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 a
rapidly 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.
