STRATEGY
AIRBNB
tered as short-term rental property or face fines of as much as $1,000 per day. There was a long battle between short-term rental platforms and the city, but in the end the final deadline for registration was mid-Jan- uary this year. The immediate effect was a drop of nearly 50 percent in Airbnb listings in that city! Many of those owners will now look into their options for renting in a more traditional way.” Ask yourself: • Is there a strong hotel lobby in the area? • How is the traditional rental demand in the location? • What is the overall economic performance? Tools of the trade: Local Legislation Resources Investment Property Calculator
3 Signs an Airbnb Rental Could Be Right for Your Market LOOK FOR THESE “GREEN LIGHTS” WHEN CONSIDERING A SHORT-TERM RENTAL INVESTMENT.
sites like TripAdvisor.com. Source your eco- nomic data from multiple venues in order to get a full picture of the local economy. GREEN FLAG #3 THE OPTION TO “FLIP” YOUR RENTAL STRATEGY “One of the best indications you will have a successful experience with your rental investment is giving yourself options,” said Andreevska. “This means buying an investment property which could potentially work as a traditional rental and an Airbnb rental in terms of the location and the actual property.” She noted Airbnb regulations and legislation are changing quickly and constantly, with some cities welcoming Airbnb investors and others “cracking down” on what they believe to be dangerous inno- vators in the short-term rental industry. “The situation with laws governing short-term rentals is very dynamic. What is a conducive market today might become prohibitive tomorrow. It’s best to know you can rent out a property tradi- tionally if things go bad for Airbnb in a given market for a few years.” Andreevska cited San Francisco as a prime example of a market in which this strategy would have benefited Airbnb in- vestors recently: “ San Francisco used to be a great Airbnb market with all the tourists and business travelers. However, all Airbnb hosts are now required to pay a registration fee of $250 to have their properties regis-
destination throughout the year, but also has some special times when it gets extremely busy,” said Andreevska. For example, a location with a ski season, a popular national conference, or a recur- ring sporting event. “ San Diego is generally an excellent Airbnb property location because of the many attractions which the city has to offer, but nothing tops the one week in July when the annual Comic-Con International is held,” she noted. “As an Airbnb investor, you can double or even triple your rates in these few days of exhibition and make enough money to cover your rental income for an entire month or two.” Ask yourself: • Is the location generally attractive? • Are there predictable special occa- sions that consistently “boost” this market’s popularity? Tools of the trade: Local Events Calendars Economic Data Local events calendars are usually avail- able online, or you can get a good idea of what attracts tourists to an area using travel
by Carole VanSickle Ellis | Featured expert: Daniela Andreevska
A
irbnb has permanently changed the way we travel and, perhaps
mortgage payments? • What are the other expenses associ- ated with this property? • Will I generate positive cash flow? Tools of the trade: Rental Property Calculator Cap Rate Calculator Data Source for Key Metrics Find these resources on your favorite real estate or investment strategy website (Mashvisor.com is Daniela's favorite!) and learn more about our favorites at Think- Realty.com/resources.
(shows ROI, CAP rate, etc.) Heatmap Analyses (indicates concentrations of various buyer/ renter/investor behaviors)
even more significantly, the way we think about real estate investing. In 2013, best estimates indicated about 3 percent (7 million Americans) considered themselves active real estate investors of any type. Just two years later, market data indicated there were more than half a million Airbnb hosts in the United States alone. The short- term rental market has changed perma- nently and opened up real estate to a new population of investors in the process. There is no question Airbnb investments can be profitable. With any relatively new industry phenomenon, however, it is im- perative investors understand what makes a market conducive (or otherwise) to a given type of investment. Daniela Andreevska, content marketing director for real estate data analysis firmMashvisor, cited three “green flags” for Airbnb rental markets:
CAP RATE: The ratio of Net Operating Income (NOI) to property value. Cap rate values are used to compare properties and analyze risk.
Track local legislative trends and if/how the local hotel lobby is working against Airbnb investors by reading local news. Investment property calculators and heat- maps are available on a variety of data and analytics sides. •
GREEN FLAG #1 CAP RATES ABOVE 5-6 PERCENT “Airbnb investors, like all investors, are in this business to make money. Profit- ability must be the first factor you con- sider when deciding whether to invest in an Airbnb property in a given market,” Andreevska said. Ask yourself: • Will my projected returns cover my
Daniela Andreevska serves as content marketing director at Mashvisor, a real estate investment data analytics provider with the mission of automating
GREEN FLAG #2 SPECIFIC, IDENTIFIABLE ATTRACTIONS
and analyzing nationwide real estate data to empower investors to find traditional and Airbnb investment properties and optimize rental performance. Learn more at Mashvisor.com.
“Choose a location for your Airbnb investment that is not only a popular
38 | think realty magazine :: august 2018
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