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3 Red Flags for Airbnb Investors

Insight Doing BusinessIndustry TrendsInvesting Strategies Airbnb is one of the most disruptive short-term rental platforms in the world right now, and that description is both complimentary and pejorative, depending on the source. Think Realty Magazine sat down with Daniela Andreevska, real estate investment data analysis firm Mashvisor’s content marketing director, to discuss this topic. She noted Mashvisor has no stated preference for short- or long-term rentals, but that they have written more about investors turning to short-term rentals here. “If you spot one of these danger signals, think very hard about an Airbnb investment in that city because you might end up with a rental property that you cannot leverage the way you had planned.” Airbnb Investor Red Flag #1: Restrictive Short-Term Rental Legislation “This is the number-one red flag,” said Andreevska. “Before buying a property to rent on Airbnb, check out local legislation on Airbnb specifically and other short-term rentals. This includes state, country, and city laws. “Just stay away from properties beyond your investing budget. According to our data, cap rate in Avondale is 1.3 percent, while it is 6.2 percent in Springfield.” Airbnb Investor Red Flag #3: Low Occupancy Rates “Even if you charge a few hundred bucks per night, if you can’t attract enough guests to your Airbnb rental, your return on investment will be low,” warned Andreevska. “Look for locations – both cities and neighborhoods – that boast high Airbnb occupancy rates.” Examples: Miami Beach* and Fort Lauderdale, Florida The average Airbnb occupancy rate in Miami Beach is 66.9 percent, while it is 48.2 percent in Fort Lauderdale. *Miami Beach is a good example of a market in the process of aggressively restricting Airbnb rentals via local legislation, so Andreevska’s Red Flag #1 should play into any decision to invest in this area.