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When planning their holiday getaways, many people opt to stay at an Airbnb instead of a local hotel or motel. With Airbnb, you can book a stay at an individual’s home or apartment. Many people prefer this type of stay as it allows them a better chance to interact with locals and save money on hotel fees. Those running short-term rentals have found that it’s a great way to make some extra income. Some hosts even reportedly make close to $10,000 a month from their short-term rentals.
Having Airbnb around seems like a win for everyone—except the hotel industry. Anyone who owns property can potentially rent out rooms, which decreases the need for hotels and motels. There have, however, been some negative impacts on the real estate market as well. Individuals looking for places to rent have also experienced problems due to Airbnb and their competitors.
Before we get started, if you would like to learn how short-term rentals are impacting the housing market and how they are treated by mortgage lenders, click the link below to book a free strategy call with our team at LendCity.
More about Airbnb and competitors
Airbnb began in 2008 and has gained massive popularity over the years. The company allows hosts to rent out parts of their home, or even their entire home, to people wanting to stay in the area. Hosts and guests can interact with each other or completely stay out of each other’s way. Additionally, each host has their own set of house rules that guests should follow, no matter how long their stay.
While most stays through Airbnb are short-term, some allow visitors to stay for months. Through the Airbnb website, visitors can easily learn about the homes they’ll be staying in as well as the hosts. Airbnb hosts have to go through background checks before being allowed to rent out their property.
Due to Airbnb’s increased popularity, several other companies have tried to match their success. These companies follow the same model as Airbnb but have a few differences here and there. Some of Airbnb’s most well-known competitors include Tripping.com, HomeToGo, OneFineStay and FlipKey.
People are buying homes specifically to rent them out
There’s a lot of money to be made with short-term rentals, especially if you live in an area with heavy tourism. The promise of high profits has resulted in some people buying property specifically to use as short-term rentals. First-time investors might be especially interested in properties that could be used as short-term rentals. Why? Using a property as a short-term rental is occasionally less risky than trying to find long-term tenants.
The problem is that people buying homes to use as short-term rentals are taking options away from those looking to buy their first home. Potential short-term rental hosts are also creating more competition in the real estate investment community, which is driving up housing costs. Over time, investors might see fewer profits because they’re having to spend so much money on an initial property purchase.
Possible benefits to property owners
People who already own properties in high tourism areas have seen plenty of benefits from the presence of Airbnb and its competitors. Airbnb has caused property values to rise in certain areas, which is great for those interested in selling their property. People with homes that look like the perfect place to rent out for a short-term stay will likely have a much easier time selling. They might even be able to sell for more than they thought the property was worth.
More and more apartment building owners have also decided to rent out their rooms to short-term renters…instead of long-term tenants. There are many reasons for this, including the fact that Airbnb renters offer the promise of more money for less work. In fact, apartment building owners could make a lot more money from short-term renters, since they’re able to charge per night. There’s also no need to have background checks done on tenants, as Airbnb will do that for you.
These are just a few of the reasons that the hotel industry is unhappy with Airbnb and its competitors.
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Limited rental options
Since there are already many people renting out their rooms and homes to Airbnb users, locals are having trouble finding a place to rent. As mentioned above, rental property owners can often make more money from Airbnb renters. This has caused many rental property owners to rent out huge parts of their building, leaving less room for long-term tenants.
Since there are fewer rental opportunities in areas with a high short-term rental presence, many property owners are increasing their prices. With monthly rental prices increasing, not only are people unable to find a place to rent but some could be forced out of the building they’ve been living in for years.
Some might argue that Airbnb and some of its competitors do offer long-term rental options, but these are sometimes difficult to find in certain areas. Most of these long-term rentals don’t have lease options that extend as long as normal leases either. Staying in a short-term rental from month to month also means that a host could ask you to leave after your rental has ended, even if they’ve agreed to continue your rental.
An increase in mortgage costs
Many areas have seen an increase in property costs because of Airbnb and its competitors. Just like with rental properties, many property owners in areas with plenty of short-term rental properties have decided to charge more when selling. While this increase appears to be minimal, it could grow over time. Individuals in areas with a high saturation of short-term rental properties are already having trouble finding homes within their price range.
The effects Airbnb and its competitors have already had on the real estate market are why several cities have decided to ban short-term rental companies. Short-term rentals are also limited in certain areas.
It’s hard to tell the long-term effects that Airbnb and similar companies will have on the real estate market, but some of these changes are already easy to see. If you’re an investor interested in buying a property to rent out for short-term rentals, be sure to do plenty of research. While it can present some great financial opportunities, you might be better off slightly undercutting other rentals and securing a great long-term tenant.
To learn more about how short-term rentals can impact your mortgage, click the link below to book a free strategy call with our team at LendCity.