3 Ways To Restore Lost Income When An Airbnb Becomes an "Airbnbust"

Has the shine worn off the short-term vacation rental market? A glut of inventory has sent vacancy rates soaring in recent months (even during the Super Bowl!), leaving homeowners declaring an “airbnbust” with empty homes and declining profits. 

Meanwhile there are people all over the country crying out for long-term rental options as rents skyrocket and vacancy rates plummet. So much so that many cities are cracking down on the practice by limiting or even banning short-term rentals in some areas. 

But homeowners are within their rights to look for passive income to help support their financial future — so what’s the balance? What are the best options for restoring passive income if you shift away from vacation rentals or Airbnb? 

3 ways to restore passive income for your short-term rental home:

1. Switch your house to a long-term rental home
2. Move into the home and start renting a room or add an ADU
3. Sell the home and reinvest the profits

Option #1: Switch your house to a long-term rental home

Let’s start with the most obvious option: long-term renting. Long-term renting has the same passive income opportunity as a short-term rental — but often without the extra headaches. 

It’s true that a per-month rate won’t attract the same per-night income as Airbnb. But with rising inflation and property values in recent years, more Americans are feeling locked out of home ownership so they are renting for longer. Even in areas where rents have dropped recently, they are coming off such high increases that most homeowners are still earning much higher rental income than before. 

This means it’s a great time to hold an investment property. If you don’t intend to use the home during the year, having a long-term lease agreement on your home may be more profitable than a short-term rental, even at a lower per-month rate. Especially if that high per-night rate is leaving the home vacant. 

Some of the benefits of taking your home off vacation rental platforms and finding long-term residents include:

• Your income will be more predictable, with less vacancies and one person/family living in your home for 12-months or longer
• Long-term rentals are in high demand and attractive rental rates are locked in for the lease term
• Residents are vetted and screened, helping you to place responsible people in your home who will treat it as their own
• With the right management, income can be truly passive, with no need to play customer service representative for holiday-makers
• It’s a more ethical choice, with your home providing a stable living environment for people who don’t want to, or can’t, buy their own home
• You can access to favorable tax breaks and capital gains depreciation
• No need to furnish the house or worry about cleaning costs and replacing amenities
• No utility costs, as residents will pay for these unless it’s included in their rent
• Lower management fees, usually around 8 - 10% (compared to 25-40% for short-term rental management) 
• There’s less local ordinance hoops to jump through
  
• No need to collect or pay Transient Occupancy Tax

Read More: Short-Term Rental vs. Long-Term Rental: The Pros and Cons

Not convinced? Let’s take a look at the San Diego market. After the introduction of the Short-Term Rental Ordinance (STRO) that has capped the number of vacation rentals, you may wonder if the long-term vacancy rate has increased or the rents have dropped. After all, many homeowners will need to relist their homes at the same time if they can’t get an STRO license. 

Neither has occurred. The average rental rate has increased between 2-12% YoY in San Diego for 1-4 bedroom homes. As of January 2023, Belong’s residential network sees an average rate of $3,526.15 per month for single-family homes and condo rentals in the San Diego market. The US Census also reports that the vacancy rate in San Diego is still a low 3.2%, down from 3.7% in Q1 2022. 

Interested in making the switch to a long-term rental? Belong can help! With guaranteed rent, great long-term residents and innovative financial options that protect your cash flow, we can help restore your passive income and achieve your financial goals. Learn more here.

Option #2: Move in and rent out a room or add an ADU

If renting your entire home is no longer profitable on Airbnb, another option is to move in yourself and rent a single room or accessory dwelling unit (ADU). You can either advertise for a full-time roommate or relist a single room on Airbnb, rather than the entire house. 

This will ensure you’re not paying costs on a home while it sits empty and gives you full access to the home whenever you need it. Without the need to pay costs on an empty house, you can restore your passive income and use the extra cash to pay your home expenses while living there.

Of course, sharing your home is not for everyone. Not everyone will have a space where they can maintain privacy, which is where an ADU is a great option. Many local governments have made it easier to add an ADU, even incentivizing ADU builds with a grant program, as they add much-needed living spaces to the city. 

Option #3: Sell the home and reinvest the profits

If you’re stuck with an unprofitable home and don’t like the idea of long-term renting, it may be time to sell up. Of course, this option won’t immediately restore your passive income. Before putting your home on the market, speak to a financial advisor about the value of your home and how to reinvest any profits so that the money can continue building toward your financial goals. 

Be sure to account for capital gains tax implications, which will be imposed on the appreciation of an investment home when it’s sold. 

It is also worth noting that single-family rentals (SFRs) have provided nearly identical returns to the stock market — but with far less volatility. This makes owning a rental property an attractive investment option to build or diversify your portfolio, so you may want to consider hanging onto the home if you can’t get the price you want!

Belong is an alternative to both Airbnb and traditional property management

Many homeowners are attracted to Airbnb or the short-term rental market because online platforms make everything so simple and tech-forward. They make traditional property management look antiquated. Which is why Belong has ditched the property management model to offer a better alternative to both — an option where you don’t need to manage everything on your own, nor put your home at the whim of travelers. 

If you’re weighing up relisting your home as a long-term rental with Belong, here are a few extra line items to jot down in the ‘pros’ column:

• Guaranteed rent — get fixed, predictable income, regardless of when your residents pay

• A dedicated 24/7 concierge service available to both you and your residents, not just a an option to log emergencies 

• Transparent, inclusive fees, with no sneaky extras like setup costs and lease renewal charges

• Rental pricing optimization, based on real-time demand for your home

• Protection against evictions with up to $15,000 of coverage against legal fees

• Cutting-edge marketing and video tours, available at no extra cost

• Innovative financial solutions for managing cash-flow on your terms, even covering homeowners during vacancies — or providing a full year’s rent upfront 
  

Think your vacation home belongs with us as a long-term rental? Learn more and find out if you’re eligible here.