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What Airbnb Means For Mortgage Note Investors

Airbnb is surging as a trend and amateur investment strategy. What are the pros and cons of this for mortgage note investors?

Airbnb is the short-term rental platform which enables property owners and even tenants to lease and sublease their units to business, vacation, and location independent travelers. Much of the controversy over the legality of Airbnb rentals has quietened down, just like in the case of Uber. Many may take that as these big tech giants winning their battle over regulations. At least for the most part. Expect this to mean this trend will only expand and become more common, especially with our more mobile workforce.

Quick stats to know:

According to Airbnb, it now has…

  • 3M listings
  • 160M guests served
  • Units in 191 countries, and 65k cities
  • 1,400 listings for castles

What it Means for the Housing Market

Airbnb has the potential to be good for the housing market, but comes with some quirks too. It has certainly increased demand for rental properties. The higher rates frequently charged by Airbnb hosts have driven up the profitability of buy and hold properties. This in turn has also driven up home prices in many areas, and has spawned many new opportunistic landlords looking to cash in on the trend. Recent housing market data reflects this in a big way.

According to NAR:

  • Existing homes sales are up 1.1%, on track to 5.62M units to be sold in 2017
  • Average DOM (days on market) is now down to just 27
  • Median home prices have hit a new record high of $252,800

For Mortgage Note Investors

Airbnb can be good and, at the same time, complicated for note investors. On one hand, it is creating some complex rental arrangements. Professional Airbnb hosts may be controlling properties they don’t own. Some tenants may be subletting units or partial units without the landlord’s permission. This, and currently sky-high rental rates, and inexperienced landlords may yield some potentially unsustainable rental property loans. Yet, at the same time Airbnb could prove to be a solid plan B that could help struggling homeowners who need extra income to make mortgage payments, offering a solution to an impending foreclosure. We are testing this out now with REO’s on the books so stay tuned for more updates...

What’s your take on Airbnb?

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

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