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Ryan Thomson#1 House Hacking Contributor
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Everyone and their mom is on Airbnb

Ryan Thomson#1 House Hacking Contributor
  • Real Estate Agent
  • Colorado Springs, CO
Posted Jun 3 2022, 21:24

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.

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Ryan Thomson#1 House Hacking Contributor
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Ryan Thomson#1 House Hacking Contributor
  • Real Estate Agent
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Replied Jun 6 2022, 21:01

@Natalie Schanne great point about house hacking. Such a valuable life strategy.

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Ryan Thomson#1 House Hacking Contributor
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Ryan Thomson#1 House Hacking Contributor
  • Real Estate Agent
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Replied Jun 6 2022, 21:03

Thanks @Rodney Sums! Good list of risks to look out for.

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Ryan Thomson#1 House Hacking Contributor
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Ryan Thomson#1 House Hacking Contributor
  • Real Estate Agent
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Replied Jun 6 2022, 21:04

@Dan Heuschele Thanks for the recession anecdote. There has got to be some good data about recessions and vacation and STR rentals. I wonder where we can find that.

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Replied Jun 6 2022, 21:44
Quote from @Ryan Thomson:

@Dan Heuschele Thanks for the recession anecdote. There has got to be some good data about recessions and vacation and STR rentals. I wonder where we can find that.

People don’t stop spending money in a Recession, they change how they spend it. Maybe they pack a lunch 4-5 days a week instead of eating out, but they still gotta eat. I remember seeing how single cup coffee makers sold like crazy during the recession because people wanted to only make a single cup instead of a whole pot that partly goes to waste. 

Same is true for travel- instead of going to Europe or the Caribbean, maybe they drive to a national park or fly to a trendy city. So some markets might do better, question is which ones? 

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Dan Heuschele
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Dan Heuschele
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Replied Jun 6 2022, 23:11
Quote from @Jon Martin:
Quote from @Ryan Thomson:

@Dan Heuschele Thanks for the recession anecdote. There has got to be some good data about recessions and vacation and STR rentals. I wonder where we can find that.

People don’t stop spending money in a Recession, they change how they spend it. Maybe they pack a lunch 4-5 days a week instead of eating out, but they still gotta eat. I remember seeing how single cup coffee makers sold like crazy during the recession because people wanted to only make a single cup instead of a whole pot that partly goes to waste. 
`
Same is true for travel- instead of going to Europe or the Caribbean, maybe they drive to a national park or fly to a trendy city. So some markets might do better, question is which ones? 


 >Same is true for travel- instead of going to Europe or the Caribbean, maybe they drive to a national park or fly to a trendy city. So some markets might do better, question is which ones?

My beach STRs that are 100' from the sand is 3 hours drive from ~20 million people (Tijuana, San Diego county, Orange county, Los Angels county, Imperial County, Riverside county). By the time of the Great Recession, it had been an STR for 7 years and was very established (about as established as any STR anywhere). My beach STRs could not get close to the occupancy to match the LTR rents during the school year. I had many months with zero occupancy. If my STR rents were close to LTR rents, I would not have bothered to convert the units to LTR in the school year as it required effort to move the furnishings out and back in.

Las Vegas was basically comping rooms and still could not get decent occupancy.

People were taking stay at home vacations (staycations).  Basically all tourist travel destinations had reduced visitation.

I no longer have my records from the Great Recession years, but it would be interesting comparing the occupancy compared to Covid impacted 2020.

STRs have many risks that do not exist for LTRs. On the upside a well-managed STR in the right area can bring in a lot of rent.

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Replied Jun 7 2022, 00:30

All valid experience. I have heard others comment how their markets improved during economic downturns. Then you have the types of places that are a summer/winter tradition for their friends/family that people make happen no matter what. 

The last place I would go if I was tight on cash would be Las Vegas, even though I realize there are other things aside from gambling to do there. 

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Mike Dymski#5 Investor Mindset Contributor
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Mike Dymski#5 Investor Mindset Contributor
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Replied Jun 7 2022, 04:56
Quote from @Ryan Thomson:
Quote from @Mike Dymski:
Quote from @Owen Hehmeyer:

@Ryan Thomson The success of AirBnB and VRBO is due to the fact that the short term lodging industry was offering only one type of easily bookable product - 95% of hotel rooms are 1 bedroom, 1 bathroom, 1 living room, 0 kitchen. It turned out that there was a huge demand for multibedroom, multibathroom, 1 living room, 1 kitchen. It is hugely inefficient to have 50 AirBnBs scattered across town, and the resulting cleaning and upkeep charges actually make AirBnBs costly and low service. If every hotel converted 20% of its floor area to suite style multibedroom, multibathroom, 1 living room, 1 kitchen style rooms and made them easily bookable, they could beat AirBnB on cost due to the huge efficiency of being under one roof and offering great on site service. If and when cities get serious about making sure every AirBnB pays hotel tax, which they should, hotels will be in an even better position to compete. I am really curious if hotels can be retrofitted to compete with AirBnB, or if it is not physically/financially feasible due to HVAC needs. Would be fascinating to see. Profits attract competition, so maybe it will happen.

Well said.  I am building one.

@Ryan Thomson They will just enforce existing residential zoning.

 @Mike Dymski Woah... tell us more please!


I'll come back and tell my story when I'm able to execute so that I'm not all talk and no action.  I have a loan term sheet in hand and hoping to select a first site this month.

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Bruce Woodruff
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Bruce Woodruff
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Replied Jun 7 2022, 06:29
Quote from @Ryan Thomson:

@Bruce Woodruff did you just quote Donte Quixote?! "Titling at windmills". Great musings. Thanks for sharing. Would you still consider the present as "getting in early"? It feels at least like getting in later than early. 

Yes, I think it's still early enough...except in markets that have been saturated....


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Melissa Nash
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Melissa Nash
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Replied May 17 2023, 12:23

Agreed--- but not everyone knows what they are doing and the ones that bought with NO goals, not understanding the math, or how to put in the work are just starting to get overwhelmed and are selling. I am seeing a LOT of properties on the market in some of these areas that got oversaturated with newbies that don't know what they are doing. So I do see a lot of fallout. That reiterates the importance of goal setting, WHY, client avatar, Amenities, guest services, automations, good cleaners, attracting the right client, etc etc. Basically doing the work- which a lot of people aren't willing to do thinking its a free ride and cashflow is never ending. :) 

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Bruce Woodruff
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Bruce Woodruff
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Replied May 17 2023, 13:00
Quote from @Melissa Nash:

which a lot of people aren't willing to do thinking its a free ride and cashflow is never ending. :) 


 Wait a minute......the cash flow ends.....? 😂

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Melissa Nash
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Melissa Nash
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Replied May 17 2023, 13:27
Quote from @Bruce Woodruff:
Quote from @Melissa Nash:

which a lot of people aren't willing to do thinking its a free ride and cashflow is never ending. :) 


 Wait a minute......the cash flow ends.....? 😂


 Right??