Reasons Why Short-Term Rental Properties Are Overrated In 2020

short term rental

Are you thinking about investing in a short-term rental property in the Portland Oregon area but you’re not sure if this is the right decision for you to make or not? If so, you’ve come to the right place!

In this article, we will share with you several reasons why we feel that short term rentals are overrated in 2020 and any investor who is debating if they should invest in a short term rental should seriously consider their decision to invest in the short term rental vs. a long term rental property.

Reason #1 – High Risk of Regulation

The first reason why investors should be wary of short-term rental properties in 2020 is the high risk of regulation from cities and states where short term rentals, especially Airbnb’s, are located.

Why are short term rentals becoming heavily regulated? The answer is simple economics, short term rental properties eat up the available supply of long-term rentals.

With fewer long-term rentals to choose from, the overall supply of rental properties becomes tighter by the year and this has caused many cities to put limits on short term rental properties.

In 2014, the City Council passed an ordinance that required Portlanders who rent out their homes through Airbnb, HomeAway, VRBO, or other short-term rental platforms to obtain a permit through the city’s Bureau of Development Services (BDS). To receive a permit, a host needs to prove their rental space meets basic safety standards (confirmed by an official BDS inspection), pay a permit fee (which can cost between $178 to $5,000), and notify their neighbors.

Yet, according to the most recent city data, only 30 percent of Portland’s short-term rental hosts are operating with that permit. That’s only up 10 percent from data collected by the city in October 2017.

This blatant non-compliance is large because companies like Airbnb don’t require their hosts to apply for a permit before listing a rental, nor do they share any data on their listings with the city—a step that could help city regulators track down non-complaint hosts. Airbnb has argued that the city’s permitting process is too burdensome.

Source – Portland Mercury 

Reason #2 – Airbnb Is Still A “New” Business Model

Airbnb has been in existence since 2008 and has largely benefited from a Bear Market that’s lasted for over 10 years now.

The reality is that their business model hasn’t truly been “tested” yet as it’s not had to go through a Bear Market.

With the challenges posed by Corona Virus (Covid-19), the time may have arrived for Airbnb to be tested since many people who have booked stays on have canceled their stays due to fear of exposure to the Corona Virus.

Although the ramifications from Corona Virus may only be short term, Airbnb hosts will likely be feeling the “sting” from Covid-19 for months to come.

Reason #3 – Lack of Competition

Yes, Airbnb has been the major “player” in the short-term rental marketplace since 2008 but if you’ve studied economics, you know that this isn’t necessarily a good thing.

Lack of competition means that investors either have to be on Airbnb or risk having their properties sit vacant for long periods.

Reason #4 – Many People Still Prefer Hotels Over Airbnb

The public perception of Airbnb in today’s world is that everybody is using it when they book a vacation but the reality is that many travelers still prefer to in a traditional hotel versus an Airbnb.

Thanks to recent statistics from Fast Company we know the following about today’s traveler:

  • 38% — prefer hotel services
  • 38% — uncomfortable staying in someone else’s home
  • 37% — prefer hotel property amenities
  • 36% — prefer hotel room amenities
  • 34% — an option never occurred to me
  • 27% — renting a home is too expensive
  • 26% — do not need the extra space
  • 17% — concerned about the safety
  • 17% — concerned about the cleanliness
  • 16% — not sure what to do if there is a problem during a stay
  • 9% — not comfortable with booking and payment process

Will short term rental properties go away in 2020? The answer to this question is no, but in a heavily regulated industry, it makes sense for investors who want steady cash flow and consistent income to invest in long term rental properties.

With a long-term rental property, an investor will have a steady monthly cash flower, lower annual expenses, and fewer headaches compared to the stresses that they face with owning short term rental properties.

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Contact Rent Portland Homes

At Rent Portland Homes we specialize in managing long term rental properties. To learn more about the services we can offer you contact us today by clicking here.

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