Recently the Idaho Statesman published an article, How Airbnb hurts Boise's affordable housing: 'It has driven up rental prices', which spiked some interest from our rental property owners. The gist is that much of the affordable housing is being converting to Airbnb. The number of short-term rentals in Boise has increased from 336 to 1,183, according to the article. First Rate Property Management is in the business of long-term rentals, not short term, and our knowledge of Airbnb is only from what we have read and heard, but we think the root of increasing rents is simply supply and demand. It's pretty hard not to drive around and see multi-family properties being built everywhere, yet this new construction can't seem to keep up with the constant stream of new Boise area residents.
We have some clients with Airbnb's and they state they are performing a little better than when they were long term rentals. But they admit, the short term rentals take up a lot more of their time and question if the extra time to manage, is worth the little extra money. We also have a client who had an apartment complex that was completely short term rentals and he hired us to convert to long-term rentals. His motivation; to simplify his life. As short term rentals, he had constant turnover which required onsite staffing and a lot of his own time. Now as long-term rentals, the rents are lower, but there is very little tenant turnover and maintenance costs have gone down. We'll see, but we're guessing that after a full year with long-term leases, the investor will actually see a higher bottom line.
Let’s examine the pros and cons of both:
Air BNB’s tend to fetch higher rents on a daily basis, but have a much higher overhead. You are looking at a huge increase in vacancy, turnover costs, management fees, advertising fees, insurance, and costs to furnish & inventory the units. Tenants come and go frequently and usually do not form any kind of ties to the neighborhood or community. With Airbnb's, you can charge top market rent and be flexible as market conditions change. A general rule of thumb is to be a good amount cheaper than neighboring hotels. From what I can find online concerning Air BNB occupancy rates, is that they appear to run right around 50%. Some HOA’s do not allow short term rentals.
Full Time rentals - tend to have lower overhead as they take less time to manage. You typically know what to expect with days vacant. You will pay a lower management fee. Rent rates are restricted and can only be changed at lease expirations. Renewals are usually done at about $50 a month under peak market value due to the fact that the unit will not be freshly turned over. Long term rentals can be more effected by market dips. We're also told that long term rentals have more tax benefits than Air BNB’s.
Jim Sharone, Vice President
First Rate Property Mgmt