As a short-term rental investor, I’ve been asking if it’s still profitable to invest in short-term rentals (STR) with rising interest rates?
There is a lot of uncertainty in the market right now, and many are asking if certain real estate assets are still profitable with rising interest rates. We’re all quick to jump to the Great Recession and compare it to what we’re currently or soon could be facing.
Though it is important to study market cycles to figure out if we could be moving into a recession, I would caution you to understand that every market cycle is unique. Many of the attributes that caused the last recession probably won’t cause the next recession.
According to AirDNA’s 2022 Vacation Rental Outlook Report, “The pandemic has accelerated STRs into the mainstream. Demand is already 10% higher than during the pandemic, the industry is generating 40% more revenue, all with 10% fewer listings. As more investors add supply to capture the growing demand of the industry, it will evolve and adapt to changing consumer trends. Expect to see more unique properties in off-the-beaten-path locations providing one-of-a-kind experiences that will accommodate guests seeking an alternative to traditional lodging options.”
According to the graph, the average revenue for short-term rentals is climbing higher and higher. While the projection shows revenue evening out and moving into a slight decline, it’s still higher than in years past.
Another interesting statistic that the report highlights is the rise of remote work during the pandemic. 60% of workers returning to the office are expected to choose a hybrid approach for returning to the office. Most of the guests who book my properties on the weekdays work remotely during the day and explore the city at night.
In essence, a lack of STR supply and the rising popularity of remote work will be the driving factors in the…