HUGE AIRBNB CRASH… Investor Reacts (Part 2)

What’s up guys, in today’s video, we’re going to be jumping right into it, we’re gonna go into part two of a video called Airbnb owners are about to sell massive house crash coming. This is by a channel called RE venture. I did a part one a little while ago on this channel. And I want to take this time to go ahead and go into a part two, because it was just a really long video, it’s almost a 20 minute video. And so I wasn’t able to go through the entire video on the last video. So if you haven’t checked that out, check that one out to get started. But for context, he’s just talking about how there’s going to be this massive crash coming in the real estate market because of short term rentals. And I kind of debunked why I disagree with that, that perspective.

Now, before we jump right into it, I did want to want to note that I jumped into this channel a little bit more after filming the last video. And if we open it up here, you can see there’s a bit of a theme on the channel. If we look at the recent videos here, you’ve got danger, people are leaving Texas time to sell time to sell why the housing market hasn’t crashed yet 2023 recession just hit commercial real estate landlords dropping their rent worst cities to buy a house and CRASH CRASH, drop, drop, sell now crash drug crisis. And we go back and we go back, we go back, we go back, we go back and we come back. And we go back. And he’s been saying to sell for basically ever. And so this seems like it’s one of those channels where you know, like I can literally just keep going and you can see like bloodbath, it’s a 2022 stock market bloodbath, Wall Street plotting, plotting to crash 2022 housing market 40% fire sale intensities, like we can go back and keep going back. And this seems to be a person who’s just going to keep on predicting a crash. And as always screaming Wolf. And then when inevitably there is a crash, because we know there eventually will be a crash, they’re gonna go I call that I called it. Because of course, if you just spray and say that it’s always gonna be a crash, eventually you will be right, you know, broken clock is still right, once or twice a day. And so yeah, just wanted to bring that up before we go into this because obviously, this time he’s talking about Airbnb, but he’s been talking about the crash for like over a year now, just for my looking, I didn’t go to too far, I’m sure it’s been multiple years more than likely that he’s going into this. And so yeah, just wanted to give that bit of context before we jump in here. Probably not gonna agree with a lot of of what gets said, but I have watched the video. So maybe he’ll be saying in a slightly different tune. And maybe there are going to be parts that I will agree with some extent. So let’s go ahead and jump into it

2:40
all. But folks, I don’t want to be too negative here, I actually think that this is going to be an opportunity for a lot of you guys out.

2:46
And so just for context in the video so far, if you didn’t watch the first one yet, he’s talking about the Airbnb crash and how you know, Airbnb places, people bought properties for way too much. And now they’re selling them and all this stuff, which parts of it are true parts of it are just really over exaggerated. I’m going to go into that in more detail in the video, but he’s saying that it might actually be an opportunity, which let’s hear him out

3:06
there. Whether you’re a homebuyer or an investor that’s waited and who’s been diligent, the Airbnb bust and the overall downturn in the market and the recession getting worse. It’s gonna create lots and lots of opportunity for a lot of you who’ve been waiting for a long time and I think that opportunity is going to come most in the cities I’m about to show you on this list. These are metros that I filtered that have the most exposure to air b&b bust through a variety of different metrics. I just want explain very quickly how I came up with this list. Number one, I wanted to look at markets where the air b&b supply has surged over the last four years where there’s been a 50% plus growth rate and Airbnb supply because that indicates a lot of amateur Airbnb operators went into the market and thus they could be the ones to sell first. Number two, these markets all have a high ratio of air b&b supply to homes for sale on the market. And the higher this ratio is of Airbnb supply to homes for sale, the more chance at some of those Airbnb making onto the for sale housing market and push prices down. Of course number three, these are

4:07
I mean that that isn’t a very good analysis. That’s a bit of a guess. But the first piece like a huge growth, a huge spike in number of Airbnbs in the market, especially like a quick spurt of growth, I would say is a pretty good indication of people just jumping onto the bandwagon getting in there probably is a lot of people with like dumb money just jumping into bad deals. But that doesn’t mean they’re going to be selling them at numbers that make them good deals, it just means that they’re going to be selling them. But if they’re selling them, and they’re trying to get what they put into it out of it and it was a bad deal for them, it’s probably just going to be a bad deal for you as well. And so it’s tough to know whether those are actually going to present really good buying opportunities. And I think the one thing I like to highlight is yes, there is opportunity in the market right now. There’s opportunity in the market all the time, right. And so the biggest thing to remember as a real estate investor is it’s Not about timing the market, it’s about time in the market. And so if you are one of those investors who was talking about who has been waiting and holding on and looking for the right opportunity, then you just have a fundamentally flawed principle like set of principles for your investing. Because the longer that you wait on the sidelines, first off, like, who’s going to try to drop a catching or to catch a falling knife, right? That’s what that’s a great analogy for trying to time the market on its way down, you’re trying to grab onto a knife as it’s dropping, right? No one knows when the bottom is going to be. There are literally people that get paid billions of dollars to manage huge portfolios, and even they with their huge teams, all their resources, they still don’t know how to time the market perfectly, like 98%, or more of all mutual funds fail to beat the market over an extended period of time. So what does that say for you and me and our likelihood of actually being able to time the market, right? Very, very, very slim chance. And even if we do, it’s purely based on luck, it’s not actually skill that allowed us to time the market. And so trying to time the market is a fool’s errand, because the time that you spend on the sidelines waiting for the for things to hit rock bottom, your your money is just dwindling away, especially right now to inflation. And you’re not actually getting a return on that investment. And frankly, if you’re investing for cash flow, which is what you should be doing, if you’re, if you’re investing in short term rentals, you should be focusing on cash flow. That’s really the big advantage of short term rental investing, then it doesn’t really matter what happens short term in the market, if the private price your property goes up, down sideways, it’s fine. Because you don’t you’re not buying it for the long term appreciation, or specifically not for the short term appreciation. If you’re flipping a house, you need it to appreciate short term so you care about those fluctuations. But if you’re holding on to it for long term, yeah, over the long term, you’re gonna come out ahead and while you’re waiting for that to happen, you’re making cash flow, you’re making good cash flow all the way along. So you’re one of those people who’s waiting for the right opportunity. I would say Stop waiting, stop trying to time the market and just get into the market. Because no matter what part of the cycle we’re in, they’re always good deals. And and they’re also always bad deals. So it’s really more about identifying the right deals and the bad deals than it is trying to time things perfectly.

7:20
Three, these are all markets where the air b&b revenues have absolutely collapsed over the last year, leading to lots of operators who are struggling and losing money and thus more likely to sell and the first city on this list that I want to talk about is actually my hometown in upstate New York. Zoom in here on Hudson, New York, you can see that the Airbnb revenue is also on VRBO and booking.com. According to all the rooms is down 37% year over year, and it’s down by nearly 50% from its levels two years ago and Hudson it’s this area this kind of vacation area that a lot of New Yorkers went to during the pandemic in the Hudson Valley well, they pushed up the demand they bought a lot of Airbnb so many Airbnb is that there is now around 900 short term rentals on the market in Hudson in Columbia County compared to only 220 homes for sale. So there’s four times as many Airbnb ease as there are homes for sale and another area that’s getting hit as soon

8:18
get the real link there between number of Airbnbs and number of homes for sale like that I get what he’s trying to say is the link there. But it just doesn’t really exist. Those two things aren’t really intrinsically linked, or causal of one another. So yeah, I don’t I don’t really agree with the whole point there. That being said, a market like upstate New York, I could see with a huge amount of growth, that there is like, you know, there’s a lot of people just opportunistically buying up there. That being said, I want to point out that a drop of 37% and rev par that’s revenue per available room night, is not the same as a 37% drop in bookings. So I just want to make that really clear. What’s actually happening is that you take revenue, right, and you divide it by the available room nights. And so if revenue, let’s say the whole market of pods and generates a million dollars in a given month, well, that would be per available room night at 100 listings right in the market, you take a million you divide by 100. And you’d go okay, cool. Yeah, that’s my revenue per available room. And if revenue stays the exact same, but you’re now doubling the number of roommates, or in this case for axing the number of room nights, because there’s four times as many properties and now you have 400 properties, a million divided by 400, you’re now getting a much lower rev bar, right. But the total revenue, the total amount of bookings in that market stayed the exact same, it may have actually even grown in may not right, more people might be booking in there, but it’s just not pacing with the amount of available room nights. And so what a lot of people think is that that means that your revenue is going to drop as an individual host. What actually happens is that a whole big chunk, like you know, 200 of those 400 or 300, or those 400 properties, they don’t really get booked But 100 of them still do. And maybe even if there’s growth 150 or 200 of them do get booked. And so the way it plays out most of the time is that the top properties eat all of their returns, right. And so that’s why it’s super important to not only buy the right property, but also to really know your way around performance on Airbnb. And I think that’s something a lot of people underestimate what it’s going to take, because you need to be able to beat out the competition. And it’s not an even distribution of the demand amongst all of the supply, it’s really like the top 20% of the supply gets pretty well all of the bookings in a situation like this. Because there be more beautiful listings, have better photos, better pricing strategies, better listings, all that stuff. You know, that’s those are the properties that are gonna get booked and the other ones are gonna sit vacant more often than not the area that’s

10:48
getting hit hard by Airbnb buses, not too far away from upstate New York, it’s actually New Hampshire, Vermont, and Maine, hilly, Portland, Maine, everyone were the Airbnb revenues are down 33%. And they’re so again,

11:00
that was a really like, that was just a misinterpretation of the actual number. He said Airbnb revenues are down 30 some odd percent, and they’re actually not revenue per available room is and those are two very different things that he’s collapsing into one. So that’s just that’s just boldly inaccurate. And I just want to point that out for clarity.

11:19
This is an area that looks scary now, because there’s 2000 short term rental listings in Cumberland County near Portland compared to only 350 homes for sale, folks. So there’s six times as many short term rentals here as our homes for sale, which again,

11:34
like the link there, it’s just it’s kind of irrelevant

11:37
sale to division, which is likely going to lead to more inventory hitting the market in future months and years. And

11:44
it’s really not necessarily going to do that, as you can see from this, like it didn’t actually that didn’t, that didn’t cause that to happen. Like throughout this graph, there are instances where it happened. Sure. And then it dropped down below and like came back up like these very clear, there’s no clear correlation between these two graphs here. And so to assert that there that there is just doesn’t really make a whole lot of sense to me. And then the other thing is that, again, these this is just properties that are going to become for sale, it doesn’t mean they’re going to be for sale for a good price. So again, like none of these macro trends are really where you want to be looking as an investor, you want to look at like, what’s the long term growth in average revenue per property I’m looking to buy? Is it like, you know, the revenue is going up, the revenue is trending down? Where do I expect it to be? What are the other properties in the market performing at what’s a reasonable price for this property? What’s it actually like there’s all kinds of things that are super important to look at as an investor, this is just not one of them.

13:57
What we’re really seeing in the trends and in the data everyone is that there’s a very clear reversion occurring from what happened during the pandemic, right? Like there was these big lock downs in places like Boston, in New York City that caused lots of wealthier people in those cities to flee up to the rural areas throughout the Northeast, and they bought homes and they push the prices up and they put them on Airbnb, that that’s all ending now more people are moving back to the city. When you look at the data,

14:22
it’s actually not ending I wouldn’t say it’s not it’s not like it’s grind to a halt. It’s actually been fairly surprising. I thought that what he’s indicating what is happening would be what would happen, but it’s actually not. So if you look at the at the revenue data for a lot of different markets, like the ones he’s talking about, what you’ll notice is that they jumped up six significantly during COVID for exactly the reason he’s pointing to like a lot of people fleeing up north and like getting out or down south or wherever there’s fleeing outside of the major metro hubs, because when they can’t travel internationally, they travel domestically. Right. And so there’s a lot of staycation happening, that market really blew up. And what you would expect is that after the blue up now that international travel opens back up, it would come right back down to like on pace for where you’d expect it to be. But this blow up is actually sustaining relatively well. And you’re still seeing a drop, but not nearly the drop that you would expect there to be in a lot of the markets like the ones he’s talking about. And so that’s actually been pretty surprising for me. And it’s funny because a lot of people are looking at it going, Oh, my gosh, there’s been a 30% crash or a 20% crash, and they’re panicking. And I’m sitting here going well, I actually expected there to be a 50% crash. And so the fact that there’s only a 30 or 20%, crash, we’re laughing, we’re in a really good place. And so again, it’s just like, if you look at the trend, you could see the writing on the wall that it was going to drop down, and you can really start to see this stuff. If you’re looking at the right data.

15:41
Look at the data on the best performing Airbnb markets over the last year. It’s the big cities, it’s New York City, it’s Washington, DC, it’s Boston. And so this isn’t just some blip or short term trend. This is a reversion back to normal, which is going to be a big problem for all the Boomtown areas during the pandemic that added the most Airbnbs one of those Boomtown areas it’s getting hit very hard right now is the southeast DC area flowing from South Carolina, North Carolina to Tennessee talked earlier about revenues and national being down 40% Seaver Ville being down 48%.

16:11
Again, he’s saying revenues are down 40% But they’re not revenue per available room is and that’s a really, really big important distinction. And it’s just it’s just super misleading the way that he’s presenting it.

16:24
percent Asheville being down 43%. But if you just keep going to the coast, you can see the losses and the bloodbath continues in a place like Myrtle Beach, the Airbnb revenues are at 45% And that’s a me.

16:35
It’s just so annoying that he’s just grossly misrepresenting what the data is actually saying. He’s just miss categorising it. It’s not a bloodbath. It’s like some people Yeah, are getting hit, but other people are getting are not getting hit because not a big drop in revenue. Right. It’s a drop in revenue per available room. So a lot of these markets, total revenue is actually growing still, or holding really constant or dropping only slightly. And the revenue per available room is only dropping because there’s more available rooms, not because there’s less revenue

17:05
is your problem is there’s currently 9000 short term rental listings in Orange County, in Myrtle Beach, compared to only 3000 homes for sale. I mean, just look at how these lines have flipped, basically starting in late 2019. And eventually, they’re going to start flipping back. But folks, the downturn in these areas,

17:25
just because you can overlay two graphs on one another does not mean that they’re correlated to one another like this is ridiculous, showing me the correlation. Because every single time that you do this for a city, the graph looks drastically different. There’s not actually a correlation here and these

17:39
areas pales in comparison to what we’re seeing in one of the biggest bubble housing markets in America that I pulled the bubble on two years ago when everyone said this market would keep

17:50
wouldn’t you know that he called the bubble? Crazy. It’s almost if you cry word of every day, you’re eventually going to be right,

17:59
it would keep going up. But no home prices in this market are down. Rents are down and now Airbnb revenues are down because Austin Texas is just a bloodbath right now with Airbnb revenues down 46 Rev. par 6%. In Austin, as well as 44% in nearby San Antonio, clearly not as many people are interested in visiting Central Texas as they were two years ago, and it’s showing up in this

18:22
No, that’s not what that means. It doesn’t mean that more that not as many people are interested in visiting, it means that there’s more accommodations available for them to visit. And the growth of revenue isn’t keeping pace with the growth in supply. So again, it’s just just like, just literally look at what the data actually means. Like just look up the term. He even said what it means before so he knows what it means. But he’s just miss characterising it. super frustrating data.

18:51
But I know what some of you are thinking at this point, everyone you’re probably thinking, Nick, all right, this data is great and interesting. But how do you know that these crashes and Airbnb revenue are going to translate?

19:03
They don’t even exist. What I’m wondering is why are you saying they exist because there’s no crashes and Airbnb revenue that you’ve shown? Like they may be there there are some markets where the revenue has crashed, but realistically that’s not what like that’s not actually what we’re looking at. And that’s only in a few markets and all these other factors right It’s like no, I’m not wondering how do you know that that’s gonna I’m wondering why are you lying and saying that that is so that there is a crash and Airbnb revenue because there isn’t like, Come on, man. We like if there is show that data if there isn’t these specific markets show that data don’t take some other data and Miss characterise it as as a different type of data. Like it’s just, it’s just inaccurate to owners

19:45
being forced to sell like, what if the owners just decide to hold their properties forever because they have a low mortgage rate because you know, a lot of people are talking about that they’re saying because all these existing owners have 3% or 4% mortgage rates that there’s no one’s Don’t have to sell. And then even if things go sideways on their rental, whether it be a short term or long term rental, maybe they’ll just decide to hold for a couple of years and funded out of pocket. And folks, I’m sure some owners will do that. This is not predicting that every air b&b Owner is going to sell. It’s merely saying that in markets where there’s lots and lots of Airbnbs, and lots of new supply and a big crash in revenue, it’s just very likely that these owners are going to be forced to sell because many,

20:27
if there were a crash in revenue, yes. But again, the point he’s trying to make is actually a real point, like there, there, he’s just using horrible data to try to back it up, because he’s just completely mischaracterizing the actual data he’s looking at. So yes, I actually agree fundamentally, that some people who bought Airbnb properties are going to need to sell them because they bought them on bad fundamentals. And that’s always been true in everything. There’s people that invest in make poor decisions, right? We’ve always known that. And there was an accelerated amount of that, if you look at it, there’s a huge, huge growth in these markets, and people just buying buying properties jumping on the bandwagon, and the markets oftentimes can’t support that. And so it doesn’t mean that it’s not necessarily to say that, like, if you bought a property in the last couple of years, you’re more likely to have to sell it’s that if you bought a property in the last couple of years, and you don’t know what you’re doing, you didn’t like do your due diligence, and you don’t know how to optimise the property, then you could be forced to so because again, it’s not a drop in revenue, it’s a drop in revenue per available room night. And so if you’re actually one of the top performing properties, whether you started recently or 10 years ago, if you’re one of the top properties in that market, you’re not seeing a big decline in your total bookings or your revenue for the year. It’s the it’s the underperforming hosts that are seeing that and yes, some of them will have to sell someone will have low interest rates on their mortgage, someone will have high interest rates on the mortgage, some of them will have bought a couple years ago, someone will bought a couple months ago, someone will bought 510 years ago, like it’s really the bad operators like the people that can’t actually compete. Those are the ones that are going to be getting hit people that the people that are going to be getting hit are the ones that just you know, don’t have don’t have good fundamentals in order to beat the competition.

22:17
Any of them are losing money. And to prove this point, I actually looked at some numbers on what an air b&b owner in a city like Austin or a city like Phoenix is facing right now. And I covered this in a post on the adventure app blog all the link to in the description, you can check it out. But basically, I put together a Phoenix Airbnb pro forma for short term rentals and figured that if someone operated the rental full time, they’d earn about $3,000 a month in revenue. Now you might be saying that’s great. $36,000 a year in revenue sounds good, except you got to deduct the expenses. Airbnb takes a fee, there’s property taxes, there’s insurance, there’s maintenance, he’s utilities, a lot of people use a property management company, which means charge anywhere from 10 to 20%. After all, that, you’re actually left with 16,000 net income for your Airbnb in Phoenix. And if you bought it with a mortgage with 20%, down at only a 4% mortgage rate, you’d actually be losing money.

23:12
So again, like he’s not disclosing what what numbers he’s looking at, again, I would assume he’s looking at average numbers like 50th percentile numbers, for example. Whereas again, if you’re in if you’re in the top 25% of the market, and you’re actually performing well, you’d be able to support these costs. If you have a lower mortgage rate, you’d be able to support these costs. If you don’t have a property management company, because you have good systems for it, then you’re not going to you know how to pay those costs. Like there’s all kinds of ways. So yeah, again, like I fundamentally do agree that some people are losing money. But putting a bunch of numbers on a sheet that are arbitrary, doesn’t help to prove that point. And frankly, I don’t think it’s a point that really needs a lot of proof behind it. It’s not a really hard concept to grasp that some people make bad investments, and they lose money on them. But the macro point to say this is happening everywhere, because of these numbers that I’m showing on this sheet that I just made up and put down. It’s like does it does more detract from what he’s trying to say in my opinion than to add

24:05
money after paying your mortgage interest at only a 4% rate. This is assuming a low interest rate and they would still be losing money and ultimately, people can only lose money for so long before they either decide to sell or they’re forced to sell from their lender if they got one of those DSCR loans one area in general where I just think the situation is going to get worse and coming on the West Coast of America particularly the Mountain West where we can see big declines in Airbnbs across all right,

24:33
I don’t think there’s really going to be anything too new and exciting and the rest of this video here the video is already getting pretty long so I’m going to wrap it up there let me know your thoughts if you agree, disagree what you think let me know in the comment section down below. If you liked this video got value from it. If you learn something from it, then make sure that you hit the like button on this video here. And yeah, just let me know if you’re new to the channel here. Make sure you subscribe. Stay up to date with the two new videos we post every single week. Hopefully you learn something and hopefully you can use In this video in this kind of way of credit, be thinking about what you see, to really question what you see because not all of it is exactly as it appears at face value. And there’s a lot of people that just aren’t really portraying things accurately. Let’s just say, so it’s ended there. Thanks so much for watching. I’ll see you in the next video.