vrbo – Lupe Ruiz

Have you been considering investing in real estate but do not know what options are out there? There are options such as creative financing or wholesale sales, which although they might not be the first to come to mind, are common in the real estate investment world. Long-term rentals have been a popular, traditional investment strategy. This entails leasing for long-term periods. This may be month-to-month or one-year leases, which are typically renewed annually. However, there are other investment strategies, which may also fit your goals.

Short-term rentals: These types of rentals may include corporate or other professions which have employees or contractors who are hired temporarily. For instance, travel nurses or corporate employees assigned to temporary projects might find it more convenient to stay in a house instead of a hotel for the duration of their contract. You may post your property on websites such as FurnishedFinder.com or other similar corporate rental sites.

The other commonly known short-term rental option is to rent to people who are vacationing or only need to stay for a few days. You can advertise on sites like Airbnb.com or Vrbo.com. This is borderline entering the hospitality industry, but it can give you a great rate of return if you are willing to put in the work and time to make it successful.

Shared housing: In these types of rentals, individuals rent the room only, share other common areas, and there may be house rules that need to be followed. If your property is near a college, you may advertise through them as well. There may also be other niches, who may benefit from shared housing as well.

House flipping: This type of investment has also been well known for many years. Keep in mind, it is recommended that you do not purchase a distressed property for more than 70% of the after repair value minus the cost of the repairs. It helps to have contractors available to inspect the property and do the necessary repairs within a reasonable timeframe.

New Construction: This type of investment will take more steps. Once you have the vacant lot, you need to decide if you will hire a construction manager to help with timelines, permits, bids, etc. or go straight to a general contractor. Then, you need to have the necessary contracts outlining buyer’s rights, financing, warranty, etc.

At a glance, these are a few strategies to consider when looking into investment options. It’s important to study your options, compare the pros and cons, and always have an exit strategy. When you are ready to take this step, I recommend you consult with a real estate professional who may guide you further through the intricacies these investments entail.

As we all know, the impact the pandemic has had in the travel and tourism industry has been one of the greatest. According to the U.S. Travel Association, as of April 30, 2020, the national weekly travel spending went down from $19.8 billion on 3/7/20 to $2.3 billion on 4/25/20. That is a difference of $17.5 billion! The states hit the hardest were the ones with higher tourism and international travel. For instance, their Total Weekly Travel Spending table reported that for this same time period, states like:

California went from $2,488 million to $298 million

Florida went from $1,883 million to $152 million

Hawaii went from $481 million to $18 million

Nevada went from $712 million to $97 million

New York went from $1,461 million to $170 million

Texas went from $1,423 million to $218 million

Consequently, vacation rentals have been impacted. Travelers cancelled plans and although not all vacation rental owners have been flexible, most have worked with the consumer in providing refunds. This means vacation rental owners have been severely affected. On May 5, 2020, the CEO of Airbnb announced they would be letting go of nearly 1,900 employees, about 25% of their workforce. The two reasons he stated for determining this were they do not know when travel will return and when it does return, it will look different; so they need to start taking action now. For instance, as of April 29, 2020, Florida’s governor, issued an executive order extending the prohibition on vacation rentals due to concerns that infected people were going to the state.

This pandemic also affected major theme parks such as Disney. The parks had to close and they are a major tourist attraction in 50% of the six states mentioned above. According to The OCR, Disney theme parks face a $21 billion loss through 2022. According to ClickOrlando.com, as of May 5, 2020, Walt Disney Co. had not revealed when its U.S. theme parks will reopen. However, they are working on safety guidelines so they can gradually reopen the parks. This is probably why on May 11, 2020, they announced they were taking reservations for their Florida attractions in July.

So, in summary, the COVID-19 pandemic has drastically affected the travel and tourism industry, which consequently, has affected the short-term vacation rentals. In my opinion, it will depend on how soon people start feeling safe to travel and the safety guidelines implemented in the major tourist attractions before we can see the vacation rentals coming back as closely as possible to normal pre-COVID-19. And, when it does, it will be very different from what we’ve known. Operators/Owners will need to be up-to-date with local health and safety guidelines and make appropriate modifications in the operations, cleaning and maintenance of the rental.

It is possible that owners who have experienced a major loss and who are not able to maintain the property while the occupancy is low, might need to sell or pivot to a different type of rental (i.e. home insurance, coronavirus quarantine, corporate leases, etc.).

As always, reach out to me for your local real estate needs. You can schedule you 15-minute online session with questions on selling your investment property.

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U.S. Vacation Rentals And COVID-19