Airbnb Real Estate Investing – Is It Possible to Make Profits during any market fluctuation or crisis? by Rachel Prince
Few may still think that owning and running Airbnb vacation rental properties means easy work and easy pay. We now know this simply is NOT the case. While it is most certainly one of the most creative ways to do real estate investing, it is by no means passive income or a passive job. The reality is, running vacation rentals takes time, skill, dedication, as well as money and strategy.
Once you figure out the best ways to buy a home (cash/finance, investors, credit card, tax deferred strategies, savings, down payment , etc) and then you figure out WHERE TO BUY your operation so that its most successful and profitable, you then need to learn the how to RUN YOUR BNB smoothly in any market and under ANY CIRCUMSTANCES- this includes global pandemics.
Here are my top keys to making profits in any market, even crumbling ones.
THE MONEY FACTOR
Let’s first understand, why Airbnb /Vacation rental units can potentially make more than with a long-term tenant…
An Airbnb rental that is booked consistently can be highly profitable as compared to renting of the same property to a single tenant over the long-term. The main reason is that the host can charge a higher nightly rate every night creating a higher annual gross income.
In Seattle, for example, the average rent of an apartment is around 2,000 USD every month with a 6-12 month long-term lease. Thus, if a tenant signs a yearly lease, this represents gross income worth 24,000 USD.
It is reported that using the Airbnb way, the annual gross revenue can be 2-4 times higher on average (in a thriving, healthy market). AirDNA reports that in Seattle the average daily Airbnb rental rate is around $150, and apartments are occupied every year for an average span of 270 days. In this case, an Airbnb property could be rented every night for $150 for as many as 270 nights every year, thus could reign in as much as $40,050 from the rental in gross revenue. This is $16,000 more than is possible through the traditional method of renting. And better yet, if there is value appreciation of your property for an event, concert or convention, your real revenues can climb even higher.
THE MARKET FACTOR
Over the last few years competition was relatively healthy and robust for the Airbnb market in most areas around the globe. Where the demand for guests to book a BNB is high enough as compared to its conventions and events, even an average listing could be booked regularly and make a decent profit.
Even more success seemed to occur to those rentals that stand out among their competition with an undeniable unique quality, exceptional service, or even luxury brand to offer. Guests seemed willing to pay top dollar just to create memorable experiences in BNB homes in any city where they might stay. Other hosts who had stayed in the game long enough, perhaps with an average listing but a lot of reviews would also see a healthy return just from naturally ranking at the top of search results.
BUT, then I noticed what happens to a market almost overnight when it becomes heavily saturated with competition and then even worse a global pandemic.
Almost as soon as the market started to thrive here in Indianapolis, it also started to become overly saturated and my client returns became less each month. It seemed like everyone was turning their fancy flip or rental home into a BNB. Unfortunately, with 30 properties managed under my belt to give me the data, I quickly became concerned that this BNB Market would not sustain.
By March 2020, I couldn’t deny that the winter months were no longer an excuse for lower bookings and rates in my area of Indianapolis where we had seemingly gone from 600 listings to 1500 in less than a year. And with over half the BNB listings still available for rent on a NCAA Friday night event weekend, I realized that this market was failing, but then something even more awful occurred in the next few days… See My Fox News Interview VIDEO
And just before I would have to have the talk with my clients about next steps as a result of an over-saturated Indy market, an even worse thing happened, the Covid19 global pandemic suddenly crashed the entire travel industry and well, the world. Now I was trying to find the words to tell them, 90% of your guests cancelled and your likely not making much money this month…” HA! Like they didn’t already know…
Its obvious that if inventory ever gets too high and the market becomes over-saturated with vacation rentals using the same platform, profits can diminish. But coupled with a major health crises where travel is suspended and events are cancelled, real estate is the last thing you may think you want to be invested in. But the reality is, I AM GRATEFUL THAT I AM VESTED IN REAL ESTATE AND NOT THE STOCK MARKET. Its the reason I continue to invest in real estate, because its a real asset that still had value and can appreciate. During an economic crisis, a lot can change, companies can fail and close, but people still need to RENT and BUYS homes.
So! Even at the bottom of a market, THE ANSWER TO THE QUESTION, CAN YOU STILL MAKE A PROFIT DURING A CRISIS, THE ANSWER IS YES!
AND YES, YOU CAN STILL MAKE MONEY ON AIRBNB!
TO BE CONTINUED…..
Part 2…coming soon (here’s a snipet)
- Be able to ADAPT (change the strategy, change the pricing, long term rent or month to month or whatever you need to do)
- Make yourself VISIBLE (on other platforms and social media)
- Know when to FOLD em. (Is now the time to get out of the game? Consider a long term renter)
- Make IMPROVEMENTS (Its the perfect time to make those upgrades to your home so when the market returns you are ready to impress)