The Short-Term Rental Revival: Why Data Beats Depreciation Every Time
Summary
This article discusses the revival of short-term rentals due to the return of 100% bonus depreciation for qualifying properties. It emphasizes the importance of data-driven decisions to avoid bad investments and offers a data-first process, including market selection, buy-box building, and revenue forecasting to help hosts succeed.
Key Insights
- •100% bonus depreciation is returning for qualifying properties placed in service on or after Jan. 20, 2025, potentially leading to substantial tax savings, sometimes six figures in the first year.
- •Data from an iGMS analysis notes that the STR market has matured, with numerous players entering the game and supply saturation in recent years.
- •Revenue is a function of pricing strategy, seasonality, and amenities, not just location.
Action Items
- ✓Choose the right market by identifying markets where demand outpaces supply and local regulations support short-term rentals; study why travelers go there, seasonal booking patterns, and guest demographics.Effort: mediumImpact: high
- ✓Build a 'buy box' to identify the specific type of property that performs well in your chosen market, based on data regarding size, layout, and amenities that drive bookings.Effort: mediumImpact: high
- ✓Forecast revenue based on real data; model nightly rates, occupancy, and seasonality using comparable listings and factor in improvements you will make to the property.Effort: mediumImpact: high
Tools & Resources
- →7-Day Airbnb Data Challenge: John Bianchi created the 7-Day Airbnb Data Challenge.
Watch Out For
- ⚠Don’t buy properties without carefully analyzing market demand, local regulations, and potential risks, as bonus depreciation doesn't fix a bad investment.
- ⚠Avoid assuming that the previous year’s numbers will magically appear for you. Revenue is a function of pricing strategy, seasonality, and amenities, rather than just location.
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