A Day in the Life of Appraising Iowa-Nebraska-Florida

Thinking about buying a short term rental or refinancing your current investment property?
February 3rd, 2024 2:19 PM
As an appraiser in Florida, in areas that allow AirBnb's; Seminole, Largo, Clearwater, Gulfport, Indian Rocks Beach, Madeira Beach I often get asked, "How do appraisers, the lending world and investors evaluate short term rental income on properties and what tools are available now in the market to evaluate earnings?  We are seeing this come up in our other markets we cover as well, Omaha, NE and Southwest IA.  

When considering short-term rental income on investment properties, lenders and investors typically assess various factors to evaluate the profitability and risk associated with this type of venture. Here are some key considerations:

1. Rental Income Potential: Lenders and investors analyze the rental income potential by examining the property's location, average rental rates in the area, demand for short-term rentals, and the property's unique features. They may study historical rental data, occupancy rates, and projected rental income based on market trends.
2. Occupancy and Seasonality: The occupancy rate and seasonality are crucial for short-term rentals. Lenders and investors may evaluate historical occupancy rates to determine the property's potential income throughout the year. They also consider peak and off-peak seasons, events, and tourism patterns that can influence rental demand.
3. Rental Management: The expertise and efficiency of property management play a significant role in the success of short-term rentals. Lenders and investors assess whether the property owner has professional management in place or reliable experience to manage the rental operations effectively.
4. Expenses: To ascertain the profitability of short-term rentals, lenders and investors consider the expenses associated with the property. These may include mortgage payments, property taxes, insurance, maintenance costs, utilities, marketing fees, cleaning fees, and management fees. Accurate projections of these expenses are crucial in determining the potential return on investment.
As for evaluating potential short-term rental earnings, several tools are available in the market:
1. Airbnb and Similar Platforms: Websites like Airbnb offer insights and analytics on rental properties, including average daily rates, occupancy rates, and seasonality trends. These platforms also provide valuable data on competing rentals in the area, helping investors evaluate pricing and potential earnings.
2. Rental Data Analytics Software: Various rental data analytics software, such as Mashvisor, AirDNA, and Beyond Pricing, provide detailed market analysis for short-term rentals. These tools offer information on rental demand, comparable property performance, revenue projections, and market trends.
3. Market Research Reports: Industry-specific market research reports can provide comprehensive analysis and insights into short-term rental markets. These reports often include data on average rental rates, occupancy rates, market growth projections, and emerging trends.
4. Local Real Estate Agents: Engaging with experienced local real estate agents who specialize in investment properties and short-term rentals can provide valuable information. Local agents have knowledge about market conditions, rental demand, and rental income potential specific to the area of interest.
Ultimately, analyzing both the lending perspective and utilizing available tools can help investors assess the viability of short-term rental income and make informed investment decisions.

Posted by Patricia Smith on February 3rd, 2024 2:19 PMPost a Comment

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