Airbnb is a brilliant online platform that allows people to find places to stay while away from home. The goal is to introduce world travelers to places other than hotels, such as castles, igloos, and beach homes. Even if you don’t plan on staying anywhere unique, Airbnb digs up short-term rental properties with the best amenities. A family might prefer a home with a full kitchen, whereas a group of outdoor enthusiasts might opt for a cabin in the mountains.
As a real estate investor, why do you need to know about Airbnb? One good reason: it affects your investments. Below, we share three ways that the short-term rental platform is influencing home prices – and why you should care.
- It affects rents and home prices.
According to a group of researchers working on a not-yet-published paper, rent and housing prices increase along with Airbnb prices. Researchers analyzed data from 100 metro areas in the U.S. between the years of 2012 and 2016. They found that a 10% increase in Airbnb listings leads to a 0.39% increase in rent and a 0.64% increase in house prices.
Why is this the case? It’s believed that Airbnb takes long-term rentals off the market and turns them into short-term rentals, catering to tourists and temporary visitors. People who are looking for long-term properties now have fewer options. Rents increase with low inventory and high demand. And, as rents increase, so do house prices.
- It increases competition.
We touched on the fact that Airbnb takes rentals off the market. This decreases the availability of homes for prospective renters and buyers. How much this increases the competition varies between cities. For example, the median long-term renter might have 13 potential homes to look at and one of them will be from Airbnb. That’s just the median, though. In areas where Airbnb listings are high, it could be one-for-one.
- It might also crash the neighborhood.
Though Airbnb has its perks, there are growing concerns for areas with high listings. Having one Airbnb property in the neighborhood is acceptable, but having four or five? Not so much. No one wants to live nextdoor to the “party house”. Therefore, it’s important to pay attention to the home you are investing in. Being in the middle of several Airbnb homes can drive down the property’s value and the number of people interested in it.
Airbnb has pros and cons that can have an impact on your real estate investments. Before making an investment, do your research and pay attention to the surrounding homes. Being located near an Airbnb rental may result in a bigger sale, but being amid several can have the opposite effect.