educational for a newbie to REI. I hadn't seriously considered going the STR route in the future, but you've got me thinking about it.

        I run an Airbnb out of my townhome and have enjoyed the process immensely (and it's been must more lucrative than a normal rental). I've very few bookings the last couple of months, but I don't know if I particularly want any visitors for a while anyway. I likely could have lowered my prices more, but this is a side hustle and I didn't see the need to increase my exposure risk, at least until more was known about COVID. 

        I don't see why Airbnb would not be viable in the future, at least after a year or so. People will eventually start traveling again. That is basic human nature. But I do wonder how long the price difference between normal rentals and Airbnb rates will continue. But, like Erin said, as long as the numbers work for STR and SFR what's the problem? You can always fall back on SFR if needed.

        Seems to me like a lot of people are picking/hating on Airbnb-ers in the media. Maybe because they're jealous of the returns? Maybe they don't like change? There seems to be a satisfaction they're getting from seeing over-leveraged STR kingdoms fail. I think some people get satisfaction from seeing "upstarts" fail. Oh well. To each their own!

        Joel 

        1Reply
      • Veronica H.
        Member since 2020 · 6 posts · 5 votes
        6y

        @Erin Spradlin

        I hear you from all the way up in Canada Erin. I have stopped reading Airbnb related articles this week because they all seem to just be bashing Airbnb owners and hoping that we lose our properties and learn our lesson.

        Personally we were fully booked through the summer, months ago, and have had two cancellations so far. We could cancel the remaining reservations and market to long term tenants, but we are not there yet and we do not have to financially. 

        Interestingly we’ve had a lot of people asking to book our place (it’s in a vacation town) since covid started. We’ve had to turn them down because our provincial government has banned short-term rentals related to tourism and we can face hefty fines if caught. I’m sure lots of people are doing it, but I’m not so bold.

        Anyways, I’m also holding tight and am confident that the short term rental model will persist past the pandemic. Why? Because there are lots of people who prefer Airbnb’s over hotels and all of the reasons @Eric Teran listed. 

        Great ideas on here to manage in the meantime otherwise though. Thanks especially to @Michael Vialpando. 


        4Reply
      • Bradley Chapman
        Real Estate Agent · Charleston, SC · Member since 2018 · 37 posts · 29 votes
        6y

        I agree with a lot of what's already been posted regarding STR's and future success. One area that I believe will flourish in this area as well is the 30-60 day rentals. Working from home is obviously on the rise and I believe the workforce of the future is going to take advantage of this. Obviously Sonder is all in on this and I think this is a great option for STR owners.

        Living in Charleston, I've had numerous conversations with individuals who packed up their laptop and came down from NY, Jersey, and Boston and have been hunkering down until the dust settles, renting STR's on a month-to-month basis.

        Lastly, investing in the South should be on top of the criteria list. 

        2Reply
      • Osazee J Osagie
        Investor · Potomac Maryland · Member since 2020 · 83 posts · 46 votes
        6y

        I totally agree that people should have reserves but how much reserves is good enough. what rules do you use to cover for this type of once in a lifetime event? Just thinking out loud.

        1Reply
      • James Wise
        Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
        6y
        Originally posted by @Erin Spradlin:

        I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

        • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
        • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
        • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
        • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

           It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

          0Reply
        • Yitzchok Carmen
          Member since 2018 · 88 posts · 55 votes
          6y
          Originally posted by @James Wise:
          Originally posted by @Erin Spradlin:

          I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

          • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
          • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
          • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
          • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

             It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

             Your argument has zero to do with Covid 19. If airbnb fails now it will have nothing to do with its business structure. The traditional landlords can get messed now the same way as the STRs. But regardless I do not think its gonna fail. Its too beloved and too used by too many travelers worldwide. Maybe some changes but it will work out in the end

            2Reply
          • Greg Ghunt
            Member since 2020 · 21 posts · 6 votes
            6y
            Originally posted by @Taylor L.:
            Originally posted by @Erin Spradlin:

            I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

            • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
            • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
            • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
            • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

               Disclaimer: I'm not an Airbnb investor and I probably never will be.

              Remember that mainstream financial journalism is not exactly pro-real estate. Most of the Main stream news was saying it was "a bad time" to invest in real estate in the early 2010s, when in reality, that was one of the best times in the last 100 years to be a net buyer of real estate. We may not see a better time to buy real estate in the rest of our lifetimes, but they kept telling people to sit out.

              You're right to push back on them, but remember that internet journalism is all about getting clicks. They get the most clicks by getting people riled up enough to share it, which gets more clicks.

              I just opened WSJ's real estate section, and the top stories are all on celebrities' mansions. Great, I'm very happy for them. That has nothing to do with what most people need to know about the state of the real estate investing market. Just take articles like this one in perspective. 


              I was listening to a Peter Shiff on YouTube about too many housing units in America and not enough people to live in them, buying  a house being a bad investment. In 2010s, articles somehow missed the uptick in housing prices. I kept reading articles that real estate was “still down 10-30% from previous year” and somehow missed the opportunity to invest completely without understanding it was there. My guess is that the articles had incomplete information and written by unqualified people not even trying to actually enlighten people.

              2Reply
            • Taylor L.
              Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
              6y
              Originally posted by @Greg Ghunt:
              Originally posted by @Taylor L.:
              Originally posted by @Erin Spradlin:

              I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

              • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
              • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
              • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
              • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

                 Disclaimer: I'm not an Airbnb investor and I probably never will be.

                Remember that mainstream financial journalism is not exactly pro-real estate. Most of the Main stream news was saying it was "a bad time" to invest in real estate in the early 2010s, when in reality, that was one of the best times in the last 100 years to be a net buyer of real estate. We may not see a better time to buy real estate in the rest of our lifetimes, but they kept telling people to sit out.

                You're right to push back on them, but remember that internet journalism is all about getting clicks. They get the most clicks by getting people riled up enough to share it, which gets more clicks.

                I just opened WSJ's real estate section, and the top stories are all on celebrities' mansions. Great, I'm very happy for them. That has nothing to do with what most people need to know about the state of the real estate investing market. Just take articles like this one in perspective. 


                I was listening to a Peter Shiff on YouTube about too many housing units in America and not enough people to live in them, buying  a house being a bad investment. In 2010s, articles somehow missed the uptick in housing prices. I kept reading articles that real estate was “still down 10-30% from previous year” and somehow missed the opportunity to invest completely without understanding it was there. My guess is that the articles had incomplete information and written by unqualified people not even trying to actually enlighten people.

                The Real Estate Guys (who are friends with Peter) like to say that he has predicted 19 of the last 2 recessions. I do like what he has to say, but bear in mind that he is Chicken Little if there ever was one. It's not really accurate to say that the whole country is overbuilt, it all depends where you are. 

                Those people writing articles about housing prices being down may have actually had the right data, but they missed the important part. Housing prices being down was a strong "buy" signal. Housing was on sale. Some areas never recovered, but most did.

                4Reply
              • Joe SplitrockPro Member
                Moderator
                Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
                6y
                Originally posted by @Erin Spradlin:

                @Joe Splitrock
                Thank you for your measured and thoughtful response. I agree that you can't have it both ways. That said, I think for the past 8-10 years, Denver and Colorado Springs have been solid investments and barring corona, people had every reason to think the appreciation trend might continue. I'm not denying that they may have stepped outside of what they should have responsibly been doing with reserves, but I do understand why they got excited and went for it. Full confession, inspired by @Michael Vialpando's remarks- we also were not totally responsible. (We're fine and advocate other people being bold- but I can't say we followed every rule of investing to a T.) 

                 Nobody predicted corona, but nobody predicts any disaster. That is the important point for people to understand. Cash reserves and backup business plans are part of running a business. Expect bad things to happen. 

                3Reply
              • James Wise
                Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
                6y
                Originally posted by @Yitzchok Carmen:
                Originally posted by @James Wise:
                Originally posted by @Erin Spradlin:

                I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

                • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
                • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
                • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
                • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

                   It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

                   Your argument has zero to do with Covid 19. If airbnb fails now it will have nothing to do with its business structure. The traditional landlords can get messed now the same way as the STRs. But regardless I do not think its gonna fail. Its too beloved and too used by too many travelers worldwide. Maybe some changes but it will work out in the end

                   Traditional rental property ownership is a proven model. Running Illegal hotels isn't. Airbnb has a much higher level of risk and higher likelihood of failure.

                  1Reply
                • Joe Cassandra
                  Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
                  6y
                  Originally posted by @James Wise:
                  Originally posted by @Yitzchok Carmen:
                  Originally posted by @James Wise:
                  Originally posted by @Erin Spradlin:

                  I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

                  • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
                  • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
                  • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
                  • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

                     It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

                     Your argument has zero to do with Covid 19. If airbnb fails now it will have nothing to do with its business structure. The traditional landlords can get messed now the same way as the STRs. But regardless I do not think its gonna fail. Its too beloved and too used by too many travelers worldwide. Maybe some changes but it will work out in the end

                     Traditional rental property ownership is a proven model. Running Illegal hotels isn't. Airbnb has a much higher level of risk and higher likelihood of failure.

                    I only own traditional rentals and haven't dipped into STR...

                    All I hear is how STR (as OP mentions) is 3X more lucratives than traditional.

                    I've never seen at STR P&L to back this up, but curious why you see it as higher risk? Simply because it's reliant on travelers instead of dwellers?

                    What's the downside of an Airbnb vs. a traditional? 

                    The only extra expense Airbnb might have vs. a traditional (capex is same, repairs are same, vacancy % to reserve is same,dep. same): 

                    - Furnishing the house (can be very expensive depending on size)

                    - I'm assuming a PM is more expensive for Airbnb than traditional

                    - I thought cleaning, but many bookings the guest pays for cleaning.

                    Maybe someone else has thoughts. 

                    I do know AirBnb hosts that are overleveraged and/or their mortgage is $1k, they make $2k in bookings and spend the 1k difference as 'cash money.' But wouldn't a traditional landlord who does the same have the same issues?

                    1Reply
                  • Dan H.Pro Member
                    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
                    6y

                    Our STRs (duplex beach rental in San Diego) are doing worse than what it appears most of the posts are indicating they are doing. The local STR community where our STRs are located, as a whole, has not dumped rents, but they are virtually all empty. I think dumping rents would be a fools folly and ensure that all the STR LL would suffer more as it would not increase the overall occupancy.

                    We are down close to $50K in rents but one unit is rented all of next week (first time since February).  The beach just opened recently for walking/surfing (no settling at a location). Both units have about 25% occupancy in June that hopefully increases.  Both of these units are typically 100% occupied for the entire year (I think last year there were 3 unoccupied days between the two units).

                    We have the reserves to ride this out.  Come August, we will decide if one or both units should be rented out LTR for the school year (Sept to May).  We did this during the Great Recession with one of the two units.  I suspect it will not be necessary this time as the STRs seem to be starting to book.  The STRs have been very profitable and now we are consuming some of those past profits (I would have preferred not to have to, but it is what it is).

                    I think the ones who will have the hardest time absorbing this are the ones that entered the STR realm recently. They often paid a price based on potential STR income that can not be satisfied via LTR rents. They have not had the time to have built up significant past STR profits. Some may be highly leveraged.

                    4Reply
                  • Matt R.
                    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
                    6y
                    Originally posted by @James Wise:
                    Originally posted by @Yitzchok Carmen:
                    Originally posted by @James Wise:
                    Originally posted by @Erin Spradlin:

                    I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

                    • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
                    • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
                    • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
                    • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

                       It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

                       Your argument has zero to do with Covid 19. If airbnb fails now it will have nothing to do with its business structure. The traditional landlords can get messed now the same way as the STRs. But regardless I do not think its gonna fail. Its too beloved and too used by too many travelers worldwide. Maybe some changes but it will work out in the end

                       Traditional rental property ownership is a proven model. Running Illegal hotels isn't. Airbnb has a much higher level of risk and higher likelihood of failure.

                      Many established airbnbs or vrbos are permitted / allowed. For some areas it was a multi year process to get permit systems in place. Some have been paying hotel style taxes for many years now. It is getting less accurate to blanket call these illegal hotels as described but I get your point. 

                      2Reply
                    • James Wise
                      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
                      6y
                      Originally posted by @Matt R.:
                      Originally posted by @James Wise:
                      Originally posted by @Yitzchok Carmen:
                      Originally posted by @James Wise:
                      Originally posted by @Erin Spradlin:

                      I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

                      • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
                      • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
                      • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
                      • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

                         It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

                         Your argument has zero to do with Covid 19. If airbnb fails now it will have nothing to do with its business structure. The traditional landlords can get messed now the same way as the STRs. But regardless I do not think its gonna fail. Its too beloved and too used by too many travelers worldwide. Maybe some changes but it will work out in the end

                         Traditional rental property ownership is a proven model. Running Illegal hotels isn't. Airbnb has a much higher level of risk and higher likelihood of failure.

                        Many established airbnbs or vrbos are permitted / allowed. For some areas it was a multi year process to get permit systems in place. Some have been paying hotel style taxes for many years now. It is getting less accurate to blanket call these illegal hotels as described but I get your point. 

                         Fair point. The ones that are zoned, permitted and located in touristy locations are a different story. They have much less going against them. The model is way over saturated though. For example, we've got people pitching them as great investments here in Cleveland, Ohio. Who in the hell considers Cleveland, Ohio a vacation destination?

                        2Reply
                      • Yitzchok Carmen
                        Member since 2018 · 88 posts · 55 votes
                        6y

                        @James Wise

                        It may not be a vacation destination but it certainly is a medical destination. I would imagine that running apartments on Airbnb to attract visiting nurses and doctors could work out very well assuming that they are allowed by the city

                        1Reply
                      • Matt R.
                        Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
                        6y
                        Originally posted by @James Wise:
                        Originally posted by @Matt R.:
                        Originally posted by @James Wise:
                        Originally posted by @Yitzchok Carmen:
                        Originally posted by @James Wise:
                        Originally posted by @Erin Spradlin:

                        I'll try to limit my rant here, but since the Wall Street Journal published a somewhat nasty article about Airbnb investors in late April and I represent a lot of Denver Airbnb Investors and Colorado Springs Airbnb investors, I think it's important to point out a few things, and see if my fellow BP-ers are of the same opinion or a totally different opinion. 

                        • Airbnbs (and short-term rentals) have classically been a good investment, with returns that were often 2-3 times that of traditional long-term investments. By that standard, even with the downturn, you have a 2-3 year pocket against a long-term investment 
                        • Yes, a lot of short-term investors leverage their properties to buy more properties (utilizing a HELOC), but that's not any different than what many standard long-term investors do
                        • This situation is awful for a lot of reasons, and may keep short-term rental numbers depressed for the next year- but a lot of short-term investors already know what a depressed season is like because rentals don't do as well October-March. In that case, they get converted to medium-term rentals, and that can and has been happening here as well
                        • We're a little vulnerable right now, but not making decisions because a once in a lifetime pandemic might show up does not seem like a wise investment strategy to me 

                           It's never been a question of "if" Airbnb would fail, but rather "when" Airbnb would fail. A business built on operating houses illegal hotels has no legs. On top of that you've got all the schmo's out there convincing people to rent 100's of houses and sublease them as Airbnb's....Good God that's a ticking time bomb............And it just went BOOM!

                           Your argument has zero to do with Covid 19. If airbnb fails now it will have nothing to do with its business structure. The traditional landlords can get messed now the same way as the STRs. But regardless I do not think its gonna fail. Its too beloved and too used by too many travelers worldwide. Maybe some changes but it will work out in the end

                           Traditional rental property ownership is a proven model. Running Illegal hotels isn't. Airbnb has a much higher level of risk and higher likelihood of failure.

                          Many established airbnbs or vrbos are permitted / allowed. For some areas it was a multi year process to get permit systems in place. Some have been paying hotel style taxes for many years now. It is getting less accurate to blanket call these illegal hotels as described but I get your point. 

                           Fair point. The ones that are zoned, permitted and located in touristy locations are a different story. They have much less going against them. The model is way over saturated though. For example, we've got people pitching them as great investments here in Cleveland, Ohio. Who in the hell considers Cleveland, Ohio a vacation destination?

                          Idk how many use airbnb but probably a lot (19.2 million 2018) visit Cleveland for tourism/vacation.  Perhaps nearby more country residents see Cleveland as their closest big city amenities for higher end options, museums, theater, concert, sports etc.   

                          1Reply
                        • Shannon Chavez
                          Investor · West Covina, CA · Member since 2016 · 6 posts · 6 votes
                          6y

                          @Erin Spradlin

                          Thank you for the post Erin and for others around the country that have shed light on how you're being impacted. My wife and I own a STR in the Palm Springs area (La Quinta) and have seen a lot of inquiries coming over recently as California begins to reopen. We have a lot of interest from individuals in Los Angeles as well as nationally as people are looking to escape colder climates to a secluded desert retreats like ours. The city and county have put very strict measures on how we can operate so many of these guests have had to be turned away as we are not allowed to rent short term (30 days or less at this point). Nevertheless seeing the uptick in inquiries is a positive sign that people are wanting to get away locally and escape from the confines of their homes.

                          I do think there are some key takeaways from this current situation we are in.

                          #1. Cash reserves are a must! just like any other business or investment you venture into.

                          #2. Have options, can you pivot to medium or long term leases?

                          Are you so seasonal that you have only 1 option? Would a long term lease cover your expenses? This should be addressed prior to purchase as not only can you be wiped out by a pandemic but possibly changes to local laws which may not allow you to operate on a short term basis.

                          #3. Don’t be reliant on one single platform.

                          As a host and knowing many hosts in the Palm Springs area there are a ton of hosts that are pissed at how AirBnB handled cancellations, almost encouraging guests to cancel. I can speak first hand on this as we had a huge loss of revenue for March and April due to the cancellation of a professional tennis tournament (BNP Paribas) as well as Coachella and Stagecoach festivals. Many are hesitant to list with Airbnb now but on the flip side guests are pissed at how VRBO sided with hosts and didn’t issue guest refunds. This section alone could be its own post but the point is you should control your own listing and post on numerous platforms cause you don’t know when AirBnB, VRBO or other platforms will be gone.

                          Just my 2 cents, this has definitely been a huge learning experience for me as I'm sure it has for all of you. I am hopeful things will get better and that people will be traveling again within the states which will help increase local demand for STR hosts.

                          3Reply
                        • James Wise
                          Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
                          6y
                          Originally posted by @Yitzchok Carmen:

                          @James Wise

                          It may not be a vacation destination but it certainly is a medical destination. I would imagine that running apartments on Airbnb to attract visiting nurses and doctors could work out very well assuming that they are allowed by the city

                          The majority of Cleveland area neighborhoods one would expect to see Dr's and nurses in have ordinances banning STR in residentially zoned properties.

                          0Reply
                        • Marlen Weber
                          Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
                          6y

                          @Erin Spradlin thanks for the great insights on Airbnb investments and its current situation due to COVID-19. 

                          1Reply
                        • Ryan McKenna
                          Real Estate Broker · Tulsa and all of Oklahoma · Member since 2018 · 26 posts · 24 votes
                          6y

                          I have Airbnb's in Tulsa and lost reservations that were booked far in advance due to cancelled events but have been staying busy with last minute bookings as people work in town or pass through.  I see them being back in full swing as everything is re-opening.

                          1Reply
                        • Erin Spradlin
                          OP
                          Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
                          6y

                          @Eric Teran - glad to hear that you can continue to hold your properties. On a personal level, I want that for everyone, and on a professional level, I'm happy to be able to be able to share stories where that is the case (and, yes, $600/month to keep both is a lot lower than anyone I work with, BUT- it's nice to know people are holding on.)

                          0Reply
                        • Erin Spradlin
                          OP
                          Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
                          6y

                          @Account Closed - Glad to hear that, and congrats! (Also I'm in Colorado Springs as well, so that's encouraging for us also.)

                          @Avery Carl "will covid keep me from buying more STRs one day? No." --> my exact feeling. And, honestly, in a lot of ways, it benefits those who embrace STRs that a lot of people still have stigmas/fears about them. 

                          @Jason Collins - 100% agree that it is basically no different than a long term rental. In both cases, doing your research is key and just running your numbers, knowing what will work is the smart move. 

                          1Reply
                        • Erin Spradlin
                          OP
                          Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
                          6y

                          @Bill F. - love the quote "when the tide goes out, you see who is swimming naked." However, I disagree that the Airbnb investors were swimming naked- I think the article is painting it that way, but that's just not been my experience. I find my clients to be very responsible, they just have a different investment strategy. 

                          @Joel W. - welcome! I would continue to pay attention to STR investing strategy because it's been really good for a lot of people. That said, I do think it was easier to make a lot of money early days with Airbnb than it is now. (You can still make money, there's just more competition.)

                          @Veronica H. - glad to see you agree. It puts me off how people are talking about the community. I think there can be legitimate criticism of short-term rentals, but often they are lost in stranger danger or a reticence to embrace new ways to invest (or do anything)

                          0Reply
                        • Erin Spradlin
                          OP
                          Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
                          6y

                          @Bradley Chapman - re your point about 30-60 days, it's often something we've told people to do during hard months (Oct to March) to limit work, bring in more money than traditional rents, and then have it free again for the busy season. It's also really worked for us in Denver where the city mandated you could only do rentals in your primary residence... doing 30+ furnished rentals allowed us to keep those properties still. (Also, those clients are usually wonderful: low fuss, pay a little more, professional.)

                          @Joe Cassandra - when I consider the downsides of Airbnb, I usually think of it as the following:

                          1.) it's more work- a lot more work than a long term rental and/or

                          2.) you have to hire property managers, which is like taking on employees (not fun)

                          3.) and if I were going to make a case for the other side, I do question sometimes if Airbnb pushes up the price in certain zip codes and how comfortable I am with that. I go both ways on this. 

                          @Dan H. - I'm sorry you are down $50K in rents, but $50K in rents sounds like a lot more to me than most long-term renter landlords are getting in a year, two years, three years, etc. 

                          1Reply
                        • Erin Spradlin
                          OP
                          Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
                          6y

                          @Shannon Chavez - That's interesting about VRBO! I did know that. I wonder if they made that decision after Airbnb took so much blow back. 

                          @Marlen Weber - thank you for the nice comment(!)

                          0Reply
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