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Short Term Rental

Why Investors are Leaving Airbnb for Coliving Rentals

Bridging the Gap Between Traditional Leases and Airbnb-Style Stays By Adam Kolojejchick-Kotch While Airbnb’s meteoric rise catalyzed the short-term rental revolution, the landscape has since shifted. Amidst challenges such as regulatory battles and neighborhood concerns, the once-alluring promise of effortless short-term profits faces headwinds. Frustrated hosts have voiced their dissatisfaction, prompting Airbnb CEO Brian Chesky to acknowledge that the platform is “fundamentally broken.” For Airbnb hosts in the U.S., the reality is more nuanced. With occupancy rates declining and the number of available listings surging, hosts are grappling with increased competition, forcing them to compete on price and quality. Top-tier hosts continue to thrive, while lower-tier, undifferentiated properties face more significant challenges. Most investors can no longer achieve the Airbnb dream unless they own properties with luxurious amenities and features or are in a high-traffic area where vacationers visit year-round. The Rise of Coliving Homes Amidst these challenges, a new trend has emerged: the rise of coliving rentals. Investors are pivoting to cater to a different demographic — low-income earners seeking housing solutions for a few months to a year, driven by the scarcity of affordable housing. Platforms like PadSplit have capitalized on this demand, offering affordable, furnished housing options that bridge the gap between traditional leases and Airbnb-style stays. While Airbnb caters to the desire for unique vacation experiences, PadSplit taps into the necessity of providing affordable housing solutions. The demand for affordable living spaces and low-cost rooms for rent is stronger than ever, and this demand is likely to continue increasing over time. Coliving rentals offer many advantages for investors: Steady Income // Longer lease durations provide more stable and reliable income streams. Investors can earn 2.5x more on a single-family home. Reduced Vacancy Rates // Coliving rentals often attract tenants with work-related needs, such as business travelers, interns, or contractors, ensuring consistent demand and lower vacancy rates. Airbnb’s occupancy typically hovers around 48%. Hosts on platforms like PadSplit have a higher occupancy rate of 85%. Lower Operational Costs // With longer stays, property management becomes much more streamlined. Compliance and Regulation // Coliving rentals often face fewer regulatory hurdles compared to Airbnbs. Reduced Management // PadSplit handles most management tasks, such as marketing, member screening, payment collection and 24/7 member support. The Surging Demand for Affordable Housing The United States requires at least 7 million additional affordable homes to meet the demands of low-income families. With thousands of individuals languishing on years-long waiting lists for housing vouchers in virtually every American city, governments alone cannot resolve this crisis. PadSplit aligns the incentives of local governments endeavoring to address this problem with millions of existing and prospective real estate entrepreneurs seeking strong, sustainable cash flows. While Airbnb swiftly amassed over 6 million listings for vacation rentals, increasing regulation of short-term rentals in major cities like New York and Dallas has nearly halved Airbnb host revenues. Potential new taxes on Airbnb in states like California further threaten profits. Turbulent Market Conditions = More Opportunities Turbulent market conditions weed out less serious investors and open up opportunities for those willing to capitalize while facing reduced competition. Despite economic uncertainties, the need for affordable housing remains a constant, unaffected by fluctuations in the economy, interest rates, or housing prices. Investors seeking an exit from underperforming short-term rental properties are finding coliving rentals to be an attractive solution. By converting their properties to coliving rentals, they can achieve higher net occupancy rates and improved profitability while serving the essential housing needs of their communities. The home-sharing revolution continues to evolve, with coliving rentals emerging as a viable and promising alternative for investors seeking stable, long-term profits in arapidly changing real estate landscape. Coliving Homes are the Best Exit Strategy While top hosts with hundreds of reviews on Airbnb continue to perform well, newer and underperforming hosts are looking for the exit as poor Airbnb reviews from hosts are becoming more commonplace. Coliving rentals through PadSplit is the best exit strategy, which is why we have seen a big spike in Airbnb hosts converting their properties to our platform. Of course, not all STR and vacation properties will make good coliving rental homes. The sweet spot is single-family properties in major metro areas with underutilized living space. On average, our hosts earn 2.5x more than traditional single-family rentals and 33% more than Airbnb. Coliving investments offer greater flexibility in terms of location, as individuals can pool their resources to acquire housing in areas that may be unaffordable for a single household. This flexibility extends to both neighborhoods with or without HOAs. In most metropolitan areas, the demand for affordable housing is high, particularly among essential workers employed within the city limits. However, rising rental costs have led to the displacement of these workers from urban centers. Coliving enables essential low-income earners to remain within the city boundaries while enjoying shorter commute times to their workplaces. A Rapid Conversion Process PadSplit’s rooms for rent offer a swift transition for property owners seeking to move away from Airbnb. The hassle-free conversion process is facilitated by the fact that all necessary furniture is already in place. In some cases, property owners can go live with their PadSplit in just a week. This ensures a seamless shift from one model to another without prolonged vacancies or logistical challenges. It is crucial for property owners to align their strategies with society’s prevailing needs. PadSplit not only addresses the pressing need for affordable housing but also offers a reliable exit strategy. PadSplit emerges as the smart choice for investors seeking sustainable and consistent returns in today’s competitive market.

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The Long and Short of Short-Term Rentals

Generate Income and Have a Place to Vacation By Jennifer Stoops Investing in real estate is becoming a very common strategy among those looking to build wealth and diversify their investment portfolio. Single family residential assets have long been the key target of real estate investing with multi-family assets coming in at a very close second. In more recent years, a new player has joined the real estate investing strategy, the short-term rental. With travel demands being higher than ever and more flexibility to work from home, the short-term market is red hot. The rise in work from home over the last few years has increased the number of people who would like to relocate, but previously could not due to work. This is also adding to the increased demand for short-term rentals as people are looking for temporary housing while they search for their new home. What is a Short-Term Rental? What classifies as a short-term rental? These are dwellings that are furnished and rented for short periods of time and considered to be for “transient” use. Accommodations such as corporate housing and vacation rentals are examples of short-term rentals and are often an alternative to the traditional hotel. The length of the rental agreements vary from an evening to days, weeks or multiple months, but are generally less than a six month (some consider less than twelve months short-term) period of time. Short-term rentals can be anything from single family homes, multi-family buildings, condos, townhomes, apartments, a cabin, a guest home, garage apartment or even a room or a portion of a dwelling. Short-term rentals have quickly become one of the most lucrative real estate investments you can buy. However, when compared to the traditional and more familiar long-term rental, short-term rentals may seem intimidating. There is a long list of benefits to owning short-term rentals. What are the Benefits of Short-Term Rentals? Short-term rental investments create higher earnings than their long-term rental cousins. A well marketed short-term rental in a desirable area will consistently outperform long-term rental revenue. Another benefit to owning short-term rentals is better maintenance of your asset. With frequent short stays, you have a much greater ability to become aware of any maintenance issues much sooner providing the opportunity to catch issues that may otherwise go unnoticed or unreported. Flexibility is another huge gain with this type of investment. You have complete control over the calendar of when you want to offer your rental and for how long. You also have the flexibility to adjust pricing of your rental as you see fit. Not only do short-term rental investments create a profitable monthly cash flow, but the asset will also continue to appreciate year after year. Like many real estate investments, the longer you hold onto a rental property, the more it will increase in value over time and the more your investment will be worth when you decide to sell. While there is never a guarantee, real estate is usually a good investment and generally withstands difficult economic times. Accessibility to building wealth much faster is another advantage to short-term rental investing. You can take out a loan to purchase a property and use borrowed money to generate more income. This strategy is immensely helpful for beginner investors. Learning how to leverage debt in a profitable way can prove very useful in building wealth at a much faster rate. One additional benefit, but certainly not the end of the list of advantages to investing in short-term rentals, is tax benefits. Real estate investing has a significant number of tax advantages, which make them a very appealing opportunity for wealth building and portfolio diversification. Some tax advantages include deductions for maintenance, marketing, management and depreciation. Factors to Consider There are some critical factors to consider before jumping into this type of investment. Choosing the best location to purchase this type of investment plays a critical role in its profitability. Also, consider hiring a professional management company. Unless you plan to make owning short-term rentals your full-time career, hiring a management company can save you money and certainly time. There is a significant amount of work involved in the management of short-term rentals such as maintaining the calendar, collecting deposits and fees, drawing up contracts, coordinating turns in between tenants (and doing so in a very quick period of time, often within hours of the previous tenant vacating) and maintaining working utilities. There is also maintenance coordination when things break, property preservation, being on call for emergencies or issues at the property, coordinating access to the property, potential evictions and so much more. Management companies also have relationships with local vendors, which will likely mean discounted rates for you. In summary, short-term rental investing is another great wealth building opportunity under the real estate investing umbrella. There are some key factors that can make or break how well and how often your property rents. Once you’ve selected your property, don’t forget to pay attention to ways you can maximize your asset. Check out other rental listings in the area to see how yours “stacks” up against the competition. Your rental listing is one of the most critical components to getting your property rented early and often and keeping the calendar full. Use professional photos, descriptive details about your property’s features, have modern and clean furnishings and keep the property clean and well-manicured on the outside (if you are responsible for landscaping and not provided by an HOA). Having a well-stocked inventory of kitchen essentials, bathroom essentials and linens are very important to the experience your renters will have. The location of your rental will also dictate what other small details you should consider providing. For example, if your property is near the beach, supplying things like beach chairs, beach towels, beach toys and a cooler will enhance the tenant’s experience. As an added bonus, owning a vacation rental gives you the ability to have a place on hand for your own vacation. An investment

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Flooring is a Vital Part of a Wise Property Investment

LVT is the Superior Choice for Short-Term Rental Flooring By Fred Harris Short-term rentals are a great investment in 2023, but a wise investment must be backed up with wise expenditures. Smart spending goes a long way to help overcome some of the challenges you may face with short-term rental investments. Flooring is one of the most important expenditures you will need to make, and here is what you need to know to choose the right one. The Factors In order to make a wise flooring choice, there are several factors that you have to remember. Materials Cost When choosing flooring, it is easy to spend much more than you need to. Floorings can vary greatly in cost, often with little visible or functional difference. Beauty Regarding style, you may be tempted to think that flooring does not matter, but remember that flooring spans an entire space. Tenants will see a stylish space and feel they are getting good value for their money. This means higher rent and better returns. Longevity The lifespan of flooring ranges from three years to a lifetime. The five main factors of floor longevity are scratch resistance, water resistance, durability, cleanability, and whether the environment is commercial or residential. Ease of Installation and Repair If you’re doing all the labor yourself, you’ll need to pick flooring that is easy to install and repair. Some floorings will require skilled labor to install or fix. When contracting, choosing flooring that is quick, easy, and affordable to work with will keep your costs down and properties occupied. On the topic of repairs, the repair needed for damage done by pets in a rental unit is often overestimated. You will make your listing more attractive with a pet-friendly policy. Sound Reduction Noise complaints can be a serious issue. Floorings with built-in sound reduction and sound-reducing underlayments can solve the problem without expensive assembly reconstruction. Make sure to look for a flooring’s HIIC score to see how much sound reduction it will provide between floors. For those unfamiliar, HIIC is the new standard replacing the IIC method of sound-reduction measurement. If the manufacturer can only provide IIC scores and cannot provide an HIIC score, they are behind the times. The Options Make your flooring of choice a wise expenditure. Here are your options. Luxury Vinyl Tile/Plank Luxury vinyl flooring (also known as LVT or LVP) is the best option for durable and completely waterproof flooring with affordability in mind. LVT is so easy it can be installed by almost anyone, not just professionals. There are several kinds of LVT flooring to fit any need. LVT can feature polyurethane wear layers of up to 28 mil as well as microscopic ceramic-bead integration for further damage deflection. Choosing the right wear-layer thickness is key to a long-lasting floor in both residential and commercial environments. If you desire the cushion, sound reduction, and heat insulation that carpet provides, a good, thick underlayment can provide all of those benefits as well as moisture protection. If you are using floating floors, make sure the manufacturer specifies that the underlayment will not compromise the flooring’s clips. Looselay LVT is a great option for residential rental spaces because it is extremely easy to replace single planks. LVT can take a beating, but if a looselay plank becomes damaged, replacement is quick, cheap, and does not need to be done by a professional. Carpet Carpet is on the opposite side of durable, rental-friendly, and DIY flooring. It is undoubtedly the most easily damaged and stained. Carpets may loosen over time, requiring the expense of stretching. Carpet can be a challenge to clean thoroughly, and even when it appears clean, it may be trapping allergy-inducing dust, dander, pests, and more. Carpets have also been known to off-gas harmful VOCs. Finally, carpet tends to have a lifespan of about five to seven years. Tile Tile made from stone, porcelain, or ceramic is a beautiful, durable, and waterproof option for short-term rental flooring. It definitely adds value to a property, but the high cost may be a problem for large projects. Tile can be uncomfortably cold and hard for people and pets alike. Tile is also a poor choice for sound reduction. Tile requires technical skills and experience to install and may be easily damaged. While damaged tiles can be replaced, it is a costly, dirty, destructive, and time-consuming process. Cork The main selling points of cork flooring are natural cushion, sound reduction, and sustainability. However, it is susceptible to scratches, dents, and moisture damage. Laminate Laminate is meant to closely resemble hardwood flooring and is a close competitor to LVT, but it fails to match up with regard to water resistance. This may be a big problem in vacation spots where tenants often return from a swimming pool or a snowy slope. Hardwood Although beautiful, solid hardwood is one of the most expensive flooring options for rentals. It can absorb liquid, resulting in permanent warping and stains. Depending on the kind of wood and finish, solid hardwood may also be very easy to damage. Support animals and pets can be a real danger to solid hardwood flooring. Solid hardwood is also one of the worst options for sound reduction. Engineered hardwood is an alternative that still suffers from similar problems to solid hardwood, just less so. Bamboo Bamboo flooring is similar to solid hardwood flooring, but when made properly, it is generally more durable and water resistant. As sustainable flooring options go, bamboo is a decent one, but its vulnerability to moisture and scratches, poor sound reduction, and high cost make it less than ideal for short-term rentals. The Best Option LVT is the superior choice for short-term rental flooring. No other flooring comes close to providing the overall form and function that LVT does while still remaining affordable to install and replace. Your short-term rental investment will succeed if you make all your expenditures with this kind of care and consideration.

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How Modern Housing is Failing American Renters

…And How Property Investors Can Pivot to Win By Jon Friesch Nearly 30% of households are adults living alone, but the market still focuses on nuclear families. The housing supply we need already exists; we just need to know how touse it better. Across the country, low-income workers are running into a housing wall. With a shortage of more than 7.5 million homes and limited affordable options available, our vital workforce is forced to commute long distances, couch surf with friends and family, or worse, live in their cars to reach their paying jobs. With the current trajectory, there’s no bright spot on the horizon. As urban centers become denser and costs continue to rise and outpace wage increases, the housing wall is only growing and furthering the housing equity divide. A housing crisis rising from an outmoded model The traditional rental model wasn’t designed to meet the low-income earner’s financial capacity. The housing market is limited to serving people who make $50k or more a year and who have a credit score of 550. In contrast, 64% of rental households make less than $40k a year and the average workforce credit score is 461. This mismatch has serious consequences, both for the individual’s and our nation’s economic livelihood. Affordable housing is essential to personal economic well-being and a thriving workforce is instrumental in supporting a robust U.S. economic recovery. A struggling workforce that can’t secure affordable housing, or takes huge financial hits to do so, is not sustainable. “The entire affordable housing real estate ecosystem — developers and builders, architects, property managers, and those in law and finance, — stands to benefit from creating and preserving this stable asset class,” shares Richard Burns, Forbes Councils Member and President and CEO of The NHP Foundation. For example, affordable modern housing produces a reliable source of income for property owners. Unlike luxury properties that are more susceptible to fluctuations in occupancy rates, affordable properties stay rented and are often backed by a waitlist of hopeful tenants. Within the community, the diversity and range of incomes that affordable housing brings allow urban business owners to staff and grow their businesses more easily while increasing the purchasing power of those who have reduced housing costs. Burns also clarifies an important point for property owners: a potential investor with a good understanding of the economic benefits of affordable housing will be in a prime position to invest and build profitably. And the market opportunity for affordable housing is massive and growing. Our housing needs are shifting — can the market? We have a glut of unused space in cities across the country. If we look at the average square feet of new single-family homes from the years 1980 to 2020, we see an increase of almost 1,000 square feet. Simultaneously, the average household size over the same period has reduced from almost 3 people per home to 2.5.  Only 20% of today’s U.S. households are nuclear families, yet the housing market is still geared toward producing inventory focused on their needs. To give further insight into this market misalignment, nearly 30% of households are adults living alone. While the real estate investor competition remains focused on the 9.5 million small renter households that earn more than $50k, the market for one- to two-person households earning less than $35k a year (and can’t qualify for anything) sits untapped at 14 million. This represents one-third of the U.S. rental population looking for a viable solution. Coliving: An old solution with a new application and profitability As urbanization leads to unaffordable housing, the use of coliving spaces is becoming a solution borne of necessity. Low-wage workers are seeking ways to share cost burdens, and with projections that 70% of people will live in cities by 2050, coliving is a sustainable housing option to make city living more affordable and bearable. Historically, housing has often been shaped according to shared needs and resource concentration. Now squeezed by population growth and increasing real estate prices in the modern world, new models and new ways of configuring space are needed. PadSplit founder and CEO, Atticus LeBlanc took the concept of shared space and saw how to convert this unfulfilled market need into opportunity. He and his team developed a platform and playbook to make it easy and scalable for real estate investors anywhere to connect with the marketplace. From 2008 to 2016, LeBlanc owned and operated 550 affordable rental homes and gained a deep understanding of the problems low-income renters were facing. As a business person, he also understood the motivations and incentives of the private market.  With PadSplit’s approach, investors take the unused spaces (like a formal dining room or an extra bedroom) in existing single-family homes that never generate income and convert them into extra bedrooms that are private and rentable. By doing this, property owners create additional revenue streams that bring $500 and more a month extra in net revenue. LeBlanc knew he could further improve the offering and profitability by incorporating some traditionally time-consuming property management tasks into the platform. To further set investors up for success, PadSplit takes on the work of marketing the property, screening members and handling payments and collections. PadSplit worked with policy consultants to ensure its standards were based on HUD standards and that the technology allows maintenance to be tracked in real-time. Since rolling out the platform, PadSplit has seen other benefits as well. Property owners are realizing an increase in NOI on single-family rentals by 2-3 times. Vacancy rates, another important metric for property owners, also decrease. Because the demand for affordable housing is unending, PadSplit can fill rooms quickly with an average of 2.2 days in Atlanta, for example. And while the ability to easily collect weekly, personalized rent payments is an obvious asset to both renter and owner, the added boon has been collection rates of 96%. By building these operations into the technology and leaning into efficiencies of scale, PadSplit is making good on LeBlanc’s

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