It has never been such a good time to become a short-term rental investor.
Short-term rental investment, also known as Airbnb or VRBO hosting, has been one of the hottest strategies for real estate investors over the past few years, and for good reason. There are many things to offer.
In addition, new data from AirDNA, a company that provides data to the short-term leasing industry, shows that even this crazy market could be the best time ever to invest in short-term leasing. Suggests.
What is STR?
If you’re new to short-term rental (STR), your investment strategy is to buy a property, but instead of renting to a long-term tenant, you’ll offer the property on Airbnb, VRBO, or other vacation. Rental website.
Benefits of STR
This strategy has become very popular these days and it’s easy to see why. First, it provides something that is fairly difficult to find at this time: cash flow.
It’s getting harder and harder to get cash flow, mainly because house prices are rising much faster than rent. However, STR still offers great cash flow potential. Of course, like any other investment, you need to own good assets in a good market, but STR has proven to provide cash flow in markets that normally have no cash flow, such as Denver, Austin and Seattle. I am.
Second, a strong market for STR is also a highly rated market. Think about where people go on vacation, such as ski towns, lake houses, and big cities like Miami. There are markets that have grown significantly over the last few years. STR offers the option to get cash flow and enter a great market with great potential for real estate valuation.
Therefore, there are good reasons for many investors to work on this strategy. And things are likely to get even better.
How does the STR market work?
To be honest, at the beginning of COVID I was pretty worried about STR. The trip stopped badly and I thought the property was vacant for months. Instead, the opposite happened, and COVID actually accelerated the existing trend of people shifting from hotels to STRs.
To back this up, I got some data from AirDNA. Looking at this data, there are two terms you need to know. 1) Occupancy rate, which is the number of nights in the month when STR is rented, and 2) Average daily charge (ADR), which is basically the average amount of guests. Pay to borrow your property.
To calculate cash flow, multiply your occupancy by your average daily rate. As an investor, you want to increase both your occupancy and your ADR. AirDNA data show that both have increased significantly over the last few years.
The occupancy rate is increasing
The graph below shows that 2021 was the best month for record occupancy, or at least as far back as 2018. Therefore, despite all restrictions and restrictions on travel during a pandemic, the demand for short-term rentals has increased significantly in both. Numbers for 2020 and 2019. Look at the difference between this year’s yellow and green lines. Demand and occupancy are rising.
The bigger news is that when comparing July 2021 and July 2019, the average daily rate for the entire United States has risen by 22%. This is a huge growth.
The combination of these (increased occupancy and significant increase in ADR) means more cash flow for STR investors.
Small cities and regions are popular
Of course, not all STRs are the same. Not surprisingly, some types of properties and some markets work better than others. AirDNA provides data to help clarify what is happening.
The graph below shows that there is a significant difference in demand between location types. Notice the y-axis of this chart. You can see that 0% is in the middle. As a result, all the lines below it decreased and the lines above it grew.
For me, the big point here is that while big cities are actually being hit, small cities and rural towns are exploding with destinations and resorts. These big cities are recovering, but have not yet returned to pre-COVID levels. Meanwhile, demand in small cities is still very high, well above 2019 levels. As an investor who owns a STR in a mountain town, my own experience confirms that the demand is very high.
Larger unit is required
We are also choosing a larger unit. The following graph shows that the large units are well up and the shared and private rooms are down. This is common sense for me considering the world today. No one wants to share a room during a pandemic, and many families have long rented large homes as a way to get everyone together. The data suggest that the larger the data, the better, and I think this trend will continue.
Finally, the data show that the demand for luxury properties is the highest. Maybe people are spending more money on vacation than they used to. Maybe after staying at home for a year, more people find value in staying in a nice place. The data is clear, regardless of the reason. The higher the property, the greater the growth in demand.
Bright future of STR
Anyway, this data is very promising for STR investors. We have confirmed that the occupancy rate has increased and the ADR has increased. This means more cash flow will flow into the market. We also learned that large and luxurious properties in small cities and vacation destinations are currently performing at their best. Therefore, whether you are currently investing in STR or trying to enter the market, these may be the best places to consider your next purchase.
If you are considering investing in STR, there are two resources.Initially AirDNATo be honest, we have the best STR data on the market. I use it myself, but it is very valuable.Second, I STR analysis guide You can find it at Bigger Pockets earlier this summer. It’s very convenient if you want to participate in a short-term rental game, so please check it out.
Find long-term wealth with short-term rentals
From analyzing potential properties to effective management of lists This book is your one-stop resource Make money with a short-term rent! Whether you’re new to real estate investment or want to add a new strategy to your growing portfolio, vacation rentals are a great way to increase your income source only if you properly acquire and manage your property.