Why You Shouldn't Make an Airbnb in 2023

in 2020 Airbnb became one of the most popular real estate Investments when it works honestly it's a dream it's pretty passive income and you still get to use your house essentially for free who wouldn't want that so people did it a lot of people the number of airbnbs grew dramatically it was not like that a year ago in post covid people were eager to travel so for a while it worked great and there was a gold rush to Airbnb it really was The Perfect Storm for hosts and people made a lot of money we made roughly about 175 thousand dollars we're on track two gross a million dollars this year but like they say nothing lasts forever and since 2020 a lot has changed is the Airbnb about to collapse the amount of people that are booking that is the concern had inflation is causing a decline in bookings Airbnb super hosts say bookings have declined due to the increase the economy supply and demand interest rates it's a completely different ball game in certain circumstances Airbnb can still be a good investment long term but I do think for most people it just doesn't make sense anymore so we're going to talk all about why I don't think getting into Airbnb in 2023 is a smart investment for context I'm an Airbnb host myself in Palm Springs I've had my house up for about a year and and the earnings were not as good as I expected and at the end I'll go over a couple scenarios where it still might be a good investment to get into Airbnb the first reason is that it's much more expensive to get started than it used to be a lot of you guys probably know interest rates Rose quite a bit this year from two to three percent to now about six percent and that means that your monthly mortgage is going to be a lot higher so let's take for example my house I purchased it in 2020 for about seven hundred and fifty thousand dollars our interest rate was a little under four percent our monthly mortgage with taxes and homeowners insurance is three thousand four hundred dollars so let's see what those numbers would look like with today's interest rates assuming the same purchase price so the same 750 000 house at a six percent interest rate would now give you a monthly payment of four thousand five hundred ninety seven dollars but here's the crazy thing prices are up too in the last two years the average home price has gone up forty percent if you bought this property today for 1 1.2 million and put down 20 percent your monthly mortgage would be about six thousand five hundred dollars that's about double what my mortgage is so you really see the power of interest rates and with my experience renting my house on Airbnb in a full year those numbers just wouldn't work you would not be able to break even like we hardly we wouldn't even break even at my interest rate you know so unless you're buying in cash and can find a killer deal the interest rates really make it tough for the numbers to make sense the next reason is that bookings are down pretty much across the board it would be one thing if you got a mortgage that was higher and nightly rates were up and bookings were Sky High but that is not the case right now you guys know that I've seen with my Airbnb personally bookings have really slowed down and it's not just me a lot of hosts are opening up about this across many different locations it's not just Palm Springs it's kind of everywhere specifically the Smoky Mountains Eugene Oregon North Georgia Mountains and South Florida and I'm sure many more markets bookings are dramatically down I've even noticed some of the airbnbs that I've made checked in episodes about that are really cool and really unique are slower than they used to be I have seen one exception to this though and that is in areas where you can't get a rental contract anymore I've been following this guy Rohan on Twitter and his have still been doing so well that he wasn't sure if it was a rumor or not however what I realized about his properties is they're pretty much all in areas where you can't get a new rental permit anymore because the supply hasn't gone crazy in these areas it seems like his rentals still do really well there when they're pretty normal looking houses they're nothing crazy or unique really besides since New Mexico one is very cool the big thing is that there is a limited Supply in these areas but all of these other markets that allowed short-term rental permits in the last few years we're seeing they're flooded with Supply and so of course bookings are down airdna reported a 20 four percent year-over-year increase in Airbnb listings that's a huge increase which would definitely have an effect on booking I mean it really makes sense we are in more of a recession going into a recession whatever this is at the moment the fact of the matter is people are spending less money on airbnbs and so I think if you're looking for this really good cash flow in the next year you're probably not going to find it another reason is what I like to call Airbnb resentment a lot of people just really hate Airbnb now for two main reasons the first is that they've had a bad experience with Airbnb a lot of people are annoyed with the fees the checkout lists and there are a lot of really bad airbnbs out there airbnbs tend to be less consistent in terms of quality than hotels and while there are a ton of amazing airbnbs out there the bad ones have really damaged airbnb's entire reputation at this point almost everyone that travels frequently has tried Airbnb and a lot of these people have not had a good experience at some point and these people they're going back to hotels unless they're booking for a big group and it's cheaper to stay in a house people are really moving back to hotels and the second type are people that have a resentment towards airbnb's overall effect on the housing market it's no secret that airbnbs have an effect on the overall housing Supply if you buy a house and you turn it into an Airbnb it is taking it off the market for someone to live in long term or to own when I first started my Airbnb Journey no one was really talking about this no one commented it on my videos but now people are aware of it and they don't like it in reality there are so many factors that affect the housing market Airbnb is probably a pretty small role in it because cities that don't even allow Airbnb still have ridiculously expensive housing let's take Seattle for example from what I found online there's 367 000 homes here and air DNA reports there's about 6 000 Airbnb ease so that means only 1.6 percent of homes are airbnbs just regular old landlords institutional investors zoning laws the fact that Builders haven't really built as much in the last 20 years all of these things affect the housing crisis but Airbnb definitely does too I'm not going to deny that and it has become like the number one thing people are pointing the finger at right now so I do think this affects where people want to spend their money and maybe less on Airbnb all right despite all this I do think there are still a couple scenarios where it could be a good investment only a couple though okay otherwise I just think for most people it's just not the first one is anyone that's able to buy a property in cash I know it's probably like literally one person watching if you're able to buy in cash then interest rates are irrelevant to you and that is one of the main things that makes airbnbs just not make sense right now booking still would be down and I don't think there would be some amazing cash flow in the next couple years but if you're buying in cash that's not going to be be a huge deal to you and I think that in five to ten years things will pick back up again and you're gonna be just fine in the meantime so it could be a good place to park your money but who really knows right the other scenario where I still think it could be a good investment is if you plan to hold a property for a very long time and you plan to use it a lot yourself I mean this is really where I'm at with my Airbnb I want to hold it for a long time and I do use it a lot myself so it just breaking even is I'd be thrilled with that you know if you have like this dream location that you know you've always wanted and you're able to afford it but you want to use Airbnb to offset most or some of the costs then I think that is a realistic way to go about it in 2022 and then maybe by 2025 bookings will be back up this one I think it could still be an okay investment I don't think it's going to be a stellar investment to be honest God honor the days of buying just a normal home like this in an area that you don't even like and putting it on Airbnb just to make a quick Buck if you can afford it and you actually want to use a place a lot yourself I still think yeah Airbnb could be a good way to offset a lot of those costs and then five to ten years from now who knows it might be profitable again if we're out of a recession some years are going to be really good some years might be a little slower so that's pretty much it those are kind of the only scenarios where I think it sort of makes sense but even these I don't think it's that good of an investment you could just put your money somewhere else and maybe make more one last thing I want to note is that this is just my own personal opinion right it's based on my experience and also research I found online I'm completely honest with you guys because I truly have no incentive for you to do Airbnb I really don't care if people do it or not and that's why I am so open about sharing the highs and the lows making money but also not always making money I think you should keep this in perspective when you're doing research on airbnbs in general I really trust when people show their numbers for the entire year a lot of what I see on YouTube now is people still promoting Airbnb I I think their properties might not be as profitable anymore either one example there is a guy Sean who has made a few videos about me and no shade to him whatever like but he is still often promoting doing Airbnb probably I think because yes a course that he sells for like 500 on how to do Airbnb so there is some incentive there to promote Airbnb to get people to want to do it but his calendars look pretty empty and he's even talked about that in some more recent videos I went through a bunch of his listings and there is like almost no bookings at all for many of these properties and almost all of them are priced under 100 a night I don't know how he could possibly not be losing money honestly I think the strategy he does actually used to work really well but it doesn't anymore so I would keep that in mind when you're watching some of these other YouTubers who are really promoting it because it could be that they're promoting it because they have an incentive it could be that they're promoting it because it genuinely is still working for them and it just I suck at it that could be I don't know but I think in general just be cautious because even if someone is selling a course that is genuinely really good information it might be that it's a little too late I think I think there are some courses that are out there that are probably really good and if you had purchased it two years ago would have made you a lot of money but now just with the circumstances that everything are at I don't know if they really would and that is why I gotta be honest in saying that the airbnbust is real also a note because I know a lot of people are going to say so are you still doing the Joshua Tree property and I am still planning on doing that I think that is kind of the third exception is if you're building new construction it's possible for the numbers to still make sense and I would have to get into that in like a whole separate video but I just think really yeah I think honestly for the vast majority of people Airbnb just isn't going to make sense in 2023. I'm learning along the way and I'm just kind of sharing my findings what I am honestly finding so if you appreciate it again would love if you hit the like button and subscribe I hope that you enjoyed this video and I'll see you in my next video bye foreign [Music]

Channel: Shelby Church

Views: 281,229

Keywords: shelby, church

Id: vwi1VbQyDQ8

Length: 11min 58sec (718 seconds)

Published: Sat Jan 14 2023