Airbnb’s are all the rage in investing right now. For a good reason too.
Short-term rentals cash flow beyond belief and make the numbers work in just about any market. I’ll admit that I own five myself and have a few in the works.
So why am I telling you not to buy them?
Airbnb’s are fantastic as long as all the variables work. I have opinions about properly mitigating risk and lived through 2008, so I speak from experience. Many real estate investors have become extremely wealthy over the past 10 years and cannot fathom a recession.
Recessions aren’t pretty, and many newer investors have a hard time believing that the real estate market could be upended and crash, but it’s possible.
Airbnb properties are an excellent investment given the right circumstances. In this article, I’ll give you five reasons not to invest in Airbnb properties.
Reason #1: The Numbers Only Work As An Airbnb
As a seasoned investor, I’m a huge fan of having various strategies to pivot in every market.
If I buy a property for $400K and can make $6,000 per month with Airbnb but only $1,200 per month as a long-term renter, I open myself up to some risk.
When times are great, I’m cash-flowing and loving life. However, if the regulations on short-term rentals become restricted as they did in Nashville and Austin, I need to pivot. My best option is to find a long-term tenant, but $1,200 or even $1,500 each month won’t cover the bills. If I decide to sell and the market goes down, or the pressure mounts because I am out of cash reserves, I’ll need to exit at a loss. These scenarios give real estate investing the reputation with some folks as being “risky”.
You need to strategize ahead of time. If that means you lose a deal, it is better than losing your shirt.
I recently had this situation occur with a lakehouse in Arkansas. I was denied the right to own an Airbnb rental unexpectedly by the city. Luckily, I planned well and was able to place a tenant…