WARNING -- How AirBnB, VRBO, HomeAway & CraigsList can HURT Your Property Values | Episode 146

Are YOU interested in investing in residential real estate?  If so, there’s one more threat to your property value that didn’t exist before a few years ago… but it’s a big one.  And you have companies like AirBNB, VRBO, HomeAway and CraigsList to thank for it.  I’m Bryan Ellis.  I’ll tell you all about it RIGHT NOW in Episode 146.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like YOU!

Imagine this:  You’ve bought a great house in Austin, Texas… or Tuscaloosa, Alabama… or San Diego, California… or Tallahassee, Florida… or Boise, Idaho… or Seattle, Washington… or any of hundreds of other cities ALL OVER America…

It’s a good house in a good neighborhood.  It’s certainly a Class A property… the type of place that would be entirely suitable for you and our own family to live in.  This isn’t a war zone.  This is a place with walkable streets and obvious local pride.

Your hopes are high.  You’re going to rent out that property, make a little cash flow, and build some equity.  You’re chasing financial freedom… and you’re doing it in a very responsible way.

Except, the phone isn’t ringing.  It seems that nobody wants to lease that house from you.  And you just can’t understand why.

That’s when you learn something interesting:  The house next door… and one several doors down… they’re listed on one of those services – like AirBNB, VRBO, HomeAway, and, of course, CraigsList – that allow home owners to rent out their houses on a short-term basis.  These services enable homeowners to begin running their own hotel service right in their own home…. The home that’s in the same neighborhood as your home.

No big deal, right?

That’s right… except for one thing:  Your property is located in a city that’s a common vacation destination… or home to a very popular college or pro football team… or it’s convenient to a huge venue where events are held on a regular basis like Madison Square Garden or the Georgia Dome or Staples Center…

And because of that proximity, those short-term rental properties that are in the same neighborhood as your property are very, VERY popular… and because of the nature of the reason why people come to town, there’s one common theme for those short-term visitor:  They’re coming to town to PARTY.

Hey, we all love a good party.  No doubt about it.  But there are limits… and when that party happens over and over… disturbing the peace in your neighborhood and making your property undesirable to renters or buyers, then that translates into a very real problem:  The potential for declining property values.

My friends, this is a real phenomenon.  The latest press coverage of it was this past Friday in the New York Times… and the coverage wasn’t kind to those renting their houses out in this way.

Clearly, AirBnB… maybe the biggest of the services who specialize in these short-term rentals… recognizes that there’s a problem. They’ve set up a neighbor hotline to call if there are problems.  But the reality is, there’s simply not much that AirBnB can do.

Austin, Texas – a very popular destination – tried to tackle the problem by stipulating that no more than 6 unrelated people could stay in any of these homes at any one time.  But that effort was thwarted by short-term renters of these properties, who had apparently been coached to tell local law enforcement that they weren’t actually “staying” in the property, just visiting… and some others claimed to be cousins or other distant relatives, thus technically satisfying the rule in a manner that couldn’t easily be disproven by police.

The net result in Austin:  Regulation has done little to stem the tide of disrespect of neighbors by users of short-term rentals.

To be certain, not every AirBnB or HomeAway client is a disrespectful partier.  Far from it.  But you know that it doesn’t take too many nights of disturbed sleep for one to lose patience with this type of behavior… and quite justifiably so.

What can we observe from this?

One thing is that you should certainly investigate the locale where you’re considering the purchase of property to see if there are any properties nearby that are offered as short-term rentals.  Particularly problematic are the properties that are represented as suitable for 8 or more people, as the larger the group of people occupying the property, the more probable it is that the group is a traveling party.  To my way of thinking, properties like these make other nearby properties less attractive than they’d otherwise be, and certainly demand additional caution.

Another thing we can conclude is that more regulation is coming to address these issues.  And reactionary regulation such as that spurred by issues like this short-term rental issue is usually poorly considered and has unintended side effects that are negative for the broader populace.  You can be sure that such regulation will ultimately restrict the rights of reasonable home owners as well, and not just those using their properties as short-term rental property.  And clearly, that’s a bad thing.

One solution that I can think of is this:  Home Owners Associations.  I’m not a huge fan of home owner’s associations, because they’re frequently controlled by people with less intellectual acuity, and even less integrity, than – well, I don’t want to insult criminals or those with mental challenges – so let’s just say they’re frequently not the most high-quality people in the world.

But this is a PERFECT place for a responsible Home Owner’s Association to take action.  Most HOA’s have quasi-governmental authority over the properties in their neighborhoods, usually including the right of foreclosure, as a response to rules violations.  And that is a very big stick to wield.  Why not use that authority – in a responsible way – to solve this problem on a neighborhood-by-neighborhood basis?

There… problem solved for a very large swath of residential properties in America.  No need for more regulations.

But bottom line, folks:  Don’t overlook this issue.  It’s an easy piece of due diligence to perform, and it could be a really big factor in the desirability, and thus the value, of that piece of property in which you’re considering investing.  Like good ole Ben Franklin told us… an ounce of prevention is worth a pound of cure!

Hey… I hope you enjoyed today’s show.  If you’d like a transcript of this show, text the word TRANSCRIPT to 33444 and I’ll be happy to send it to you, free of charge.

My friends, I’ve got some GREAT… really great… investment opportunities coming up that I’ll announce very soon – within 10 days, actually… and you’ll definitely want to know about these.  May I remind you that when I had 19 great investment properties available 2 weeks ago, they all disappeared within a few days?  And what I have to share with you within 10 days is just as spectacular as those opportunities – maybe even more so!

So be prepared.  Text the word TOPPICKS to 33444 to get on my early notification list.  The word there is TOPPICKS spelled TOPPICKS with no spaces.  Text TOPPPICKS to 33444 now!

My friends… invest wisely today, and live well forever!

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