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Higher Rates and Short Supply: The State of Real Estate in 2022
The last two years caught many of us off guard—and not just because of the pandemic. They also ushered in the hottest housing market on record, with home prices rising nationally by nearly 19% in 2021, driven primarily by low mortgage rates and a major supply shortage.
But while some had hoped 2022 would bring a return to normalcy, the U.S. real estate market continues to boom, despite rising interest rates and decreasing affordability.
So what’s driving this persistent demand? And is there an end in sight?
Here are three factors impacting the real estate market right now. Find out how they could affect you if you’re a current homeowner or plan to buy or sell a home this year.
MORTGAGE RATES ARE RISING FASTER THAN EXPECTED
Over the past couple of years, homebuyers have faced intense competition for new homes—in part due to historically low mortgage rates that were a result of the Federal Reserve’s efforts to keep the economy afloat during the COVID-19 pandemic.
However, in response to a concerning level of inflation, the Fed is now reversing those efforts by raising the federal funds rate. And as a result, mortgage rates are rising, as well. Few experts predicted, though, that mortgage rates would go up as quickly as they have.
In January 2022, the Mortgage Bankers Association projected that rates would reach 4% by the end of this year. By mid-April, however, the average 30-year fixed mortgage rate had already hit 5%, up from around 3% just one year prior. On a $400,000 mortgage, that 2% difference could translate into an additional $461 per monthly payment.
Since then, mortgage rates have continued on an upward trend. So what impact are these rising rates having on demand? While many buyers had hoped for a cooling effect, experts warn that may not be the case.
Ali Wolf, chief economist at housing market research firm Zanda, told Fortune magazine, “Rising mortgage rates are having a counterintuitive effect on the housing market. Home shoppers are actually sprung into action in an attempt to buy a home before mortgage rates rise any higher.”
Since inventory remains low, the resulting “race” has kept the homebuying market highly competitive–at least for now.
What does it mean for you?
While current 30-year fixed mortgage rates represent an increase over previous months, they remain well below the historical average of 8%. As inflation across the economy continues, the Fed is likely to raise rates further this year. Buyers should act fast to secure a good mortgage rate. We’d be happy to refer you to a lender who can help.
For sellers, speed is also of the essence. The pool of potential buyers may shrink as mortgages become more expensive. And if you plan to finance your next home, you’ll want to act quickly to secure a favorable rate for yourself. Contact us today to discuss your options.
HOME PRICES KEEP CLIMBING
History shows that higher interest rates don’t necessarily translate to lower home prices. In fact, home prices rose 5% between 1980 and 1982, a period of significantly higher mortgage rates and inflation.
Forecasters expect that home prices will continue to go up throughout 2022, though likely at a slower pace than the 18.8% increase of the last 12 months. Bank of America predicts that prices will be up approximately 10% by the end of this year, while Fannie Mae estimates 11.2%.
In addition to limited supply and a race to beat rising mortgage rates, home values are also climbing because of positive economic indicators, like low unemployment. Plus, rents are soaring–up 17% from a year ago–which is prompting more first-time homebuyers to enter the market. Add to that the continued popularity of remote work, and it’s easy to see why property prices continue to surge.
However, it’s not all bad news for prospective homebuyers. Economists expect that as mortgage rates rise, the rate of appreciation will continue to taper, though the effect may be gradual.
“Eventually mortgage rates will slow down home prices,” according to Ken Johnson, an economist at Florida Atlantic University interviewed by Marketwatch. “We should not see rapid upticks in prices as mortgage rates rise.” Forecasters agree—Fannie Mae expects price increases to slow to 4.2% in 2023.
What does it mean for you?
While the pace of appreciation is likely to decrease next year, home prices show no signs of going down. However, current labor shortages are leading to higher salaries and better job opportunities for many workers. You may find that your income growth outpaces home prices, making homeownership more affordable for you in the future.
For homeowners, the outlook’s even brighter. You could find yourself sitting on a nice pile of equity.
INVENTORY REMAINS EXTREMELY LOW
As noted, one of the largest hurdles to homeownership is a lack of inventory. According to a February 2022 report by Realtor.com, there’s an expanding gap between household formation and home construction, which has resulted in a nationwide shortage of 5.8 million housing units.
The origins of this shortage date back to the 2008 housing crisis, during which crashing home values led contractors to stop building new properties—a trend that has not been fully reversed.
That decline in home construction also resulted in a decrease in the number of home building professionals, a trend that was exacerbated by job losses during the COVID-19 pandemic. Now, many builders are limited by their ability to find qualified labor.
Another major challenge is a staggering increase in the cost of materials. Pandemic-related supply chain shortages have been a significant driver, with home building material costs rising on average 20% on a year-over-year basis. The price of framing lumber alone has tripled since August 2021.
These trends add tens of thousands of dollars to the cost of a typical home. Factors like a lack of buildable land in many areas, restrictive zoning, and a shortage of developers are also contributing to the issue.
Most homebuying experts agree that the lack of inventory is the primary factor driving rising housing prices and unprecedented competition for homes. With available housing units near four-decade lows, the end of the current housing boom is not yet in sight.
What does it mean for you?
Prospective buyers should be prepared to compete for a home, since low inventory can lead to multiple offers. Y ou may also need to expand your search parameters.
For sellers, the picture is rosier. In this strong market, your home may be worth more than you realize.
Think of Joshua Tree as the scrappy little brother of Palm Springs.
This desert community marches to the beat of its own mystical drum circle, trading in midcentury-modern glitz for a funky homesteader feel. You’re just as likely to strike up a conversation about aliens or the healing properties of sound baths here as you are to trade tips on the best hiking trails in Joshua Tree National Park. At 1,235 square miles, the park is slightly larger than the state of Rhode Island, encompassing the nexus of the Mojave and the Colorado Desert ecosystems, with its colorfully named rock formations, petroglyphs, and forests of spindly Joshua trees.
During a visit, you can reserve a National Park Service campsite or choose from among one of the area’s many lodging options, including a new Airstream glamping site. But to truly capture the spirit of the place, live like a temporary local in a Joshua Tree Airbnb, where you’ll often find eclectic desert-inspired decor, “cowboy pools” (aka galvanized steel livestock troughs) for cooling off, and fire pits for late-night conversations under the stars.
Best neighborhoods near Joshua Tree to stay in
- Joshua Tree features a walkable business district centered around California State Route 62, with an assortment of weekender-friendly spots such as a coffee shop, a brewery, a weekly farmers’ market, and art galleries, including the decidedly quirky World Famous Crochet Museum.
- Yucca Valley sits east of Joshua Tree along Highway 62 and is home to attractions like the Hi-Desert Nature Museum, plus conveniences including grocery and sporting goods stores if you need to stock up before hiking, camping, or cooking at your Airbnb.
- Other nearby communities include Twentynine Palms, which sits near the national park’s North Entrance Station and offers nearly two dozen restaurants, and Pioneertown, a kitschy Old West community built in the 1940s, where dozens of westerns were filmed and which is still home to Pappy & Harriet’s Pioneertown Palace, a landmark honky-tonk and barbecue restaurant.
5 Must Knows: Vacation Rentals in Greater Palm Springs
Planning your trip to Greater Palm Springs holds endless options. If you’ve been dreaming about relaxing poolside in a caftan, sipping martinis in a mid-century modern gem like the stars of Hollywood’s golden era or reconnecting with family and friends under one roof sharing recipes in the kitchen and teaching the kids to play backgammon, a Greater Palm Springs vacation rental is the perfect place for you.
When booking a vacation rental, it is important to remember to keep in mind these 5 things:
BEFORE YOU BOOK
Avoid scams by checking for a Permit ID on the advertisement for the home you’re booking. Vacation rental homes and condos are required to be licensed in Greater Palm Springs, so when you’re doing your search, make sure you see the home’s Permit ID number somewhere on the listing. Booking an unlicensed home can lead to problems, like the home not really being there when you go to check-in. Once you book, you can even contact the city the home is licensed in to confirm the permit number and address matches up. Also, be sure to review the house rules before you book so you know what to expect.
Prices and availability can vary widely depending on the time of year. Check out the signature events page for dates and information about some of the region’s largest events. These are great times of year to visit, but if you’re looking for a great deal, and your dates are flexible, consider the summer and fall months or mid-week stays. Hosts will typically offer breaks on the nightly rate for longer stays, as well.
CHECK-IN DAY
Every vacation rental is a little different. Make sure you read the check-in procedures before you leave so you know if you’re going directly to the house or to another location to pick up keys first. Some communities require a host meet guests for an in-person arrival, so scheduling that in advance can save valuable vacation time.
Travel sustainably. Most vacation rental homes have limits on the number of vehicles that can be parked at a property. Having too many cars can even result in fines for guests in some communities. Plan ahead to help reduce your carbon footprint and avoid costly parking fines by carpooling with other guests and bringing as few vehicles as possible.
Pro Tip: Bring your food and drinks in a cooler or buy them cold at a local grocery store. Even the best refrigerators will take 6-8 hours to cool down if you fill it full of room temperature groceries. Starting out cold will mean less time waiting and more time enjoying chilled beverages by the pool.
BE A GOOD NEIGHBOR
Greater Palm Springs consists of nine cities. Each city has specific guidelines for vacation rentals that you can find in their ‘Good Neighbor Brochure’ linked below:
- Bermuda Dunes (and other unincorporated Riverside County)
- Cathedral City
- Desert Hot Springs. PDF File
- Indian Wells
- Indio
- La Quinta
- Palm Desert
- Palm Springs
- Rancho Mirage. PDF File
When thinking of renting a vacation rental, keep in mind that you are most likely going to stay in a neighborhood, surrounded by residents in their own homes.
Tips for being a good neighbor while in your vacation rental:
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speakers, if you bring them, play them inside only
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enjoy your day in the pool, but keep in mind any curfew hours and when noise levels must be brought down
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stick to the house rules with the amount of people you are letting onto the property
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avoid parking vehicles in front of neighbor’s homes, use the garage and driveway whenever possible
TRAVELING WITH FIDO
Looking to bring your dog to Greater Palm Springs? When in search of a vacation rental, filter out options that do not allow pets, narrowing down your options from the start. You will also want to pay attention to any restrictions, such as weight, number of dogs that are permitted during your stay and any others. When communicating with the owner, it is recommended and often required that you tell them if you are bringing a dog and how many. When at the house, it is your responsibility to clean up after them (come prepared with poop bags). Many homes with pools do not have a gate surrounding it, so please be careful when letting your dog around it.
When going out into town, you will find that most of Greater Palm Springs is very welcoming to dogs! Check out all these dog-friendly restaurants and hiking trails. Please remember that the ground does get hot and can burn your puppy’s paws, so keep in mind when you take them out! Leaving dogs in your car is illegal at all times. Please always keep your dog on a leash and supervised when out in public places!
PLANNING YOUR STAY
Planning for your stay in Greater Palm Springs will vary depending on what your intentions are while here. For the thrill-seekers and adventurous travelers, discover the wonderful activities that will invite you outdoors where you can literally reach new heights while hiking. For the chill-chasers and ones who want to spend their days by the pool, learn about the natural mineral waters and well-known spas throughout the nine cities.
Another great thing about Greater Palm Springs is the amount of events that are constantly taking place, whether you are here in the middle of summer of during the holidays, there is always something to do. From farmers markets where you can find locally grown and made goods to live music and performances, your favorite performer may just be headlining.
If you are looking to immerse yourself into the culture of Greater Palm Springs and learn more about the background of the communities, there are great resources for that when trip planning. Download the ArtsGPS app in the app store and take self-guided tours around Greater Palm Springs. Learn about farmworkers that started growing on this land, indigenous people that have always called this their home and how it has grown and evolved into what it is today. After touring the art, you may find yourself hungry–look no further than DineGPS. You will find a diverse range of food to choose from, including Mexican, Greek, French and so much more. While out and about, look here to find locally owned businesses to show support to.
Greater Palm Springs is filled with beautiful views, sunny blue skies and attractions that keep everyone in mind. Book your stay in Greater Palm Springs and discover the endless possibilities in this Southern California oasis. Here are some fun facts to know when visiting Greater Palm Springs!
The sun is shining more that 300 days out of the year in this Southern California oasis! Before heading out to one of the 50,000 pools, grab that sunscreen and hat and refill your water, staying hydrated is very important to staying cool!
Visit the Palm Springs Aerial Tramway where you can find the world’s largest rotating tramcar. The date gardens here produce more that 80 percent of dates in the United States – which is why you have to try a famous date shake! Desert Hot Springs has one of the world’s best mineral water aquifers with naturally heated waters. When driving in, those large wind turbines that greet you produce energy for most of Southern California, with one turbine having the capacity of 3 megawatts, enough energy to generate over 1,500 homes.
Are you ready to experience Greater Palm Springs? Plan your getaway to this beautiful oasis and find a vacation rental that best suites you!
Hedge Against Inflation With These 3 Real Estate Investment Types
The annual inflation rate in the United States is currently around 7.5%—the highest it has been since 1982.1 It doesn’t matter if you’re a cashier, lawyer, plumber, or retiree; if you spend U.S. dollars, inflation impacts you.
Economists expect the effects of inflation, like a higher cost of goods, to continue.2 Luckily, an investment in real estate can ease some of the financial strain.
Here’s what you need to know about inflation, how it impacts you, and how an investment in real estate can help.
WHAT IS INFLATION AND HOW DOES IT IMPACT ME?
Inflation is a decline in the value of money. When the rate of inflation rises, prices for goods and services go up. Therefore, a dollar buys you a little bit less with every passing day.
The consumer price index, or CPI, is a standard measure of inflation. Based on the latest CPI data, prices increased 7.5% from January 2021 to January 2022.1 A little bit of inflation is considered healthy for the economy, but 7.5% in a single year is high.
How does inflation affect your life? Here are a few of the negative impacts:
Decreased Purchasing Power
I touched on this already, but as prices rise, your dollar won’t stretch as far as it used to. That means you’ll be able to purchase fewer goods and services with a limited budget.
Increased Borrowing Costs
In an effort to curb inflation, the Federal Reserve is expected to raise the federal funds rate. Therefore, consumers are likely to pay a higher interest rate on new mortgages, car loans, and variable-rate credit cards.3
Lower Standard of Living
Wage growth tends to lag behind price increases. According to Moody Analytics, when adjusted for inflation, average weekly earnings in January were down 3.1% from a year earlier.4 As such, life is becoming less affordable for everyone. Inflation can force those on a fixed income, like retirees, to make lifestyle changes and prioritize essentials.
Eroded Savings
If you store all your savings in a bank account, inflation is even more damaging. As of February 2022, the national average interest rate for a savings account is 0.06%, not nearly enough to keep up with inflation. And economists don’t expect that rate to go much higher.3
One of the best ways to mitigate these effects is to find a place to invest your money other than the bank. Even though interest rates are expected to rise, they’re unlikely to get high enough to beat inflation. If you hoard cash, the value of your money will decrease every year and more rapidly in years with elevated inflation.
REAL ESTATE: A PROVEN HEDGE AGAINST INFLATION
So where is a good place to invest your money to protect (hedge) against the impacts of inflation? There are several investment vehicles that financial advisors traditionally recommend, including:
Stocks
Some people invest in stocks as their primary inflation hedge. However, the stock market can become volatile during inflationary times, as we’ve seen in recent months.5
Commodities
Commodities are tangible assets, like oil, livestock, and minerals. The theory is that the price of commodities should climb alongside inflation. But the classic choice–gold–hasn’t risen consistently during periods of inflation since the 1970s, according to data from Morningstar Direct.6
Inflation-Indexed Bonds
Treasury inflation-protected securities, or TIPS, are U.S. government-issued bonds that are indexed to the inflation rate. Bonds are considered low risk, but the returns they offer are generally low, as well.7
Real Estate
Real estate prices across the board tend to rise along with inflation and often rise faster than inflation.8 That’s one of the reasons demand for real estate is soaring right now.9
I believe real estate is the best hedge against inflation. Owning real estate does more than protect your wealth—it can actually make you money. For example, home prices rose nearly 17% from 2020 to 2021, 10% ahead of the 7% inflation that occurred in the same timeframe.10
Plus, certain types of real estate investments can help you generate a stream of passive income. In the past year, property owners didn’t just avoid the erosion of purchasing power caused by inflation; they got ahead.
TYPES OF REAL ESTATE INVESTMENTS
Though there are myriad ways to invest in real estate, there are three basic investment types that I recommend for beginner and intermediate investors. Remember that I can help you determine which options are best for your financial goals and budget.
Primary Residence
If you own your home, you’re already ahead. The advantages of homeownership become even more apparent in inflationary times. As inflation raises prices throughout the economy, the value of your home is likely to go up concurrently. At the same time, you’ve locked in a set mortgage payment for the next 30 years, so you’ll be immune to rising rental costs.
If you don’t already own your primary residence, homeownership is a worthwhile goal to pursue.
Though the task of saving enough for a down payment may seem daunting, there are several strategies that can make homeownership easier to achieve. If you’re not sure how to get started with the home buying process, contact me. My team can help you find the strategy and property that fits your needs and budget.
Whether you already own a primary residence or are still renting, now is a good time to also start thinking about an investment property. The types of investment properties you’ll buy, as a solo investor, generally fall into two categories: long-term rentals and short-term rentals.
Long-Term (Traditional) Rentals
A long-term, or traditional rental, is a dwelling that’s leased out for an extended period. An example of this is a single-family home where a tenant signs a one-year lease and brings all their own furniture.
Long-term rentals are a form of housing. For most tenants, the rental serves as their primary residence, which means it’s a necessary expense. This unique quality of long-term rentals can help to provide stable returns in uncertain times, especially when we have high inflation.
To invest in a long-term rental, you’ll need to budget for maintenance, repairs, property taxes, and insurance. You’ll also need to have a plan for managing the property. But a well-chosen investment property should pay for itself through rental income, and you’ll benefit from appreciation as the property rises in value.
I can help you find an ideal long-term rental property to suit your budget and investment goals. Reach out to talk about your needs and our local market opportunities.
Short-Term (Vacation) Rentals
Short-term or vacation rentals function more like hotels in that they offer temporary accommodations. A short-term rental is defined as a residential dwelling that is rented for 30 days or less. The furniture and other amenities are provided by the property owner, and today many short-term rentals are listed on websites like Airbnb and VRBO.
A short-term rental can potentially earn you a higher return than a long-term rental, but this comes at the cost of daily, hands-on management. With a short-term rental, you’re not just entering the real estate business; you’re entering the hospitality business, too.
Done right, short-term rentals can be both a hedge against inflation and a profitable source of income. As a bonus, when the home isn’t being rented you have an affordable vacation spot for yourself and your family!
Contact me today if you’re interested in exploring options in either the long-term or short-term rental market. Mortgage rates are expected to rise, so you’ll want to act fast to maximize your investment return.
I'M INVESTED IN HELPING YOU
Inflation is a fact of life in the U.S. economy. Luckily, you can prepare for inflation with a carefully managed investment portfolio that includes real estate. Owning a primary residence or investing in a short-term or long-term rental will help you both mitigate the effects of inflation and grow your net worth, which makes it a strategic move in our current financial environment.
If you’re ready to invest in real estate to build wealth and protect yourself from rising inflation, contact me. My team can help you find a primary residence or investment property that meets your financial goals.
The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.
Sources:
- Bloomberg –https://www.bloomberg.com/news/articles/2022-02-10/u-s-inflation-charges-higher-with-larger-than-forecast-gain
- CNN –https://www.cnn.com/2022/01/01/economy/inflation-prices-2022-preview/index.html
- CNBC –https://www.cnbc.com/2022/01/26/the-fed-sets-the-stage-for-a-rate-hike-heres-what-that-means-for-you.html
- Reuters –https://www.reuters.com/business/us-consumer-prices-rise-strongly-january-weekly-jobless-claims-fall-2022-02-10/
- NBC News –https://www.nbcnews.com/business/markets/market-slide-dow-falls-700-points-sp-enters-correction-territory-rcna13304
- CNBC –https://www.cnbc.com/2021/12/20/gold-is-losing-its-status-as-an-inflation-hedge-two-traders-warn.html
- Morningstar –https://www.morningstar.com/articles/1079158/why-are-inflation-protected-bond-funds-losing-money
- The Washington Post –https://www.washingtonpost.com/business/2022/01/04/heres-how-inflation-could-affect-your-next-real-estate-move/
- Bloomberg –https://www.bloomberg.com/news/articles/2022-01-24/is-real-estate-a-good-investment-hedge-against-inflation-what-the-experts-say
- CNN –https://www.cnn.com/2022/01/20/homes/us-nar-home-sales-december-and-2021/index.html
12 Attributes of a Successful Vacation Rental
There’s no one-size-fits-all approach to what makes a vacation rental successful. However, there are 12 attributes of a successful vacation rental that indicate better performance than those that don’t exhibit these aspects. This post breaks down what makes each aspect so powerful, as well as tips for applying these traits to your short-term rental, no matter your market.
- Take Great Photos
- Implement Instant Book on Airbnb for Better Occupancy Rates
- Choose the Right Cancellation Policy
- Get Good Reviews: Focus on Guest Satisfaction
- Learn How to Set an Cleaning Fee That Doesn’t Deter Guests
- Leverage Dynamic Pricing
- Pick the Best Type of Property for Your Goals
- Keep It Clean: Cleanliness Impacts Your Ratings
- Attract More Guests with Only the Best Amenities
- Be Pet-Friendly—And Earn More Revenue
- Benchmark Your Property’s Performance
- Be Unique: Ideas Outside the Box Get More Guests
1. Take Great Photos
A picture is worth a thousand words, as well as several thousands of dollars if you take good photos. The more (representative) photos you have, the higher your occupancy rate. But be sure to include 20–40 verified photos. Guests want to know that their experience matches the listing. Give them peace of mind by including verified photos, and see your effort pay off with higher occupancy rates.
Don’t sweat it if you’re not confident in your photography skills. There are plenty of online resources that teach you how to take excellent photos with your smartphone. But, if you’d rather hire a professional photographer, the short-term rental giant makes it easy to do.
2. Implement Instant Book on Airbnb for Better Occupancy Rates
In our fast-paced world, people expect instantaneous buys and bookings; they don’t want to wait for you to accept their reservation request. Do your guests (and your occupancy rate) a favor by implementing Instant Book.
By giving your guests the option to book immediately, you’re not only guaranteeing their spot, but boosting your ranking on Airbnb’s Search Engine Results Page. This means that your listing will pop up ahead of others, letting guests lay eyes on your property before others. If you have stellar photos, you’re among the top listings, and guests can book instantly, you can anticipate a 4.1–5.7% increase in your occupancy rates.
3. Choose the Right Cancelation Policy
No two vacation rental hosts will agree on which cancelation policy is best; cancellation policies are split somewhat evenly among hosts. Whatever you decide, be strategic. Strict cancellation policies often make more sense for hosts with nicer properties. These hosts can usually afford to lose a few bookings here and there.
On the other hand, hosts with more modest properties generally benefit from a flexible policy that allows guests to cancel up to the day before their stay.
4. Get Good Reviews: Focus on Guest Satisfaction
Every new vacation rental host wants to know how to get good reviews. The answer’s simple, really: be a good host and offer a great experience. That’s easier said than done sometimes, but overall, it’s a proven approach. And it pays off; your Airbnb business is based on positive reviews, so better reviews bring in more guests.
If you have a single property and can be pretty hands-on, ensuring guests have everything they need is pretty easy. It’s when you scale your vacation rental count that it becomes harder to keep an eye on guest satisfaction. In fact, the data shows that non-professional (read: hosts with only one or two properties) perform better than hosts with a dozen (or dozens of) properties.
If you are looking to scale your vacation rental operation, or even thinking about hiring a property manager for your sole property, be sure to choose a top-rated property manager to ensure your guests have a great stay—and leave a positive review to let potential guests know.
5. Learn How to Set a Cleaning Fee That Doesn’t Deter Guests
This might be the most polarizing topic among hosts.
Should you set a steep fee in case you have inconsiderate guests? Or should you lower your cleaning fee to attract potential guests? It all depends, really; there’s no blanket answer here.
However, that doesn’t mean that there aren’t multiple correct answers. As a host, you have to do what’s right for you and your goals. If you find that guests are booking other comparable properties in your area, take a hard look at your cleaning fee.
Data shows that cleaning fees need to align with the property size — there’s no reason to have a steep fee for a small property.
There may be a good reason to bring it down, too: having a low cleaning fee can boost your occupancy rate. On the flip side, high cleaning fees can actually be justified if you’re armed with good reviews.
6. Leverage Dynamic Pricing
No host optimizes their revenue, occupancy rate, or guest satisfaction by setting their pricing and never updating it. To truly boost your property’s performance, you need to leverage dynamic pricing.
This approach lets you adjust your nightly rate to match supply and demand in your area. If there’s an event in your area a few months down the road, up your price to capitalize on increased demand. If it’s the slow season, adjust accordingly there, too.
7. Pick the Best Type of Property for Your Goals
Before the COVID-19 pandemic, buying a vacation rental was a solid investment for virtually all property types. But throughout the darkest days of the pandemic to the present, the best type of property for a vacation rental has been larger homes. It makes sense: guests from cramped, urban areas craved more space. “Friend bubbles” felt safer renting large, spacious properties spread apart from other homes.
Hosts with vacation rentals with 5+ bedrooms routinely performed better than hosts with smaller spaces throughout the pandemic. The trend is likely to hold, at least until the pandemic is truly behind us. So, if you can afford a large property, the numbers say it’s an excellent investment.
8. Keep It Clean: Cleanliness Impacts Your Ratings
Though we’ve already discussed cleaning fees, it’s important to reiterate that guests have new standards for “clean.” While short-term rentals gave many people a much-needed escape from daily life during the depths of the pandemic, hosts (and those who kept hosts’ properties clean) upped their cleaning protocol. Now, guests expect a sparklingly clean stay every time—and why shouldn’t they? No one wants to stay in a dirty or uncared-for space
Besides it being a good practice for hosts to offer their guests a clean place to stay, it’s good for your business, too. Before the pandemic, hosts who scored high on cleanliness enjoyed a 2.3% occupancy rate increase compared to hosts who scored lower. In 2021, hosts with high cleanliness rates saw their occupancy rates increase by 6.8% over hosts in the seven-to-eight category of cleanliness. Even if you’re only looking at it from a financial perspective, reviews on cleanliness improve occupancy rates.
9. Attract More Guests with Only the Best Amenities
Guests don’t just expect a palace to stay, they expect an experience. You can’t get by on just offering plush towels, mid-tier linens, and some spotty wifi. Guests expect more, and the most successful vacation rentals have the most in-demand amenities for their market.
The best amenities help your property stand out from the rest—and offer your guests a memorable experience. These amenities earn more Airbnb bookings; if you have a fireplace, AC, hot tub, or allow pets, and other amenities guests love, you could earn much more than competitors who don’t, depending on your market. In short, find out which amenities make the most sense for revenue and occupancy rates, and make changes if you can.
10. Be Pet-Friendly—And Earn More Revenue
Should you allow pets? Absolutely. The data shows that pet-friendly vacation rentals earn more than those that don’t allow pets. And, really, you have nothing to lose by allowing pets. Pet fees on Airbnb vary wildly but should help you rest easy knowing that, should a four-legged guest ruin a rug, the pet fee covers it.
11. Benchmark Your Property’s Performance
If you’re serious about increasing your vacation rental rates, you need to get serious about benchmarking your property’s performance. The most successful properties benchmark against their competition.
12. Be Unique: Ideas Outside the Box Get More Guests
Guests choose to stay at a vacation rental for several reasons. But one of the biggest reasons is to stay in a unique space. If your property blends in with the rest, it’s difficult to attract some of the most selective guests. If you’re eyeing a new property, go for a unique one. While this may not be an option for every host, it’s an excellent investment.
If you already have a short-term rental, do anything you can to make it stand out from the pack, and make it feel like an experience your guests will want to document and return to. If that’s the case, you can rest assured they’ll leave a positive review. With just a few solid bedroom ideas, you can turn a modest bedroom into a plush, memorable one.
And, while decor doesn’t matter as much as the amenities you offer, there’s a lot to be said about decorating your vacation rental. Choose neutral-yet-attractive features, colors, and decor—make it pop. Unique ideas are endless; you don’t need a yurt, Airstream, or tree house to wow guests. Just make it stand out, and watch the bookings roll in.
Source: AirDNA
Keith Powers REALTOR®
DRE #01940642 Cell: (714) 402-1357
Powers Realty Group - Alta Realty Group
3416 Via Lido, Suite ENewport Beach, CA 92663