Are The Airbnb Walls Tumbling Down?

According to Reuters, Airbnb CEO Brian Chesky predicted that the company's business will bounce back after the pandemic, but that's more than we can say for many of the Airbnb property owners; everyday folks who chased the Airbnb dream by leveraging life savings and primary residences to get there.  Many of them won't have the stay-power to hold out for brighter days, and many of them will be faced with foreclosure because of it.  For them, the Airbnb walls ARE tumbling down.

The Airbnb-bug caught on in 2008 and the company was targeted to go public in 2020.  It's a brilliant concept, your home away from home while traveling; the first choice for many travelers not keen on cookie-cutter hotel rooms.  As the demand for properties grew, more and more people jumped into the Airbnb business.  Unfortunately now many of them will be forced to bail out.

 

The Wall Street Journal:  "For example, Cheryl Dopp earned more than $8,000 per month from one Airbnb listing on the Jersey Shore, double the amount that regular tenants would pay. She owned another beach house nearby as well as a Miami property, all producing what Dopp referred to as “magical money” that she would collect month after month. But the magic ended as soon as travel restrictions related to the coronavirus became widespread. Airbnb landlords like Dopp lost more $1.5 billion in bookings as cancellations stacked up. With $22,000 in monthly expenses from her Airbnb portfolio and no money coming in, Dopp now says that she “made a bargain with the devil.”

There are lots of expenses associated with running an Airbnb property - from marketing to maintenance, but nothing compares to mortgage payments that are intended to be offset with rentals.  For Airbnb owners, it's a double blow.  Their income disappeared with the COVID 19 cancellations, but the expenses didn't slow down in the process.  Although banks are offering forbearance agreements to Airbnb property owners, forbearance doesn't mean forgiveness, and many of the Airbnb property owners likely won't be in the position to double-down on payments when the forbearance term expires.  For many of them, the Airbnb walls WILL be tumbling down.

Obviously many of the Airbnb property owners were in the financial position to leverage into these investment properties,  and some leveraged their primary residence banking on long-term success.  As long as the rental income flows all is well.  When the rental income dried up overnight most of them were not in the financial position to float payments (without income) indefinitely.  Their walls are definitely tumbling down.

It's too bad the Airbnb entrepreneurs were more focused on leveraging life savings and equity to chase the American Dream than they were on paying down their mortgages - it would be an entirely different end to their story if they had.  There IS a way to pay off a mortgage (and all other debt) in a fraction of the time without refinancing, with no consideration for credit scores, and without a windfall of cash to throw at the bills.  It's not magic,  it's just math. 

The world of Airbnb is not over for good.  It will bounce back one day soon and will most likely be stronger than ever.  But ONE hard lesson for many of the gold diggers is that any shift in the market or personal mishap can be weathered IF have with little or no debt.

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