INVESTMENT

It’s not too late to join the short-term rental investing game


This was not a good time to be a short-term rental investor.

Short-term rental investing, otherwise known as Airbnb or VRBO hosting, has been one of the most popular strategies for real estate investors for the past several years — and for good reason. It has a lot to offer.

What’s more, new data from AirDNA, an organization that provides data in the short-term rental industry, suggests that the best time to invest in short-term rentals right now – even in this crazy market.

What is STR?

If you are unfamiliar with short-term rent (STR), this is an investment strategy where you are buying a property, but instead of renting it to long-term tenants, you offer the property on Airbnb, VRBO or any other vacation. Rental website.

Advantages of STR

This technique has become really popular recently and it is easy to see why. First, it offers something that is quite hard to find at the moment: cash flow.

Cash flow is becoming increasingly difficult, primarily because home prices are rising faster than rents. But STRs still offer great cash flow possibilities Of course, you need to have a good asset in a good market, just like any investment, but STRs have proven that even in non-cash markets like Denver, Austin and Seattle, they offer cash flow.

Second, markets that tend to do well for STRs are also highly-acclaimed markets. Think about where people go on vacation, like ski cities, lake houses or big cities like Miami. There are markets that have grown exponentially over the last few years. STRs offer great market placement options with great potential for cash flow and asset valuation.

So many investors have good reasons to come up with this strategy – and it probably looks like things are going to get better.

How is the STR market performing?

Honestly, at the beginning of COVID I was quite worried about my STR. I thought the trip would stop and the property would be empty for a few months. Instead, the opposite has happened, and Covid has actually accelerated the existing trend of people moving away from hotels and towards the STR.

To back it up, I got some data from AirDNA. Looking at this data, you need to know two conditions: 1) Occupancy, which is how many nights are rented in your STR month and 2) Average daily rate (ADR), which is basically the average amount of guests. Rent your property.

To find out your cash flow, multiply your holdings by the average daily rate. As an investor, you want both your holding rate and your ADR to be higher. Data from AirDNA shows that both have grown significantly in the last few years.

Occupied

The chart below shows that 2021 is the best month to occupy the record — or at least 2018 dating. So despite all the restrictions and limitations on travel during the epidemic, the demand for short-term fares has increased significantly compared to both the 2020 and 2019 numbers. See the difference between the yellow and green lines throughout this year. There is demand and possession.

The bigger news is that between July 2021 and July 2019, the average daily rate across the United States has increased by 22%. This is a huge increase

If you put these things together – increased holdings and a huge increase in ADR – it means a lot more cash flow for STR investors.

Popular in small towns and rural areas

Of course, not all STRs are the same. It’s no surprise that some types of property and some markets are going to pay better rents than others – and AirDNA has provided some data to help shed light on what’s happening.

The chart below shows that there is a big difference in demand between the types of locations Be sure to note the y axis in this chart. You see that 0% is right in the middle, so the bottom lines are all down and the top lines are up.

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To me, the big takeaway here is that small towns and rural towns are exploding with destinations and resorts, while big cities are really getting a hit. Those big cities are recovering, but they have yet to return to pre-covid levels. On the other hand, the demand for small towns is much higher and even higher than the 2019 level. As an investor who owns a STR in a mountain town, I can confirm from my own experience that the demand is very high.

There is a demand for large units

Guests are also choosing larger units. The chart below shows the larger units going up, while the shared and private rooms are down. It is common knowledge to me given the world at the moment – no one wants to share a room during an epidemic and many families are renting big houses for a long time as a way to bring everyone together. The data suggest that so far, the bigger the better, and I think this trend is likely to continue.

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Finally, the data shows us that the demand for luxury property is the highest. Maybe people are spending more of their extra money on vacation than in the past. After a year at home maybe more people are finding value in staying in a beautiful place. Whatever the reason, the information is clear: the more developed the property, the greater the increase in demand.

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Bright future for STR

As everyone has been told, this information is extremely encouraging for STR investors. We have seen that the occupancy rate has increased and the ADR has increased, meaning more cash flow is coming into the market. We’ve also learned that large, luxurious properties in small towns or vacation destinations are performing best at the moment. So whether you’re a current STR investor or you’re looking to enter the market, these can be sweet spots for your next purchase.

If you are thinking of investing in STR, I have two resources for you. The first is AirDNA, which honestly has the best STR data on the market; I use it myself and it is extremely valuable. Second, I’ve put together a guide to analyzing STRs earlier this summer that you can find at BiggerPocket এটি it’s very useful if you’re going for a short-term rental game, so check it out.

Short term rent

Find long-term assets, including short-term rents

To effectively manage your listing from potential feature analysis, this book is your one-stop resource for profit with short-term rentals! Whether you’re new to real estate investing or you want to add a new strategy to your growing portfolio, vacation rentals can be a very lucrative way to add an extra income stream — but only if you acquire and manage your property properly.



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