Does airbnb increase property value?

Question

I was just wondering if a property with a decent Airbnb track record is worth more. Say that by normal standards the property is worth 300k. But it was placed on Airbnb and now brings in 100k a year, is it now worth more?  Is there any way to calculate this when buying or selling these types of short-term rental properties?

Bruce Woodruff · Answer

This has been discussed on here before and a lot of people say no. I disagree and think that they have some added value.

But of course it depends on the specific buyer, and you have to have complete and verifiable records, including tax returns.... :-)

Bonnie Low · Answer

By Airbnb, I assume you mean short term rental because there are multiple platforms. And, frankly, many owners are really suffering under changes within Airbnb to their algorithms, customer service, etc which is causing them to migrate away from Airbnb. So I'd broaden your question beyond Airbnb. You might get a higher premium from STR buyers if you have a property that is already a successful STR because it proves the model works in your area. You may even transfer bookings to the new owner, which could be a bonus they're willing to pay a higher premium for. And in markets where there is a limited number of STR permits issued you can absolutely command a higher premium for your property because the buyer is buying not only the property but the highly coveted permit as well. For example, Bend OR. While it's a strong tourist market, the City has also limited the number of permits so properties that come up for sale with an existing permit are snapped up quickly and command a higher price.

Bruce Woodruff · Answer

You're absolutely right. Some people that don't get it think that LTRs are easier to maintain. Nope. A STR gets cleaned and inspected every weekend or week. No drippy pipes that cause damage for a year before being discovered, no pet/kid damage that goes unreported.....

I always hated the turnover mess at the end of a LTR tenant's moveout. A (well run) STR is a piece of cake in comparison.....

Bruce Woodruff · Answer

I know, bit they will add value to any other business. Even ones that get wear and tear. And the income is not inconsistent with good STRs....?

I just don't think banks get it....it's like hobby to them....

Josh Starner · Answer

Hey Javier, much like any investment these often will trade at a multiple against earnings. Having the option to purchase and make those types of returns would drive up the price as it becomes attractive to investors, however if you are on the buy side I would caution you as the last two years have seen spikes in demand due to international travel restrictions. If you were looking to buy, I would suggest asking to see 2019 numbers if available during your underwriting.

Best of luck,

Josh

Bruce Woodruff · Answer

Good point! So you could sell the house for say $400k, and add a separate contract for $200k for the business value. That would make more sense....

Eliott Elias · Answer

Ideally it should, realistically it doesn’t

Brad S. · Answer

As an appraiser, i'd say possibly, but not necessarily the real estate.

People seem to confuse the real estate with the business. An str is a business, beyond just the real estate. It is a hospitality business. So, generally a good str track record would not increase the real estate value, but it might add to the business value.

Dallas Regimbal · Answer

@Javier Emilio Tirado I would say it depends on what kind of property it is and what your market’s rules and regulations are for STR's. This is because if it is a single family residence, then most likely the appraiser will use comps of other single family residences and not consider the income. Since most buyers would likely just live in the property themselves. A majority of your buyer pool would likely be using a loan to purchase and will require an appraisal. So you'd likely need to sell to an investor using cash who plans to use it as a STR to sell for more. Also your area's rules and regulations can affect this because some do not allow the Short Term Rental permit to transfer to the new owner. Such as with Bend, OR only properties who have a Vacation Home Rental permit and who applications were filed on or before April 15, 2015 will run with the land and transfer to the new owner. The new owner then has 60 days from the date of closing to file for a new operating license. Any Short Term Rental permits for Bend, OR are considered applications filed after April 15, 2015 and are issued to you as the owner and will not run with the land. So when you sell the property, the land use approval will terminate and be void. If the new owner would like to use the property for a short term rental then they will need to apply for a new Short Term Rental land use permit and if approved, a new Operating License as well. That is why it is going to depend on your market’s rules and regulations and why I highly recommend you go over them thoroughly and review them often, as they are subject to changes. I hope this helps!

Bill B. · Answer

It actually lowers the value a little or doesn’t affect it all. 90% of your buyers, and 99% of the best paying buyers want to live in the property. So the STR portion goes away. The only person keeping it a STR is a person who could buy the house next door, or any house at regular price and and do the same thing. I guess you could get “used furniture” pricing for your existing furniture instead of having to run a. Garage sale. So there’s that upside to taking less from an investor.

Does airbnb increase property value?

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