My AirBnb is still generating thousands each month even with COVID-19…
How COVID-19 is impacting my short and long term rentals differently and how it’s impacting our property investment strategies.
The Larger Picture — By the Numbers
September 2019 through February 2020 saw the lowest unemployment rate (3.5%) in the US since 1968. The economy was great, property prices up, market demand was strong. I was prepping for another lucrative AirBnb summer.
Enter the latest Coronavirus. COVID-19 has officially generated one of the biggest and fastest economic crashes in the last century. In just one month, unemployment skyrocketed to 4.4% in March of 2020
and the stock market dropped nearly 30% (FYI, the market drops during our last two recessions — the Financial Crisis and Dot-com Bubble burst — took years, not one month).
How’s it Affecting our Short Term Rentals?
One of our US properties is 100% AirBnb. Typically we’ll gross about $3,000 a month on the unit. In March and April, we came in just under $1,300 and about $1,450 respectively. Frankly we were a bit surprised. We still generated thousands. However, we had a greater than 50% drop, which also prevented us from covering the mortgage those two months ($1,750).
Two factors contributed to this, one more obvious than the other.
First, travel was simply down — duh. With shelter-in-place, flights getting cancelled left and right, and more, it shouldn’t be much of a surprise. However, when you look at our page view statistics that AirBnb provides, there were still almost 1,000 views for the month — that’s crazy! One thousand views when apparently everyone is stuck at home creating new random social media challenges.
So why the drop in business? Factor two — shared spaces. We rent out our AirBnb per room vs the entire unit. We continue to have numerous inquiries about renting (just a little less than normal) but people are way more hesitant to book with others being in the house.
So how have we changed our strategy? We haven’t.
For a moment we considered changing our strategy to renting the entire unit as one instead of each room individually, but we continue to stay busy. So for now, strategy stays as is. (FYI, someone can rent the entire unit, but we charge a premium for that, and with COVID, we haven’t seen large groups traveling, just a bunch of locals in between housing).
Obviously we weren’t the only ones affected, with AirBnb announcing serious layoffs of about 25% of their workforce
this week. However, as a SuperHost, kudos to AirBnB for having excellent communication with us throughout the process.
How’s it Affecting our Long Term Rentals
This one is fairly random and, for us, is very dependent on our renters and their professions.
Example 1:
One of our stateside condos is filled with working professionals in the tech industry. No noticeable changes there. No lost jobs. No request for rent deferrals. Business as usual.
Example 2:
One of our other homes is occupied by a family who runs their own home improvement business. Business is slower, but not stopped. The father asked if rent could be lowered for a few months and then (ideally) paid back later. We obliged and he’s been consistently paying during the pandemic (and we feel warm fuzzies for helping).
Example 3:
Our apartment downtown in a large city with extreme shelter-in-place orders recently became unoccupied. It still is. We can’t even get people to take a look. Typically this unit rents extremely fast due to its prime location (downtown by a university) in a massive city.
What changes are we making? At the moment nothing, just biting the bullet on the apartment right now as the other two are doing fine.
Is it a Good Time to Sell?
I wouldn’t go that far, especially without consulting WayBoz, but even if you wanted to, selling is a huge pain right now.
Let’s face it, the real estate industry is way behind the curve when it comes to digitization of archaic processes. When human interaction is needed to close on a house, get a home tour, collaborate with a real estate agent, you know it’s time for a change. (Don’t even get me started on how backward and outdated Title Insurance
is).
According to Realtor, “About 16% of Realtors saw sellers take their homes off the market due to the coronavirus — compared with only 3% a week earlier” (early March).
Our best advice: Hold.
Is it a Good Time to Buy?
This one is more interesting. It appeared that we were in for a big market crash — which we got to a degree — but has since recovered fairly well. So, in many areas, home prices are fairly unaffected.
However, the unemployment rate — which unfortunately is hitting millions — might open up a number of investment opportunities with short sales and foreclosures… and while I love a great investment opportunity, I’d much rather prefer it didn’t come at another’s expense.
Interestingly enough, businesses are opening and those unemployed are getting reemployed. A few examples in my area: my sister-in-law works at a fast food restaurant which recently began allowing guests to dine in, gyms have again opened (you have to book a time to come in advance), and a few entertainment establishments are again taking reservations.
On the flip side, there was a study released in April 14th, 2020 by Harvard University
saying “intermittent distancing may be required into 2022 unless critical care capacity is increased substantially or treatment or a vaccine becomes available.”
Our best advice: We love buying — pretty much always :), just depends where and what your investment strategy is. Short term? Long term? Flip? Sit on it? We’re actually about to buy a big chunk of land — so there’s nothing to put tenants in quite yet. :)
How are you Handling Everything?
What changes have you seen with your rentals?
How, if at all, has your strategy changed?
Please leave your comments, tips or articles you recommend we read.
We’ll keep diving into this and releasing more detailed information and thoughts related to how COVID-19 is impacting all our personal and investment properties.
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