There are several reasons why using your multi-family dwelling as a short-term rental may not be the most advantageous use of it. If you’re in business to make money, you’ll want to choose a business model that provides you with the greatest return, and short-term rentals just may not be the best way to go, when trying to generate income from your multi-family unit. Here are some reasons why that would be so.

Airbnb Is Still Very New

Despite the outrageous popularity of Airbnb, it’s good to keep in mind that it’s only been around for a little more than 10 years as a marketing option. While the Airbnb market has been pretty much entirely successful thus far, that doesn’t mean it always will be. In fact, a downturn is virtually inevitable, so proceed with caution when considering this possibility. Take a look at this book, if you still want to consider AirBnb, this will be a great resource to get your listing viewed more often.

Not Many Competitors

Right now, renting out your multi-family unit on a short-term basis might seem like the best possible option. However, economics in general dictates that any time a new industry is created, most of the profits are made right at the beginning, and then over a matter of time, margins tend to decrease when a number of other competitors enter the market. Some of these new competitors will be armed with more efficient ways of managing things and will have less risk associated with them. Look for Airbnb to falter sometime in the near future.

Regulatory Risks

Short term rentals have undergone many regulatory changes in the last several years across this country. In fact, there are areas in the country such as Las Vegas, where these kinds of short-term rentals are completely banned. There will also be higher business costs coming into play, and that will reduce profitability on short-term rentals, so this option won’t be as appealing. Expect taxation, insurance costs, and business licensing to increase short-term rentals, so that they become a much less appealing option.

Want to Acquire a Multi-Family Dwelling?

These units can be enormously profitable, and if you’d like to include one in your portfolio, we may be able to help. Contact us at Aspen Commercial Lending, so we can discuss some possibilities whereby you might be able to acquire the multi-family you’ve had your eye on.

Here is a great book on how to get your property ranked at the top of the AirBnb search rankings. If you are going to do it, it is a good idea to reach out to some current top performing owners and ask them how they like it. You will be able to gain more insight from one thoughtful conversation, than from ten books written on the subject.