The Long Game on Short-term Rentals
In the Fall of 2014, a young married couple in Charlotte bought a house.
The husband was an operations employee at a soccer company, and the wife was a nurse. They wanted children someday and imagined starting there family in that house. But for now, they had extra space.
The couple had been watching the relatively new trend of renting out rooms in your house for short-term stays online to generate extra income. While they didn’t love the idea of having other people in their home, they did love the idea of using their new home to generate some money on the side. They compromised and listed a small room and bathroom above their garage on Airbnb.
The couple was blown away by how well it worked. They kept the room cleaned, stocked with toilet paper, and listed online. It rented frequently and not only offset their monthly mortgage payment, it paid for their entire home each month.
That husband was Emir Dukic, and he knew he was onto something.
After seeing the success of his garage apartment on Airbnb, Emir decided to explore the strategy further. Would other properties in great locations perform similarly well?
To answer this question, Emir and his wife Sarah found For Rent properties they felt might do well on Airbnb, and reached out to those landlords with a proposition: rent to us for a slightly higher rate, as long as we can list the property on Airbnb. Many landlords were happy to have a well-paying tenant, and before Emir and Sarah knew it, they had a growing portfolio.
Over time, as real estate investors began to understand the kind of revenue short-term rentals can generate, they started asking to participate in the upside. The dynamic flipped: landlords started coming to Emir and asking “can you manage my property on Airbnb for a percentage of revenue?”
Let’s pick it up from there.
Interview with Emir
What is Rabbu?
Rabbu is a full-service asset management platform enables property investors to achieve higher yields through shorter stays.
How did you go from managing your own short term rental properties to founding Rabbu?
At some point there was an opportunity to help other investors with their short term rental strategy and management in addition to my own portfolio. So it naturally evolved into a wider business of providing that type of support.
I’ve always identified opportunities in the market based on data, which is at the core of Rabbu’s platform.
What type of data?
We help investors compare what they can be making with a traditional, long-term lease vs a flexible, short-term rental setup. To do that we mine data from rental listing platforms like Airbnb and VRBO, and make that available to our users as a revenue projection based on an asset’s location, size, and quality. Many properties can achieve higher revenue and net income by renting to short-term tenants who pay higher rates for flexibility.
What are the key variables to consider when determining if a unit can generate more revenue through short term stays vs a traditional long-term lease?
This has changed significantly even over the last year since the pandemic, but the biggest factor is location. Twenty years ago you’d only want to be in vacation destinations. Airbnb made short term rentals more urban. COVID has actually drawn lots of growth to rural markets. Location is still key but so is size, proximity to attractions, and uniqueness. We provide some instant insights on this via our free portal, data.rabbu.com.
Does the increase in popularity of short-term housing like Airbnb and VRBO help or hurt the nation’s housing crisis?
We think it helps. Airbnb properties are not just used for daily stays, but they are increasingly used for weekly and monthly stays by remote workers. Those workers are leaving overpriced cities and apartments and living a nomadic lifestyle. That is forcing the landlords in the most expensive markets to come back down to Earth (looking at you NYC & San Fran).
If I open up a unit in my multifamily property for short-term rentals, does that make my property less safe for other tenants?
From our experience allowing short-term rental guests won’t inherently make a property less safe. Short-term rental guests go through a highly selective screening process so the quality of the tenant doesn’t change. In fact, most of your current tenants are also short-term rental guests elsewhere so this is normal for them.
What’s the biggest NOI increase you’ve seen converting a unit from long-term rent to short-term?
We partnered with a landlord with around 30 doors in Asheville, NC. Monthly rent per door before Rabbu was right at $1000. We are now trending closer to $3000 per month (https://data.rabbu.com/e/jQcBS). Our occupancy aim is right around 75% which allows us to optimize for nightly rate. We could easily have near 100% occupancy but that would actually sacrifice RevPAN (Revenue Per Available Night).
Our expert Capital Advisors help you secure your ideal capital stack, resulting in a lower cost of capital for your investments in less time and with more transparency than a traditional commercial mortgage brokerage. Learn more at StackSource.com.