Top 10 Apartment Search Websites

Happy couple laying on floor, looking at apartment search sites on laptopShopping for a new apartment can be overwhelming. Sure, many times you can jump into your car and scour the area in search of that perfect place. But, if you need to save time —or if you live in a different city or state — most searches for a new apartment begin online. But which site do you use? Are all apartment internet listing services the same? How do you choose? These questions alone can drive any apartment seeker mad. Luckily, we did the legwork for you and found the top 10 sites you can use to find your next apartment.

No. 1 ApartmentSearch
Whether you are a professional looking to relocate for work, a college student seeking an apartment close to college, or a family seeking a newer, better, furnished apartment, ApartmentSearch has you covered. As a division of CORT, the site’s national partnerships with apartment management companies offer an unparalleled resource for market information, all while making them a one-stop shop for furnished apartments. Also, they are the only national apartment Internet listing service that pays users a $200 reward for using them. Whether you are looking to move across the state, across the country, or from another part of the world, ApartmentSearch has you covered for everything you need to make finding your new apartment easy.

No. 2 For Rent
Another one of the most regarded brands in the multi-family industry, ForRent prides itself on a great experience for apartment shoppers. They have teams meeting with your potential apartment community on a daily basis so they can bring you the most up-to-date listing possible. College students seeking a new place to live also love ForRent University, specifically designed to help them find a great apartment for college.

No. 3 Apartment Guide
One of the most established brands in the nation, Apartment Guide is one of the top respected names in the multifamily industry. Easy-to-use with a huge assortment of apartment listings, Apartment Guide brings you up-to-the-minute info on the latest rental available. Just as with ForRent, their team is on the streets and in the offices of the apartments you are keeping in mind. This means they have the latest scoop on the apartment communities you are considering moving to.

No. 4 Lovely
Looking for an apartment? There is an app for that. Only a few of years ago, Lovely hit the apartment-finding scene and took the nation by storm. Lovely’s interactive app is one-of-a-kind and is an especially useful tool for people who are out and about looking for a great new apartment to call home.

No. 5 ApartmentList
For anyone who loves a great digital experience when searching for a new apartment, look no further than ApartmentList. Both the website and app are interactive, and a joy to engage with. ApartmentList provides some of the most fun you can have when looking for a new apartment.

No. 6 Trulia
Another one of the big dogs of the real estate finding world, Trulia is also a great place to find a single family home rental and they have plenty of apartments to boot. We love the info bar at the top of its search map, which gives info on crime, schools, commute and other factors.

No. 7 Zillow
Being one of the real estate search giants has its advantages. Zillow has an expansive listing of rentals in nearly every market in the U.S. However, Zillow’s site and app are not the easiest to use when seeking a new rental. While the service provides apartment listings to choose from, Zillow truly shines if you are looking to rent a single family home, though it still has lots of traditional apartments to search among. The way Zillow groups listings together by popular criteria is a great place to start.

No. 8 Rent Cafe
Rent Cafe has a very elegant layout and feel. The added information they provide for marketplaces via their “Rent Trends” tab is especially appealing. Also, the site’s informative blog is often cited by national news sources. They have limited listings in certain markets but are a great resource for those looking in a major metro area (especially in the western half of the U.S.).

No. 9 Apartment Finder
Being one of the most established brands in the industry, Apartment Finder remains a great choice for individuals seeking a new apartment. The 3D tour in the photo gallery is a stand-out feature, and the simplicity of seeing the amenities offered by thumbnail make for a nice, interactive experience. This is an especially good choice when searching in smaller cities and towns.

No. 10 Hot Pads
Hot Pads has a terrific interactive map when you start to search by city. It also sports a handy “Get Alerts” feature so you can be updated when new options that meet your search criteria come online. It is a great option for people looking to move within the same area.

Source: blog.apartmentsearch.com

Factors Driving The Housing Market Moving into 2021

According to a study done by Eyul Tekin, “after adjusting for inflation over time the future of the American Dream seems rather gloomy. Median home prices increased 121% nationwide since 1960, but median household income only increased 29%.” This is rather disturbing.

Thankfully, we have companies like Fannie Mae and Freddie Mac who have mandates to keep housing affordable for Americans.

In response to this disparity between the rise in wages versus home prices, Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae said “the rise of women in the workforce has changed the dynamics of house prices to reflect an expectation of two incomes. If you look at median house price in a market relative to median income of a two- person household, it’s at long term normal levels. If you have only one income, that is where the affordability problem is.”

So, it’s not so gloomy, it is societal trends running their course.

The accelerated increase in house pricing is being driven by several factors:

  • The cost of the big three components – land, labor and lumber – have all increased. Lumber cost is at an all-time high. With lower levels of immigration, labor costs have increased and, with strict zoning regulations, especially in urban settings, land has been limited and the price driven up.
  • Low interest rates, which are expected to remain at existing levels though this year, have made borrowing more affordable. That same monthly payment can now buy more house, driving up buyers’ bids.
  • The supply/demand imbalance, which is perhaps the biggest factor. On January 22nd, the National Association of Realtors announced that unsold housing inventory sits at an all-time low of 1.9 months based on the current sales rate. That’s down from 3 months a year ago. Demand, driven by low interest rates and societal shifts due to Covid-19, has outpaced supply.

Why the shortage of houses for sale?

Many people, especially older people driven by COVID-19 concerns, who own homes don’t think now is a good time to sell. In December, the Fannie Mae  Home Purchase Sentiment Index® (HPSI) declined for the second consecutive month and fell to its lowest level since May 2020 as consumers adjusted to the worsening COVID-19 conditions of the first few weeks of December.

“Both the ‘Good Time to Sell’ and ‘Good Time to Buy’ components fell significantly, with respondents overwhelmingly noting the unfavourability of economic conditions,” Duncan said. “In particular, the sell-side component fell for the first time since April and by 18 points, reversing most of the increases of the past three months and implying to us that, at least temporarily, potential home sellers might wait to list their homes. If so, this could have the effect of perpetuating already-tight inventory levels and supporting additional (albeit lesser) home price growth, which could contribute to a further moderating of home sales.”  When supply falls more sharply than demand, prices increase.

Supply is Expected to Increase Going Forward

The U.S. Commerce Department announced that housing starts jumped 21.4% on a year-over-year basis and building permits soared 9.2%, the highest level in 13 years. “The good news about the house rise is that markets are performing the way you would expect. When prices go up and profits go up that is a signal for others to enter production and increase supply, and that’s certainly happening,” Duncan said. However, it might take a while for the supply to catch up with demand. Experts say that homebuilders and construction companies will have to continue these increased efforts though 2022 to meet demand levels.

It’s Not Just About Building More Houses

More people may be putting their houses on the market as well. As the HPSI indicates, there is pent up demand on the sell side.

Also, the MBA estimates that 5.54% of mortgage loans are in forbearance. When forbearance ends, some homeowners will be faced with a tough choice, either sell or get foreclosed upon. Unless they bought very recently, chances are they have built up enough equity to make selling the best option. This too will add to inventory levels.

The impact of the end of forbearance on the housing market is a matter of debate, but Fannie Mae sees the impact as one reason it is forecasting housing appreciation in 2021 to be 4.5% rather than the 10% of 2020. (Note: the historical norm for annual price increase is 3.75%)

Millennials were already starting to move from urban to suburban areas. During the financial crisis Millennials were looking for jobs and the places they were available was in the urban centers. This meant many lived in apartments. Now that they have children that are reaching school age they are moving out to areas with more land, more sports, good schools and other amenities.

They are moving from urban areas to the suburbs. When COVID-19 hit, the plans these people had for the next three years accelerated. The recent housing starts data support this, showing single family housing starts rose 12% while multi-family fell 13.6%.

How sustainable this movement is remains to be seen. If this is just an acceleration of buying that would have happened anyway, it implies that the supply/demand balance would move toward more supply, less demand a few years out.

There are a lot of factors at play when it comes accessing the cost of housing. It seems that the house prices will continue to rise in the short term and have the potential to grow at a slower pace, or even decline slightly, a few years out. With that said, if you have to borrow to buy a house, now is a good time to buy. You might just have to be more patient or more aggressive than you would have been otherwise given the competition.

Source: themortgageleader.com

Freddie Mac’s 12-Month Portfolio Growth Nears Half Trillion

Freddie Mac reported this week that its total mortgage portfolio increased
at an annualized rate of 16.1 percent in January
compared to a 22.4 percent
gain in December. The portfolio balance at the end of the period was $2.777
trillion compared to $2.740 trillion the prior month and $2.339 trillion a year
earlier.

Purchases and Issuances totaled $120.128 billion and Sales were ($.588)
billion. The December  numbers were $129.639
billion and ($1.330) billion, respectively.

Single-family refinance loan purchase and guarantee volume was $84.5 billion
in January compared to $77.6 billion in December, representing a 73 percent
share of total single-family mortgage portfolio purchases and issuances, up
from 70 percent the previous month.

Purchases in Freddie Mac’s Mortgage Related Investments Portfolio totaled $92.263
billion for the month compared to $111.509 billion during the prior period.
Liquidations were ($1.650) billion and ($1.924) billion for January and December
respectively and Sales for the two periods were ($100.425) and ($120.351)
billion. The ending balance in the portfolio was $172.372 billion, compared to
$182.184 billion in December and $202.175 billion in January 2020.

The Mortgage Related Investments portfolio declined 64.6 percent compared to
a decrease of (67.0) a month earlier. The annualized growth in January 2020 was
(59.2) percent.

The ending balance of the Mortgage Related Investments Portfolio was
composed of $59.478 billion in Mortgage Related Securities, Mortgage Loans
valued at $108.806 billion, Non-Agency, non-Freddie Mac Mortgage-Related
Securities at $1.400 billion; and Agency non-Freddie Mac Mortgage related
securities of $2.688 billion. Mortgage related securities and other guarantee
commitments increased at an annualized rate of 17.8 percent in January compared
to 25.9 percent in December. 

Freddie Mac’s single-family delinquency
rate decreased from 2.64 percent in December to 2.58 percent in January. The
multi-family delinquency rate was unchanged at 0.16 percent.   

Freddie Mac said the measure of its exposure to changes in portfolio value
averaged $17 million in January compared to $72 million in December. Maximum
exposure to Fannie Mae-issued collateral that was included in Freddie
Mac-issued resecuritizations was approximately $89.7 billion.

Source: mortgagenewsdaily.com

Homebuilders preparing for big 2021, data suggests

Overall housing starts in January totaled 1.58 million units, a decline of 6% from December, according to the latest statistics from the U.S. Census Bureau. But there’s reason for optimism from homebuilders – a huge spike in building permits.

“Despite a modest month-over-over decline, single-family housing starts are up 17.5% from one year ago,” said Odeta Kushi, deputy chief economist at title insurance firm First American. “Single-family permits, a leading indicator of future starts, are up nearly 30% from one year ago. It’s still not enough to significantly narrow the gap between supply and demand, but it’s a step in the right direction.”

A total of 1.881 million residential building permits were issued last month to homebuilders, roughly 1.2% above December’s tally but more than 22% greater than were issued a year ago.

Interestingly, the overall decrease in housing starts last month was driven by single-family starts, which decreased by 12.2% from the prior month, while multi-family starts increased by 17.1% from last month. A seasonal dip was to be expected, experts said, but the widespread distribution of a COVID-19 vaccine should give the economy – and the housing industry – a shot in the arm in 2021.

Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the vaccine combined with President Joseph Biden’s $1.9 trillion fiscal stimulus will drive consumer interest in locking-in historically low mortgage rates, thus driving the amount of home sales upward.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

“We assume that the proposed fiscal stimulus of around $1.9 trillion will be passed in mid-March, and that growth will accelerate sharply beginning in the second quarter,” Duncan said. “If 2020 was the year of the virus, then 2021 will more than likely be the year of the vaccine. Whether the vaccines are effective, including with the new virus strains, and how broadly and timely they can be distributed remain key questions.”

Economists are wary, Duncan said, of a potential boom-or-bust scenario for the housing industry in the new year: the combination of rising interest rates from record-low levels, a high national debt, and the risk of rising inflation.

“Very strong growth in the second half of 2021 could push inflation, and thereby rates, up significantly in 2022, thus invoking a Fed response of tightening and a significant deceleration later in 2022,” Duncan said. “This is not our base case scenario, but we see it as a significant risk moving forward.”

Added John Pataky, TIAA Bank executive vice president: “With rates creeping up and homebuilding still partially restricted by the pandemic, the housing market’s next phase of growth may be much more of a grind.”

Privately-owned housing starts in January hit an adjusted rate of 1.336 million, down 2.3% from December but up 2.4% from January 2020.

Single-family authorizations in January were at 1.269 million, up 3.8% from December.

January housing starts increased in the Northeast (+2.3%), but decreased in the Midwest (-12.3%), the West (-11.4%), and the South (-2.5%).

Where homebuilders go from here is of great interest to industry experts: Construction rates are expected to climb in the opening quarter of 2021 and possibly into the summer thanks to high-lumber prices and low land inventory, but the demand for homes is expected to remain high thanks to low interest rates and the hope of President Joseph Biden’s $15,000 first-time homebuyer tax credit.

“Lumber now costs more than double what it did this time last year – a fact that that has reportedly caused some builders to stop some projects mid-way,” said Matthew Speakman, Zillow economist. “Land and labor shortages also continue to hinder the ability to take on new projects.”

Still, Speakman noted, homebuilders’ earned some benefit of the doubt with the way they handled hurdles in 2020.

“Home construction was a source of strength in the U.S. economy in 2020, as builders strove to keep up with robust demand for housing and put up homes at the strongest pace in a decade and a half,” he said.  

Source: housingwire.com

Freddie Mac 2020 Portfolio Growth Doubles 2019’s

Freddie Mac reported this week that its total mortgage portfolio increased
at an annualized rate of 22.4 percent in December compared to a 29.5 percent
gain in November. The portfolio balance at the end of the period was $2.740
trillion compared to $2.689 trillion the prior month and $2.301 trillion a year
earlier. The growth rate for 2020 was 17.6 percent, up from 6.8 percent for all
of 2019.

Purchases and Issuances totaled $129.639 billion and Sales were ($1.330)
billion. The November numbers were $155.291 billion and ($4.080) billion,
respectively.

Single-family refinance loan purchase and guarantee volume was $77.6 billion
in December compared to $107.3  billion
in November, representing a 70 percent share of total single-family mortgage
portfolio purchases and issuances compared to 74 percent the previous month.

Purchases in Freddie Mac’s Mortgage Related Investments Portfolio totaled $111.509
billion for the month compared to $117.106 billion during the prior period.
Liquidations were ($1.924) billion and ($2.090) billion for December and November
respectively and Sales for the two periods were ($120.351) and ($113.522)
billion. The ending balance in the portfolio was $182.184 billion, compared to $192.951
billion in November and $212.673 billion in December 2019.

The Mortgage Related Investments portfolio declined 67.0 percent compared to
an increase of 9.4 percent a month earlier.
The annualized growth in December 2019
was 48.7 percent. Growth for the year that ended in December 2020 was negative
at (14.3) percent.

The ending balance of the Mortgage Related Investments Portfolio was
composed of $67.091 billion in Mortgage Related Securities, Mortgage Loans
valued at $110.750 billion, Non-Agency, non-Freddie Mac Mortgage-Related
Securities at $1.414 billion; and Agency non-Freddie Mac Mortgage related
securities of $2.929 billion. Mortgage related securities and other guarantee
commitments increased at an annualized rate of 25.9 percent in December compared
to 27.2 percent in November.  

Freddie Mac’s single-family delinquency
rate decreased from 2.75 percent in November to 2.64 percent in December. The
multi-family delinquency rate was unchanged at 0.16 percent.    

Freddie Mac said the measure of its exposure to changes in portfolio value
averaged $72 million in December compared to $118 million in November. Maximum
exposure to Fannie Mae-issued collateral that was included in Freddie
Mac-issued resecuritizations was approximately $85.8 billion.

Source: mortgagenewsdaily.com

The 15 Hottest Real Estate Markets of 2020

Despite the current COVID-19 recession and the initial drop in home sales, the national housing market expanded significantly in 2020. According to a report by the Joint Center for Housing Studies of Harvard University, record low home inventories in tandem with historically low mortgage interest rates will most likely ensure home prices continue to rise.

Data from Zillow shows that the national average monthly home value index for 2020 was 4.7 percent higher than in 2019. Yet some housing markets have significantly exceeded this growth. A comprehensive look at state-level data and data from the nation’s 95 largest real estate markets reveals that home prices in the Western U.S. are projected to increase more than in any other region over the next 12 months.

Chart1 Despite COVID 19 home prices have risen to record highs in 2020

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Younger adults, including millennials, drove much of the increase in home sales during 2020, with millennials making up the largest share of home buyers at 38 percent. Higher earners—often less affected by detrimental COVID-19 economic and financial repercussions—also accounted for higher home sales in 2020.

According to statistics from the National Association of Realtors, the median household income of first-time buyers in 2020 was $80,000; the median household income of repeat buyers was $106,700. By comparison, the median household income in 2019 was $68,703. These higher earners also typically work in industries that allow for remote work, which, in conjunction with historically low mortgage rates, incentivizes larger home purchases outside of urban centers.

In addition to strong financial drivers, experts attribute several other factors to the uptick in home buying since the May 2020 trough: delayed purchasing of homes due to the pandemic, an increased need for larger spaces to accommodate parents working from home and children attending school virtually, a departure from multi-family buildings to single-family homes to mitigate exposure to the virus, and an increased ability to attend virtual home tours and close on a purchase virtually.

To find the hottest real estate markets of 2020, researchers at Construction Coverage analyzed data from Zillow on the largest 95 real estate markets in the U.S. They created a composite score of each city based on the following metrics:

  • Previous 1-year change in home price (the percentage by which median home price increased or decreased over the last 12 months)
  • Median price cut (the median percentage by which the final selling price was reduced from the original listing price)
  • Median days on the market (from listing to pending)
  • Projected 1-year change in home price (the percentage by which median home price is expected to increase or decrease over the next 12 months)

At the state level, certain Western states like Idaho, Arizona, Washington, and Utah experienced some of the largest changes in price since 2019, and are also forecasted to see the biggest increases in the coming 12 months. On the contrary, Alaska and parts of the Great Plains region saw limited price growth in 2020, and prices are expected to trail the national average in the months ahead.

Chart2 Home prices in the Western US are projected to increase most in 2021

At the city level, Western locations are also disproportionately represented among the nation’s hottest real estate markets. In these areas, prices are growing quickly, homes are moving off the market fast, and buyers are typically paying very close to asking prices. Here are the 15 hottest real estate markets of 2020.

The Top 15 Hottest Real Estate Markets of 2020

15 Tennessee Memphis KXW7P6

15 Tennessee Memphis KXW7P6
Photo Credit: Alamy Stock Photo

15. Memphis, TN

  • Composite score: 70.75
  • Median home price 2020: $161,066
  • Previous 1-year change in home price: 7.7%
  • Median price cut: 2.3%
  • Median days on the market: 10
  • Projected 1-year change in home price: 5.9%

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14 Texas Austin DJN886

14 Texas Austin DJN886
Photo Credit: Alamy Stock Photo

14. Austin, TX

  • Composite score: 71.25
  • Median home price 2020: $348,838
  • Previous 1-year change in home price: 5.4%
  • Median price cut: 1.8%
  • Median days on the market: 11
  • Projected 1-year change in home price: 6.1%

13 Ohio Columbus KH4JT5

13 Ohio Columbus KH4JT5
Photo Credit: Alamy Stock Photo

13. Columbus, OH

  • Composite score: 74.00
  • Median home price 2020: $218,158
  • Previous 1-year change in home price: 6.6%
  • Median price cut: 2.2%
  • Median days on the market: 7
  • Projected 1-year change in home price: 6.2%

12 California San Diego E18BY4

12 California San Diego E18BY4
Photo Credit: Alamy Stock Photo

12. San Diego, CA

  • Composite score: 74.50
  • Median home price 2020: $620,635
  • Previous 1-year change in home price: 5.8%
  • Median price cut: 2.1%
  • Median days on the market: 15
  • Projected 1-year change in home price: 8.2%

11 North Carolina Charlotte FC0BCK

11 North Carolina Charlotte FC0BCK
Photo Credit: Alamy Stock Photo

11. Charlotte, NC

  • Composite score: 74.75
  • Median home price 2020: $249,275
  • Previous 1-year change in home price: 7.0%
  • Median price cut: 1.9%
  • Median days on the market: 11
  • Projected 1-year change in home price: 6.0%

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10 Florida Tampa EE4CHC

10 Florida Tampa EE4CHC
Photo Credit: Alamy Stock Photo

10. Tampa, FL

  • Composite score: 75.75
  • Median home price 2020: $230,627
  • Previous 1-year change in home price: 6.1%
  • Median price cut: 2.0%
  • Median days on the market: 17
  • Projected 1-year change in home price: 8.1%

09 Washington Seattle TRMHDY

09 Washington Seattle TRMHDY
Photo Credit: Alamy Stock Photo

9. Seattle, WA

  • Composite score: 77.50
  • Median home price 2020: $536,718
  • Previous 1-year change in home price: 7.5%
  • Median price cut: 2.6%
  • Median days on the market: 7
  • Projected 1-year change in home price: 7.7%

08 California Sacramento JANT9C

08 California Sacramento JANT9C
Photo Credit: Alamy Stock Photo

8. Sacramento, CA

  • Composite score: 79.00
  • Median home price 2020: $438,115
  • Previous 1-year change in home price: 5.5%
  • Median price cut: 2.1%
  • Median days on the market: 11
  • Projected 1-year change in home price: 8.8%

07 New Mexico Albuquerque W320RC

07 New Mexico Albuquerque W320RC
Photo Credit: Alamy Stock Photo

7. Albuquerque, NM

  • Composite score: 79.50
  • Median home price 2020: $219,355
  • Previous 1-year change in home price: 8.0%
  • Median price cut: 2.1%
  • Median days on the market: 10
  • Projected 1-year change in home price: 6.4%

06 Utah Provo 2BWAETY

06 Utah Provo 2BWAETY
Photo Credit: Alamy Stock Photo

6. Provo, UT

  • Composite score: 79.50
  • Median home price 2020: $362,479
  • Previous 1-year change in home price: 6.1%
  • Median price cut: 1.6%
  • Median days on the market: 12
  • Projected 1-year change in home price: 6.6%

05 Utah Salt Lake City D44ETX

05 Utah Salt Lake City D44ETX
Photo Credit: Alamy Stock Photo

5. Salt Lake City, UT

  • Composite score: 80.75
  • Median home price 2020: $398,728
  • Previous 1-year change in home price: 6.6%
  • Median price cut: 2.0%
  • Median days on the market: 9
  • Projected 1-year change in home price: 6.3%

04 Arizona Tucson MWRFTC

04 Arizona Tucson MWRFTC
Photo Credit: Alamy Stock Photo

4. Tucson, AZ

  • Composite score: 81.50
  • Median home price 2020: $227,902
  • Previous 1-year change in home price: 8.3%
  • Median price cut: 2.2%
  • Median days on the market: 11
  • Projected 1-year change in home price: 7.6%

03 Utah Ogden HM9DXF

03 Utah Ogden HM9DXF
Photo Credit: Alamy Stock Photo

3. Ogden, UT

  • Composite score: 82.50
  • Median home price 2020: $341,196
  • Previous 1-year change in home price: 8.1%
  • Median price cut: 2.0%
  • Median days on the market: 11
  • Projected 1-year change in home price: 6.7%

02 Arizona Phoenix PAN2Y4

02 Arizona Phoenix PAN2Y4
Photo Credit: Alamy Stock Photo

2. Phoenix, AZ

  • Composite score: 87.00
  • Median home price 2020: $298,322
  • Previous 1-year change in home price: 9.4%
  • Median price cut: 1.6%
  • Median days on the market: 17
  • Projected 1-year change in home price: 8.5%

01 Idaho Boise 2A4ENPE

01 Idaho Boise 2A4ENPE
Photo Credit: Alamy Stock Photo

1. Boise City, ID

  • Composite score: 92.00
  • Median home price 2020: $337,099
  • Previous 1-year change in home price: 11.5%
  • Median price cut: 1.8%
  • Median days on the market: 10
  • Projected 1-year change in home price: 7.8%

Methodology & Detailed Findings

To identify the hottest real estate markets of 2020, researchers at Construction Coverage used data from Zillow to create a composite score based on the following metrics (all weighted equally):

  • Previous 1-year change in home price
  • Median price cut
  • Median days on the market (from listing to pending)
  • Projected 1-year change in home price

Only the 95 largest real estate markets in the U.S. with available data from Zillow were included in the analysis.

Source: constructioncoverage.com

Redfin Estimate: Now More Accurate and Available for 11 Million More Properties – Redfin Blog

December 19, 2019 October 5, 2020 by Alina Ptaszynski

Updated on October 5th, 2020

Big news! Redfin is excited to announce today that we’ve improved the accuracy of the Redfin Estimate and expanded coverage to five new metro areas and several additional property types, including land and multi-family properties. The Redfin Estimate is a calculation of a home’s worth, built on our propriety machine learning algorithm that uses billions of data points about properties across the country. Our engineers and data scientists improved the accuracy of the estimate for off-market homes by 70 basis points, as the median error improved from 6.3% to 5.6%. An error rate of 5.6% means that half of all Redfin Estimates fall within 5.6% of the home’s eventual sale price. For a typical $300,000 home, the updated Redfin Estimate is now $2,100 closer to the market value and will be within $16,800 of the final sale price half of the time. 

Among Redfin’s most popular features, the Redfin Estimate gives homeowners, buyers, sellers and real estate agents insight into the value of more than 85 million properties. Claim your home on Redfin to track its Redfin Estimate over time and edit facts about your property to further improve the accuracy. When it’s time to sell, the Redfin Estimate is often the starting point in a conversation with your Redfin agent. 

“Everyone wants to know what their home is worth, which is why the Redfin Estimate drives so many homeowners to visit our site and start a conversation with a Redfin agent,” said Redfin CTO Bridget Frey. “In real estate, every tenth of a percentage point matters and can represent hundreds or thousands of dollars in a home’s value. Agents know that a smart, data-driven pricing strategy is often the difference between a home that sells quickly with multiple offers and one that sits on the market. The accuracy of the Redfin Estimate speaks to Redfin’s data advantage as a brokerage that employs thousands of real estate agents across the country who work hand-in-hand with our engineers, providing uniquely human insights as we train our machine learning algorithms. With the best data, top tech talent and deep agent expertise, Redfin has the necessary ingredients to transform the real estate industry through AI and machine learning.”

A highly accurate estimate is also critical for RedfinNow, our instant-offer business. RedfinNow buys homes directly from homeowners for cash, fixes them up, if needed, and then quickly resells them. 

“The new release not only improves the accuracy of the estimate, it includes back-office tools for RedfinNow that show the confidence of the estimate and project the future sales price, so we can better assess the risk and opportunity of buying a particular home,” said Quinn Hawkins, head of RedfinNow. “With continued advancements in AI and machine learning, we can envision a future where the Redfin Estimate becomes a live offer for a subset of properties.”  

More Accurate

Redfin has improved the accuracy of the Redfin Estimate for both off-market and on-market properties. For homes actively listed for sale, the Redfin Estimate error rate improved by 5 basis points, improving from 1.62% to 1.57%. These accuracy gains for both on- and off-market properties were measured by comparing the performance of the previous algorithm to the updated algorithm between February and August 2019. The Redfin Estimate error rate is dynamic and updates daily for on-market homes and weekly for off-market homes. The most current national and local error rates are listed on the Redfin Estimate page

Redfin’s engineers and data scientists improved the Redfin Estimate’s accuracy by conducting hundreds of experiments, testing and retesting new models and incorporating new data. Because Redfin is a brokerage, the company has complete access to the Multiple Listing Services (MLS) used by real estate agents to describe properties in extensive detail, with each MLS tracking different attributes of a home that Redfin can use to calculate a more accurate estimate, such as whether a home is located on the water, has a view or faces a busy street.

Expanded Coverage

Redfin also expanded the Redfin Estimate to five new markets: Connecticut, Boise, Des Moines, Spokane and Chattanooga. Previously available for three property types: single family homes, condos/coops and townhouses; Redfin can now provide estimates for several new types of properties including land, mobile homes and multi-family buildings. 

Check your home’s Redfin Estimate on redfindevelop.wpengine.com/redfin-estimate.

Source: redfin.com

How We Reached Financial Independence in 3 Years Using Airbnb & Real Estate

Hello! Today, I have a great guest post from Boris and Susan. They purchased their first real estate property in 2017, and became Airbnb hosts. This was a 4-bedroom home that ended up generating them $120,000 in revenue in the first 12 months. They now host close to 10,000 guests per year across all of their properties and do all of this remotely. Below is their story, enjoy!

A foreword given the current state of the world

We wrote this post back in February to describe and share our experience using real estate and Airbnb over the past 3 years to build additional sources of (semi-passive) income. As everyone else, we had no idea that the world would change so dramatically in less than a month after that.

However, although it certainly did change – especially given that the travel and hospitality industry came to a grinding halt and caused a few heartburn-filled weeks – the fundamentals remained valid. 

As we’ll discuss towards the end of the article, we’ve been able to make adjustments and pivot in a way that kept our properties occupied, covering costs, and still generating a profit (albeit a smaller one than usually).

The truth is that if we’re looking at a 3-9 months horizon, things will remain challenging and uncertain. However, this was never a short-term strategy for us, as we try to plan for the next 3-10 years and make decisions based on that sort of a timeline. But first, let’s start in the beginning.

_______________________

Here’s how it all got started as Airbnb hosts.

For many years, real estate was not really on my radar.

I was happily renting, enjoying the flexibility that it offered, and generally thought of real estate in the context of owning your own home – mainly that it limited your options and didn’t really bring too many positives, other than the hassle of maintenance and doing your own lawn every Saturday.

When I met my wife, Susan, on the other hand, she grew up with a completely different mindset.

When she was growing up in China, the common wisdom was that you should always strive to own your own place as soon as you can afford it.

When she moved to the U.S., she maintained the same viewpoint that owning real estate is a key to becoming financially secure.

We’ve met in late 2013 and started dating shortly thereafter. At that time, I was renting while she already had a condo that she was living in and the topic of real estate and financial independence would start to come up with occasional frequency.

In late 2015, we decided to go to Seattle for Susan’s birthday and, as a surprise, I rented a little houseboat on a lake for the weekend on Airbnb. If only we knew what this would have led to!

We enjoyed the weekend on the houseboat so much that when we came back home, we started to throw around the idea of buying a houseboat of our own to rent out to others on Airbnb and occasionally using it ourselves.

Although we went back to our daily routine, we continued to toy around with that idea – although we weren’t quite sure how to proceed.

Then, as it often happens, the situation changed, as Susan decided to move out of her place and we were thinking of moving in together, so we started thinking about the options. During one late evening, I found myself on Craigslist and typed in “liveaboard boat” into the search.

Pretty much the first result was a beautiful, 36′ foot, twin-engine power boat with a description that started with “perfect for a liveaboard”. Complete with 2 (tiny) bedrooms, 2 (tiny) bathrooms, a living room, kitchen and 2 open-air decks, it seemed to offer everything you’d need to be comfortable. 

Best of all, it was half the price of anything else we looked at before at $28,000. Since it was about 30 years old, it was already fully depreciated, so we figured that we’d be able to buy it, use it and then eventually resell it and recoup most of our costs if we took good care of it. 

I went to sleep that evening thinking that this idea, like so many other late-night thoughts that “seem like a good idea at the time”, would go away by morning, but surprisingly it didn’t. Even more surprisingly, when I suggested the idea to Susan of getting that boat and actually living on it, she was intrigued!

Within about two months, we gave up the apartments that we both had, bought the boat, found a marina near downtown that had a slip available, and made it our new home. This began the new phase of our life together.

Related content:

Our Foray Into Semi-Passive Income

Living on a boat was a life-changing experience for us. It certainly wasn’t always easy, but it was incredibly special and beautiful.

We had the best of both worlds. The marina was near downtown, so we got to benefit from convenient access to work and all of the amenities of city-living.

However, our living costs were cut in half, as we no longer had rent to pay (there was still a sizable marina fee, utilities, and many, many maintenance expenses – but it still ended up lower than renting).

We continued to work full-time while living aboard. During that time, we slowly came to a realization that we want to have a bit more freedom and flexibility in our lives. Although we both enjoyed work, we wanted to have the flexibility to do other things later on and not have to rely on a corporate job. Of course, this would all depend on having enough income to pay for it.

Our thought process started to come back to real estate – but this time, it was also complemented by an idea that we thought that we could generate a decent income passively through hosting via Airbnb. 

We’ve used the service numerous times on our own and have even considered renting out the boat when we were away, but we’ve always hesitated making the first jump in it (the marina also did not permit it). 

While we were still considering it, an acquaintance passed me a lead on a property that just came on the market and everything aligned such that we decided to move forward with it and purchase it.

Our start as an Airbnb host

As we acquired the property, we decided to learn everything we possibly could come across about being a successful Airbnb host. As we’re both tech, marketing and spreadsheet-obsessed, we wanted to approach this in a very structured, strategic way.

We wanted to figure out how we can best optimize our occupancy and rates, how we can automate the mundane and repetitive tasks, and how we can deliver an 5-star experience to every guest every time – without necessarily creating a second full-time job for ourselves. 

We learned everything from scratch, from how to best decorate and furnish the rooms to how to hire a reliable housekeeper and streamline those processes. There were a million little things involved but before we knew it, our property was up and running.

To our great surprise, we’ve ended up generating over $7,000 in monthly revenue from it during the first full month.

This blew us away – this was literally my monthly paycheck and yet here, we were able to generate this all on a side. I think at the end of that first month, we already knew that this would be a game-changer.

Michelle’s side note: You can click here to sign up as an Airbnb host.

Taking it to the next level

The experience with the first property was quite insightful. As we continued to run and optimize our first property, we were already thinking about repeating this with another one.

We’ve decided to take what we learned and do it again elsewhere. After some consideration, we determined that we should look in other cities. This was in part driven by the fact that real estate prices were much more affordable elsewhere, as well as the idea that we actually wanted to spread our risk a bit better.

We figured that if we’re going to approach this with a goal of automation and scale, it wouldn’t make a difference if it was a 2-hour drive or a 2-hour flight from us.

Within the next three years, we proceeded to acquire another 5 properties in cities around the U.S. that we now run as short-term rentals. 

Between them all, we’re now on track to host 10,000 guests per year, while doing it entirely remotely – living hundreds and sometimes thousands of miles away from our cities. 

For us, doing short-term rentals became one of the key components of our investment strategy. And we’d love to share a bit of our approach, so it could hopefully be helpful to you as well.

Our hosting strategy before the pandemic:

Each time we considered a new city, we started with thinking about the hosting strategy itself. Every market is a bit different and the property should cater to the types of visitors that come there. We generally like cities and urban areas – especially those that have large universities, hospitals, or large companies based there. 

This typically means that there are a large number of people coming and going there all the time – not just on weekends.

Other people will find success in more traditional vacation markets or in their own backyard.The truth is that there is demand for short-term accommodations nearly everywhere, so it’s a bit of your personal decision what you want to focus on.

As far as our strategy goes,  at least before the pandemic happened, we prefer to rent out the properties that we have by the bedroom. Contrary to expectations, it actually tends to be less work than doing full-house rentals because people tend to leave less of a mess and be more respectful of the space if they are sharing it with others.

We also generally find that at the right price point, people don’t mind the fact that the common areas and bathrooms are shared. After all, they are paying a fraction of what they’d pay at a hotel.

At the same time, we also find that there is a premium on a larger space on the weekends when groups travel. For groups, renting a 3-4 bedroom house is much more convenient than renting multiple hotel rooms – so they are willing to pay a premium for that.

As such, we rent out the full house as a single listing on the weekends and then rent out the bedrooms – individually – during the week.

From the revenue perspective, this will help keep occupancy high and will ensure that the property is not sitting empty during the week. We generally see occupancy rates of 90%+ across all of our properties when we follow this approach.

Our first step was to really nail down our processes. If you simply launch and proceed to handle everything manually, it can quickly become overwhelming to manage it – especially if you’re running multiple properties. You’d essentially create a full-time, 24/7 job for yourself.

Fundamentally, there are several key areas of running a short-term rental business: 

  • Guest communication, 
  • Check ins and check outs,
  • Housekeeping, and 
  • Price optimization. 

Fortunately, we can now benefit from a plethora of 3rd party tools that exist on the market that can automate 95% of our work in a really simple way. Here’s how we approached it:

  • Guest Communication – typically the most time consuming process is guest communication and sending instructions. This includes details on how to check-in, how to use everything inside the house, how to check-out, and so on. Fortunately, we can solve this by using a tool like Smartbnb.io. This nifty service allows us to automate all of the check-in and check-out communication for your guests, as well as automatically send out responses to the most common questions.
  • Automated Check In and Check Out – we utilize keyless, digital locks that enable us to create a code for every guest when they check in. These locks can expire the code when the guests check out and generate new ones for every guest, if desired. This makes it very easy the coming and going of the guests.
  • Housekeeping – we typically invest quite a bit of time in finding, vetting and training a local housekeeper. That individual is quite important to the overall success, as they have a large impact on guest satisfaction (it has to be clean and neat every single time), as well as our ability to manage multiple properties remotely (they have to show up on time, every time).
  • Price Management – There’s a reason why hotels, airlines, and other industries adjust their pricing regularly depending on the demand, time of year, and a myriad of other factors. This is where technology comes in again. There are a couple of tools available on the market, such as PriceLabs, BeyondPricing, and UseWheelhouse that help Airbnb hosts with price management. They monitor the demand, competition, and occupancy of your listings and those of your competitors and automatically adjusts pricing for every single one of your listings every single day. You can set a strategy that you prefer and it will make the adjustments that help you get there.

Hosting strategy adjustments during and after the pandemic:

The reality is that the crisis had an effect on all types of real estate investors – both with long-term and short-term rentals. 

Arguably, for investors with long-term rentals, the situation was also quite difficult. If the tenants are unable or unwilling to pay rent, the tools you have at your disposal are limited. 

Short-term rentals are a bit different. Firstly, it’s worth highlighting that for short-term rentals, the impact was quick and significant – but not evenly spread. 

As properties in urban areas saw their occupancy decline overnight, there was actually an increase in demand for more remote, drive-to accommodations as people looked to book them for several weeks or months at a time to isolate themselves.

If you owned property like that, you have likely seen a small dip in demand when the country initially shut down followed by an increase in longer-term bookings. So traditional vacation rentals actually fared OK – and will likely continue to do well as people likely switch to more domestic travel for the foreseeable future. 

However many others, including ourselves, have properties in urban areas who don’t necessarily cater to the leisure traveler. As such, our demand dried up and did not necessarily recover on its own right away.

As the pandemic situation began to unfold in March 2020, most hosts had to figure out how to deal with the new reality. The objective for most was simple — in the short-term, cover all of your holding costs  (mortgage, interest, insurance, property taxes) and hold on until the situation begins to improve.

Taking Action

As the situation continued, we took a number of immediate steps:

  • Increased the maximum duration that guests can stay from 5 nights (our regular limit) to 90 nights to encourage longer-term stays while also giving us flexibility to go back to regular short-term rentals when things begin to improve.
  • Tweaked the pricing to offer discounts for multi-week or monthly stays.
  • Begun to explore additional channels outside of Airbnb, such as FurnishedFinder.com – which is a popular site for connecting with travelling nurses who are looking for temporary accommodations during their assignments.
  • Implemented and highlighted more intensive cleaning and sanitizing procedures throughout all of the properties.

What happened as a result is that we’ve quickly begun to fill up our listings with people who were looking for accommodations for 2 to 4 weeks or a bit longer. 

Some guests are medical professionals. Others are students who have been kicked out of their dorms. A number were airline employees who were caught in limbo between cities. 

Although the tourist and business travel market dried up, there were no shortage of people that have been displaced suddenly that needed a place to stay that was furnished, flexible and reasonably priced. 

And then there are quite a few people who were local who looked to isolate themselves for one reason or another and just needed a safe, affordable place to stay for a couple of weeks.

Although the RevPAR (Revenue Per Available Room) went down quite a bit with these reservations, it was still a bit higher than with traditional long-term rentals and allowed us fill in our listings quickly.

As a result, our occupancy across all of the properties remained at above 90% through March and April and is on track to do the same in May. Between all of the properties, we’re able to stay above break even point even during the worst of it.

Support Your Team

We’ve provided our housekeepers in different cities with additional directions on how to sanitize the property daily and highlighted this in the listings to let the prospective guests know what’s being done.

We’ve also communicated to our housekeepers that we’ll continue to support them through this and instituted a floor pay. Whereas before, their pay was typically dependent on the number of turnovers or days worked, we’ve let them know that even as we have more longer term stays that reduce the need for daily turnovers, they’ll continue to get a fixed pay throughout this entire crises that’s about 80% of the regular amount.

This was key because these relationships are vital to the long-term success and the people on the other end are the most vulnerable to the crisis.

So while it may be tempting to cut their work as booking revenue comes down, I think it’s wise to provide everyone with stability until things begin to return to normal — if you expect to continue to operate in the short-term rental space.

What’s next?

It is our opinion that the consequences of this crisis will be felt for some time to come. Regardless of whether the government “lifts the lockdowns”, people will be hesitant to travel until the vaccine is widely available and adopted.

I think that under the best of circumstances, we’re looking at a year or so until this is more under control.

In the meantime, we’re likely to see economic pain continue to depress the hospitality industry and the real estate market.

That said, for folks investing in real estate, it represents an opportunity not seen since the financial crisis over a decade ago:

  • For one, real estate prices have been unsustainably high to the point where in many markets, it is nearly impossible to buy and cashflow a small multi-family property. Yes, short-term rentals made it possible to be profitable, but ideally, any multi-family property should also be underwritten to work as a long-term rental so you have a backup plan. For better or for worse, I think we’re going to see a significant impact on the real estate market in the coming months as the sellers begin to be more anxious to get cash out of the market and the buyers are more hesitant with using their depleted cash reserves.
  • We’ll likely see a significant number of short-term rental properties shut down or be converted to long-term options. Many existing hosts who were not able to adjust may decide that they don’t want to deal with it anymore and simply convert their listings to long-term rentals.

Paradoxically, this may actually lower the pricing on long-term rentals, as more inventory will come online. On the flip side, the lowered supply of short-term rentals may actually increase the average daily rates for the short-term rentals that remain on the market.

Personally, since the beginning, we’ve loved the idea of using real estate as a means towards getting to financial security. This hasn’t changed today.

What has changed is how we underwrite any new purchase, what sort of a discount we’d be looking for to offset the uncertainty, and the ability of a property to be able to function both as a short-term, mid-term and long-term rentals and remain profitable even if the revenue is depressed.

We’re also not in a rush – there’s no reason to be. While we may see some opportunities come up in the next few weeks, we will likely wait towards the second half of the year before beginning any additional acquisitions.

Then, we’ll likely expand beyond just urban markets to also focus more on traditional vacation markets. Especially over the next few years, we expect that people will remain hesitant about traveling abroad for their leisure and instead will seek out places they can go to domestically with their families for vacations.

We remain bullish on short-term rentals as a long-term investment strategy and will be spending the next few months on research, analysis and forming the strategy, so we can get everything in order for when we are ready to act.

To sum it up, once everything settles down, for those that are prepared, there will undoubtedly be significant opportunities to explore and act on.

Are you interested in buying real estate to rent out? What about becoming an Airbnb host?

About Boris & Susan

Boris & Susan are experienced Airbnb hosts and real estate investors hosting close to 10,000 guests per year around the country and managing their properties remotely while working full-time.

They write more about their experience, as well as help other people acquire, launch and automate their short-term rental properties at www.BuildYourBnb.com. Drop by to say hello or email them at [email protected] with any questions you may have!

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Source: makingsenseofcents.com

How We Reached Financial Independence Using Airbnb & Real Estate – Plus Strategies During The Pandemic

Hello! Today, I have a great guest post from Boris and Susan. They purchased their first real estate property in 2017, and became Airbnb hosts. This was a 4-bedroom home that ended up generating them $120,000 in revenue in the first 12 months. They now host close to 10,000 guests per year across all of their properties and do all of this remotely. Below is their story, enjoy!

A foreword given the current state of the world

We wrote this post back in February to describe and share our experience using real estate and Airbnb over the past 3 years to build additional sources of (semi-passive) income. As everyone else, we had no idea that the world would change so dramatically in less than a month after that.

However, although it certainly did change – especially given that the travel and hospitality industry came to a grinding halt and caused a few heartburn-filled weeks – the fundamentals remained valid. 

As we’ll discuss towards the end of the article, we’ve been able to make adjustments and pivot in a way that kept our properties occupied, covering costs, and still generating a profit (albeit a smaller one than usually).

The truth is that if we’re looking at a 3-9 months horizon, things will remain challenging and uncertain. However, this was never a short-term strategy for us, as we try to plan for the next 3-10 years and make decisions based on that sort of a timeline. But first, let’s start in the beginning.

_______________________

Here’s how it all got started as Airbnb hosts.

For many years, real estate was not really on my radar.

I was happily renting, enjoying the flexibility that it offered, and generally thought of real estate in the context of owning your own home – mainly that it limited your options and didn’t really bring too many positives, other than the hassle of maintenance and doing your own lawn every Saturday.

When I met my wife, Susan, on the other hand, she grew up with a completely different mindset.

When she was growing up in China, the common wisdom was that you should always strive to own your own place as soon as you can afford it.

When she moved to the U.S., she maintained the same viewpoint that owning real estate is a key to becoming financially secure.

We’ve met in late 2013 and started dating shortly thereafter. At that time, I was renting while she already had a condo that she was living in and the topic of real estate and financial independence would start to come up with occasional frequency.

In late 2015, we decided to go to Seattle for Susan’s birthday and, as a surprise, I rented a little houseboat on a lake for the weekend on Airbnb. If only we knew what this would have led to!

We enjoyed the weekend on the houseboat so much that when we came back home, we started to throw around the idea of buying a houseboat of our own to rent out to others on Airbnb and occasionally using it ourselves.

Although we went back to our daily routine, we continued to toy around with that idea – although we weren’t quite sure how to proceed.

Then, as it often happens, the situation changed, as Susan decided to move out of her place and we were thinking of moving in together, so we started thinking about the options. During one late evening, I found myself on Craigslist and typed in “liveaboard boat” into the search.

Pretty much the first result was a beautiful, 36′ foot, twin-engine power boat with a description that started with “perfect for a liveaboard”. Complete with 2 (tiny) bedrooms, 2 (tiny) bathrooms, a living room, kitchen and 2 open-air decks, it seemed to offer everything you’d need to be comfortable. 

Best of all, it was half the price of anything else we looked at before at $28,000. Since it was about 30 years old, it was already fully depreciated, so we figured that we’d be able to buy it, use it and then eventually resell it and recoup most of our costs if we took good care of it. 

I went to sleep that evening thinking that this idea, like so many other late-night thoughts that “seem like a good idea at the time”, would go away by morning, but surprisingly it didn’t. Even more surprisingly, when I suggested the idea to Susan of getting that boat and actually living on it, she was intrigued!

Within about two months, we gave up the apartments that we both had, bought the boat, found a marina near downtown that had a slip available, and made it our new home. This began the new phase of our life together.

Related content:

Our Foray Into Semi-Passive Income

Living on a boat was a life-changing experience for us. It certainly wasn’t always easy, but it was incredibly special and beautiful.

We had the best of both worlds. The marina was near downtown, so we got to benefit from convenient access to work and all of the amenities of city-living.

However, our living costs were cut in half, as we no longer had rent to pay (there was still a sizable marina fee, utilities, and many, many maintenance expenses – but it still ended up lower than renting).

We continued to work full-time while living aboard. During that time, we slowly came to a realization that we want to have a bit more freedom and flexibility in our lives. Although we both enjoyed work, we wanted to have the flexibility to do other things later on and not have to rely on a corporate job. Of course, this would all depend on having enough income to pay for it.

Our thought process started to come back to real estate – but this time, it was also complemented by an idea that we thought that we could generate a decent income passively through hosting via Airbnb. 

We’ve used the service numerous times on our own and have even considered renting out the boat when we were away, but we’ve always hesitated making the first jump in it (the marina also did not permit it). 

While we were still considering it, an acquaintance passed me a lead on a property that just came on the market and everything aligned such that we decided to move forward with it and purchase it.

Our start as an Airbnb host

As we acquired the property, we decided to learn everything we possibly could come across about being a successful Airbnb host. As we’re both tech, marketing and spreadsheet-obsessed, we wanted to approach this in a very structured, strategic way.

We wanted to figure out how we can best optimize our occupancy and rates, how we can automate the mundane and repetitive tasks, and how we can deliver an 5-star experience to every guest every time – without necessarily creating a second full-time job for ourselves. 

We learned everything from scratch, from how to best decorate and furnish the rooms to how to hire a reliable housekeeper and streamline those processes. There were a million little things involved but before we knew it, our property was up and running.

To our great surprise, we’ve ended up generating over $7,000 in monthly revenue from it during the first full month.

This blew us away – this was literally my monthly paycheck and yet here, we were able to generate this all on a side. I think at the end of that first month, we already knew that this would be a game-changer.

Michelle’s side note: You can click here to sign up as an Airbnb host.

Taking it to the next level

The experience with the first property was quite insightful. As we continued to run and optimize our first property, we were already thinking about repeating this with another one.

We’ve decided to take what we learned and do it again elsewhere. After some consideration, we determined that we should look in other cities. This was in part driven by the fact that real estate prices were much more affordable elsewhere, as well as the idea that we actually wanted to spread our risk a bit better.

We figured that if we’re going to approach this with a goal of automation and scale, it wouldn’t make a difference if it was a 2-hour drive or a 2-hour flight from us.

Within the next three years, we proceeded to acquire another 5 properties in cities around the U.S. that we now run as short-term rentals. 

Between them all, we’re now on track to host 10,000 guests per year, while doing it entirely remotely – living hundreds and sometimes thousands of miles away from our cities. 

For us, doing short-term rentals became one of the key components of our investment strategy. And we’d love to share a bit of our approach, so it could hopefully be helpful to you as well.

Our hosting strategy before the pandemic:

Each time we considered a new city, we started with thinking about the hosting strategy itself. Every market is a bit different and the property should cater to the types of visitors that come there. We generally like cities and urban areas – especially those that have large universities, hospitals, or large companies based there. 

This typically means that there are a large number of people coming and going there all the time – not just on weekends.

Other people will find success in more traditional vacation markets or in their own backyard.The truth is that there is demand for short-term accommodations nearly everywhere, so it’s a bit of your personal decision what you want to focus on.

As far as our strategy goes,  at least before the pandemic happened, we prefer to rent out the properties that we have by the bedroom. Contrary to expectations, it actually tends to be less work than doing full-house rentals because people tend to leave less of a mess and be more respectful of the space if they are sharing it with others.

We also generally find that at the right price point, people don’t mind the fact that the common areas and bathrooms are shared. After all, they are paying a fraction of what they’d pay at a hotel.

At the same time, we also find that there is a premium on a larger space on the weekends when groups travel. For groups, renting a 3-4 bedroom house is much more convenient than renting multiple hotel rooms – so they are willing to pay a premium for that.

As such, we rent out the full house as a single listing on the weekends and then rent out the bedrooms – individually – during the week.

From the revenue perspective, this will help keep occupancy high and will ensure that the property is not sitting empty during the week. We generally see occupancy rates of 90%+ across all of our properties when we follow this approach.

Our first step was to really nail down our processes. If you simply launch and proceed to handle everything manually, it can quickly become overwhelming to manage it – especially if you’re running multiple properties. You’d essentially create a full-time, 24/7 job for yourself.

Fundamentally, there are several key areas of running a short-term rental business: 

  • Guest communication, 
  • Check ins and check outs,
  • Housekeeping, and 
  • Price optimization. 

Fortunately, we can now benefit from a plethora of 3rd party tools that exist on the market that can automate 95% of our work in a really simple way. Here’s how we approached it:

  • Guest Communication – typically the most time consuming process is guest communication and sending instructions. This includes details on how to check-in, how to use everything inside the house, how to check-out, and so on. Fortunately, we can solve this by using a tool like Smartbnb.io. This nifty service allows us to automate all of the check-in and check-out communication for your guests, as well as automatically send out responses to the most common questions.
  • Automated Check In and Check Out – we utilize keyless, digital locks that enable us to create a code for every guest when they check in. These locks can expire the code when the guests check out and generate new ones for every guest, if desired. This makes it very easy the coming and going of the guests.
  • Housekeeping – we typically invest quite a bit of time in finding, vetting and training a local housekeeper. That individual is quite important to the overall success, as they have a large impact on guest satisfaction (it has to be clean and neat every single time), as well as our ability to manage multiple properties remotely (they have to show up on time, every time).
  • Price Management – There’s a reason why hotels, airlines, and other industries adjust their pricing regularly depending on the demand, time of year, and a myriad of other factors. This is where technology comes in again. There are a couple of tools available on the market, such as PriceLabs, BeyondPricing, and UseWheelhouse that help Airbnb hosts with price management. They monitor the demand, competition, and occupancy of your listings and those of your competitors and automatically adjusts pricing for every single one of your listings every single day. You can set a strategy that you prefer and it will make the adjustments that help you get there.

Hosting strategy adjustments during and after the pandemic:

The reality is that the crisis had an effect on all types of real estate investors – both with long-term and short-term rentals. 

Arguably, for investors with long-term rentals, the situation was also quite difficult. If the tenants are unable or unwilling to pay rent, the tools you have at your disposal are limited. 

Short-term rentals are a bit different. Firstly, it’s worth highlighting that for short-term rentals, the impact was quick and significant – but not evenly spread. 

As properties in urban areas saw their occupancy decline overnight, there was actually an increase in demand for more remote, drive-to accommodations as people looked to book them for several weeks or months at a time to isolate themselves.

If you owned property like that, you have likely seen a small dip in demand when the country initially shut down followed by an increase in longer-term bookings. So traditional vacation rentals actually fared OK – and will likely continue to do well as people likely switch to more domestic travel for the foreseeable future. 

However many others, including ourselves, have properties in urban areas who don’t necessarily cater to the leisure traveler. As such, our demand dried up and did not necessarily recover on its own right away.

As the pandemic situation began to unfold in March 2020, most hosts had to figure out how to deal with the new reality. The objective for most was simple — in the short-term, cover all of your holding costs  (mortgage, interest, insurance, property taxes) and hold on until the situation begins to improve.

Taking Action

As the situation continued, we took a number of immediate steps:

  • Increased the maximum duration that guests can stay from 5 nights (our regular limit) to 90 nights to encourage longer-term stays while also giving us flexibility to go back to regular short-term rentals when things begin to improve.
  • Tweaked the pricing to offer discounts for multi-week or monthly stays.
  • Begun to explore additional channels outside of Airbnb, such as FurnishedFinder.com – which is a popular site for connecting with travelling nurses who are looking for temporary accommodations during their assignments.
  • Implemented and highlighted more intensive cleaning and sanitizing procedures throughout all of the properties.

What happened as a result is that we’ve quickly begun to fill up our listings with people who were looking for accommodations for 2 to 4 weeks or a bit longer. 

Some guests are medical professionals. Others are students who have been kicked out of their dorms. A number were airline employees who were caught in limbo between cities. 

Although the tourist and business travel market dried up, there were no shortage of people that have been displaced suddenly that needed a place to stay that was furnished, flexible and reasonably priced. 

And then there are quite a few people who were local who looked to isolate themselves for one reason or another and just needed a safe, affordable place to stay for a couple of weeks.

Although the RevPAR (Revenue Per Available Room) went down quite a bit with these reservations, it was still a bit higher than with traditional long-term rentals and allowed us fill in our listings quickly.

As a result, our occupancy across all of the properties remained at above 90% through March and April and is on track to do the same in May. Between all of the properties, we’re able to stay above break even point even during the worst of it.

Support Your Team

We’ve provided our housekeepers in different cities with additional directions on how to sanitize the property daily and highlighted this in the listings to let the prospective guests know what’s being done.

We’ve also communicated to our housekeepers that we’ll continue to support them through this and instituted a floor pay. Whereas before, their pay was typically dependent on the number of turnovers or days worked, we’ve let them know that even as we have more longer term stays that reduce the need for daily turnovers, they’ll continue to get a fixed pay throughout this entire crises that’s about 80% of the regular amount.

This was key because these relationships are vital to the long-term success and the people on the other end are the most vulnerable to the crisis.

So while it may be tempting to cut their work as booking revenue comes down, I think it’s wise to provide everyone with stability until things begin to return to normal — if you expect to continue to operate in the short-term rental space.

What’s next?

It is our opinion that the consequences of this crisis will be felt for some time to come. Regardless of whether the government “lifts the lockdowns”, people will be hesitant to travel until the vaccine is widely available and adopted.

I think that under the best of circumstances, we’re looking at a year or so until this is more under control.

In the meantime, we’re likely to see economic pain continue to depress the hospitality industry and the real estate market.

That said, for folks investing in real estate, it represents an opportunity not seen since the financial crisis over a decade ago:

  • For one, real estate prices have been unsustainably high to the point where in many markets, it is nearly impossible to buy and cashflow a small multi-family property. Yes, short-term rentals made it possible to be profitable, but ideally, any multi-family property should also be underwritten to work as a long-term rental so you have a backup plan. For better or for worse, I think we’re going to see a significant impact on the real estate market in the coming months as the sellers begin to be more anxious to get cash out of the market and the buyers are more hesitant with using their depleted cash reserves.
  • We’ll likely see a significant number of short-term rental properties shut down or be converted to long-term options. Many existing hosts who were not able to adjust may decide that they don’t want to deal with it anymore and simply convert their listings to long-term rentals.

Paradoxically, this may actually lower the pricing on long-term rentals, as more inventory will come online. On the flip side, the lowered supply of short-term rentals may actually increase the average daily rates for the short-term rentals that remain on the market.

Personally, since the beginning, we’ve loved the idea of using real estate as a means towards getting to financial security. This hasn’t changed today.

What has changed is how we underwrite any new purchase, what sort of a discount we’d be looking for to offset the uncertainty, and the ability of a property to be able to function both as a short-term, mid-term and long-term rentals and remain profitable even if the revenue is depressed.

We’re also not in a rush – there’s no reason to be. While we may see some opportunities come up in the next few weeks, we will likely wait towards the second half of the year before beginning any additional acquisitions.

Then, we’ll likely expand beyond just urban markets to also focus more on traditional vacation markets. Especially over the next few years, we expect that people will remain hesitant about traveling abroad for their leisure and instead will seek out places they can go to domestically with their families for vacations.

We remain bullish on short-term rentals as a long-term investment strategy and will be spending the next few months on research, analysis and forming the strategy, so we can get everything in order for when we are ready to act.

To sum it up, once everything settles down, for those that are prepared, there will undoubtedly be significant opportunities to explore and act on.

Are you interested in buying real estate to rent out? What about becoming an Airbnb host?

About Boris & Susan

Boris & Susan are experienced Airbnb hosts and real estate investors hosting close to 10,000 guests per year around the country and managing their properties remotely while working full-time.

They write more about their experience, as well as help other people acquire, launch and automate their short-term rental properties at www.BuildYourBnb.com. Drop by to say hello or email them at [email protected] with any questions you may have!

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Source: makingsenseofcents.com