The AirBnB Bubble Burst

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am not a real estate expert and this blog post is an opinionated post relating to the real estate industry.

With the coronavirus deterring customers from traveling and the international lockdowns happening, many AirBnB hosts, who have mortgages on their properties, are now struggling to pay their mortgages and could potentially have their properties on foreclosure. With many first-time home buyers anticipating a drop in real estate prices, here's something you should note:

Photo by Aw Creative on Unsplash

Many AirBnB properties are actually smaller homes, like townhomes or condos, not single family homes.

From my experience, I've noticed that the single family home listings are usually the host's home and not a home that an investor bought just to leased out. Interestingly, the median square footage of a vacation rental is 1,500 feet, which is usually the size of a small home, condo, or even a townhome. 

When buying properties with the intent of making them vacation rentals, usually you'd want the rentals to be in a great neighborhood with great proximity to tourist spots. That's where the hotels usually are. But for those who would rather get an AirBnB, they would most likely go for a property that's close to those spots, and usually those properties would be the condos and townhomes, not the single family homes that are in large suburbs. 

Plus, having a home owner's association take care of some of the responsibilities and provide amenities makes condos and townhomes as more attractive AirBnB listings. 

Now, I might be wrong

And maybe most of the properties investors buy and turn into vacation rentals are single family homes and not condos and townhomes. I've searched many sites and tried to find a statistic that can tell me what percentage of vacation rentals are single family homes, condos, townhomes, etc. 

Also, there's a possibility that many of the AirBnB hosts with many properties don't own the property. Instead of owning the property, they rent it and then turn it into a vacation rental.

Will AirBnB fall?

In my opinion, I highly doubt it. AirBnB doesn't own a lot of properties, it provides a platform for those wanting to get a vacation rental. AirBnB might not be profitable but if they need need capital to survive the lockdowns, with VCs having tons of dry powder, many of these venture capitalists will be alright with doubling down on AirBnB.