This year has been an eventful one for short-term rentals around the world: The boom-bust saga and seeming unending fights about new regulations.
06.12.2023 - 04:35 / skift.com / Srividya Kalyanaraman / On Tiktok
Taylor Jones, a Florida real estate investor, tells us the key to making money from an Airbnb you invested in is the purchase price for the property — and how much revenue you can extract from the property.
While that may seem like an elementary point, it is often overlooked. “It’s all about what you buy it for,” Jones told the Short-Term Rental Report. He admittedly has skin in the game, running Techvestor, which helps people passively invest in short-term rentals.
He tweeted the other day about a 6-bedroom home in Indio, California that was up for sale for $1.6 million. “This Airbnb made $194,000 in revenue last year,” Jones wrote. “If you buy it for the current asking price, you’ll LOSE MONEY.”
He broke down how he calculated that the home at that sales price would mean negative cash flow of $21,683 for the year, assuming a 25% down payment, 7.75% interest rate, 40% in operating expenses, and an 18% property management fee.
“Even if you self-managed, this deal is around 2.87% cash on cash return,” he tweeted. “Cheap debt made people think STRs are easy. They are not.”
Several people pushed back on his tweets. One argued that the amount of the estimated operating expenses were “absurd.” Meaning it was way too high.
Still, it’s clear that the financials of buying a home and converting it into a profitable short-term rental are much more complex than the easy money someone on TikTok tells you about.
Jones told the Short-Term Rental Report that the current owner of that Indio, California home “bought it for $675k. They are definitely making money and doing well. However, if someone buys it for the current list price, the math doesn’t make much sense.” D.S.
The interests of individual hosts and large property management companies have been at odds at times, and that tension has historically been reflected in the Washington, D.C.-based Vacation Rental Management Association. But in an interview, VRMA Executive Director Kimberly Miles explained how and why the association created a new category for hosts with just 0-5 properties.
However, not everyone believes that the VRMA is addressing the needs of individual hosts. Jim Prugh of Lindsborg Vacation Rentals in Lindsborg, Kansas, told us he didn’t renew his VRMA membership because the association was oriented toward services for larger property managers and lacks geographic diversity, especially in the U.S. heartland.
Meanwhile, in another twist, the VRMA has begun working at times with the American Hotel & Lodging Association, which in the not-too-distant past battled the short-term rental and vacation rental industry on regulations in a variety of local jurisdictions.
In this exclusive interview, Miles detailed where VRMA is heading. D.S.
Vacation
This year has been an eventful one for short-term rentals around the world: The boom-bust saga and seeming unending fights about new regulations.
Hawaii Governor Josh Green has asked for 3,000 condos and homes operating as short-term rentals to be converted into long-term housing for those displaced by this summer’s wildfire in Lahaina.
Hawaii Governor Josh Green said he is ready to “drop the hammer” or go “nuclear” on short-term housing rentals on Maui.
Taylor Swift’s Eras Tour made headlines even before it began — by overwhelming booking platform Ticketmaster and drawing attention even from the U.S. Senate.
Dealmaking has kept short-term rental businesses in Europe busy. The past few months have seen an uptick in activity — be it mergers, or acquisitions or rebrandings.
Booking Holdings Chief Financial Officer David Goulden said this week that the flagship Booking.com brand launched its short-term rental business as a supplement to hotels “15-plus years” ago, which is roughly around the time Airbnb got going in San Francisco.
This is not a story of “Airbnbust,” but instead we’re talking about a correction of the “Airbnboom” that has taken place since the highs of the pandemic.
Happy Thanksgiving, folks! I know you’d rather carve a turkey than open your inbox, so we will keep this brief.
You read it here first: We’re halfway into the year, and the short-term rental industry has been buoyed by summer travel picking up, despite prevailing economic uncertainty.
Stat of the Day: Thinking that you, like us, are wondering what’s happening to occupancy levels this summer, we had some numbers crunched for us by data analysis firm Beyond Pricing and this is what it found: U.S. occupancy for July is pacing about 5 percentage points down year-on-year, from 37 percent in 2022 to 32 percent in 2023.
New This Morning: Following extensive discussions within the community spanning almost four years regarding short-term rental homes, the Dallas City Council implemented zoning limitations to prohibit their presence in single-family neighborhoods last week. However, as a middle ground, short-term rentals will still be permitted in commercial areas and multi-family neighborhoods.
If you’ve seen a tweetstorm about the alleged “Airbnb collapse” and are wondering if the data seems too dramatic – you’re not alone, or even wrong.