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Writer's pictureDavid Heisler

Why Short-Term Rentals Aren't The Answer

Here's The Deal Real Estate's foundation is hinged upon furnished rental properties. Although we operate our properties as mostly medium-term rentals, we have exposure to the short-term rental market. This has put us uniquely positioned to see first-hand the way this market has operated over the past few years.


One of the biggest trends we've witnessed in the real estate industry over the last three years is the growth of short-term rental investors. This has been a near ubiquitous thing across all markets in the US, and it's something we've noticed personally in our market niche.


When Covid hit, many short-term rental providers unlisted their properties from all platforms to reassess what they could sustain moving forward. This was actually an incredibly important tipping point in this space. Effectively, overnight, 20-30% of market listings vanished. This left a massive hole in the supply side of the market. And, at first, that was an appropriate market response. Not many people were traveling in the quarters directly proceeding the pandemic's outbreak. But, as we witnessed first-hand, that didn't sustain itself.



Where All My "Gurus" At?

Enter what we like to call the Real Estate Guru Complex. Now, this isn't a complex that is limited to the Real Estate industry. There is no shortage of supposed "gurus" in the age of social media influencers. Where they were once amassed a cult following, they're now signified by checkmarks and a following boasted to be in the thousands. It pains me to say, they're incredibly effective.


The structural market conditions met with the Real Estate Guru Complex brought us to this moment in the real estate investing market - where everyone and their mothers are diving carelessly into the short-term rental market, thinking it's going to solve all their problems, and create instant Grand Slams on each investment purchase. We can't even begin to express how utterly wrong we think everyone is about this. If you jumped in headlong per the recommendation of one of these "gurus", we're praying for you. Especially if you purchased properties anytime after May 2022 with the sole intent of operating your properties as short-term rentals. We'll keep it our little secret, but we know those properties won't work as long-term rentals now.


There's Just Too Many Reasons

There are numerous reasons why short-term rentals are a far cry from a perfect investment strategy. First and foremost, short-term rentals are significantly more active work than long-term (or even medium-term rentals) are. Second, with all the added interest in prophecy from "gurus", the supply side of the market has massively shifted. Nowadays, you'll find just as much, if not more supply of short-term rentals in most markets - especially the popular ones. Have fun owning a short-term rental in the Phoenix market. Reports from there aren't looking great. As if the supply side becoming unfavorable wasn't enough, we don't think the demand side of the equation has suffered as much as it could yet. Over the next six to twelve months, what do you think the effect of a recession will be on the tourism industry? Do people take more or less vacations when the economy is tightening?


You Keep Zigging, We'll Keep Zagging

It can be difficult to take contrarian opinions in the face of so many "expert" voices espousing to have the solution to all your problems. We hope that you'll join us in reevaluating the noise that is coming from the real estate investing industry currently. Before you dive in headfirst, ask yourself: "Is this influencer selling me a coaching program, because short-term rentals really are lucrative, or because they need to sell coaching programs due to their real estate investments not panning out?"


We've often found the answer to that question is simply stated in the end.

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