Bloomberg: Americans Are Building Vacation-Home Empires With Easy-Money Loans

Americans Are Building Vacation-Home Empires With Easy-Money Loans

Selling risky mortgages based on volatile per-night Airbnb income could end badly for communities, borrowers, and investors.

Inexperienced landlords may not be accounting for volatile rents or the cushion they’ll need for unexpected repairs, says McCoy, who oversaw mortgages at the federal agency and now teaches law at Boston College. “The influx of the starry-eyed inexperienced investors is artificially boosting demand and causing the rental market to be overheated,” she says. “This whole class of loan and, in particular, some of these underwriting practices are a sign of market euphoria. That rarely turns out well.”


I was never a big investor but I have been an inexperienced landlord and I’m still paying for some of those early miscalculations and mistakes.

In my limited experience of helping new hosts build their listings, 3 have invested over $700,000 in their STR properties. That level of bills for one property scares me.

An older host (almost my age) basically liquidated two LTRs, reaped the equity (so hefty down payment) & purchased a beautiful home 4br 3ba with a pool, on a golf course not far from Phoenix. So far she’s renting long weekends plus a few extra days & grossing more than enough to pay the bills & provide cash flow. She wisely selected a property she could flip to LTR if needed so if HOA or City or market make STR not feasible, she can easily continue.

My two younger (late 30’s-maybe early 40’s) purchased beautiful properties but low potential for LTR. In other words, if something does not go as hoped, highly subsidizing the rental with their personal income (possibly grocery money) or selling are the options. Ouch. wants to purchase another property. After we survive this strange summer of bookings, we shall see if they want to continue to embrace STR.

Easy financing based upon volatile STR earnings, will ruin us all just like the easy financing killed real estate in 2006.


You are not alone. I’ve made many mistakes.

I HATE those YouTube videos of “ how I make $10,000 a week doing Airbnb”.
At least we weren’t trusting a YouTube anonymous money hound.

I popped off at a new younger host, “you cannot believe those videos. They don’t know you. They don’t know your investment. They don’t care about you. They just want you to buy something. “


7 of the hosts, I’ve assisted, Purchased smaller, lower priced properties.

The 4 retirees & 3-30 something couples did not go into high debt & purchased properties that during peak season will rent for enough to pay the bills for the year plus a bit more so off-season money is the gravy or if summer doesn’t book as expected, the off season can fill in the $$

BTW I shared @gypsy ’s listing with one as an example of what a camper can be. So @gypsy is an inspiration. Adorable young couple purchased a camper a few years ago for the family. The children are older & not so interested in camping. Couple owns home & acreage in rural Washington state close to several parks. Wife wanted to leverage camper & land & do a STR. Husband skeptical. Both saw Tiny Tiki & they made the investment. Their STR is off to a great start this summer. I love the idea they are using existing assets


There’s a cathedral in my neighborhood that was being worked on for a few years. It “sold” a couple times and the last time at $650,000. Think it started at close to 1 million and kept coming down.

I was rather shocked to see it was going on Airbnb. The host has another funky place that’s she’s had on Air for years.

Think it got listed on Air sometime in March/April and has zero reviews.

This host maybe got support from someone else, but with zero bookings in several months, keeping up to a 650,000 loan is not going to be easy. I think it will probably go back on the market.

Meanwhile, up the hill from me is a host I made contact with last year after she bought a house that had an Airbnb going for years. After 10 months she either decided it wasn’t for her or she wan’t making enough money. It’s now for sale, was asking $100,000 above sales price last year.

This seems an incredibly dicey time to be buying expensive properties in some places. Property values were climbing pretty quickly here for the last year and now they’ve really slowed down.

Moved here 2 years ago after looking for quite awhile. I’m glad I bought when I did as houses half my size are now selling for much more than I paid. I couldn’t afford to buy something that would work now.


In several of the STR Facebook groups there is a movement to reap equity, leverage future rentals thus finance & purchase something larger because of potential for higher rental dollars.

I’m struggling to understand how that can work in my area. Demand is high so condos sell in 24-72 hours at my price point. It would be this side of impossible to find & purchase a replacement property.

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I have seen this movie before and it did not have a happy ending.


And back when Covid hit, there were all these multi-property hosts screaming about how they can’t pay the mortgages on their 7 or 17 properties since all the bookings were cancelled. It seemed they had zero nest egg set aside, and were completely dependent on a certain occupancy rate every month, as if everything in the world can be depended upon to stay the same forever.


My hubby and I were in our early/mid 50s when we bought our property. It was purchased as a retirement home and was already being rented out short-term. We put together a business plan and made sure we could pay the mortgage and expenses by using the money we usually put into retirement savings if we got no/very few bookings. Not ideal, but we wouldn’t go under, either.

Fortunately, other than 2020 when we were shut down due to COVID, the revenue has exceeded our estimates. But having the plan developed and knowing our options BEFORE we purchased saved us when the worst came to pass in 2020.


What’s going on with your bookings? I’m closed right now (need the break and have to do some work on the house), so I don’t know the “guest temperature” at the moment.

Isn’t she? I am gobsmacked at what she’s done with her listing.

I do small business consulting when people come to me for their web-based business app development and I insist on a Business Plan, Functional Spec, and Technical Spec before I’ll even quote their software development.

I am still amazed at how many people go into business without a plan. Or even an Excel spreadsheet.

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My area is facing a perfect STR killing storm of:
Countless new listings (over supply)
being featured earlier in the search ( older listings at bottom)
Difficult to navigate new Airbnb search
Perception that Airbnb fees are excessive on guest side
Highest home sales prices since 2006 crash
High travel costs combined with higher cost of living
Higher expenses (property taxes, higher lawn maintenance fees, higher HOA fees etc)

High demand/low supply rentals such as sleeps 16, walk to beach are rocking & rolling. Good rates. Booking months in advance.

High supply rentals 1& 2 BR oceanfront or not, all are chasing the rentals. Prices are dropping for all but July. Hosts who last year could do Sat-Sat rentals are now doing 2-3 night rentals to get any rentals.

Practically every new booking request is asking for additional discounts. They are booking closer to trip dates. They will book & quickly cancel for a lower price.

Newer hosts who paid high prices are having a difficult time. Hosts like me, who purchased before the crazy prices will survive but this year I’m not going to have the net earnings of prior years.

Btw I snooped on my neighbor’s VRBO listings. Their bookings were slow too UNTIL a couple weeks ago (after Airbnb search changed).


In my area , Sedona Az , home prices have gone up so much , a house that would of sold for 350K a few years ago , now it’s 1.2M.
Population of 10K , there are 1K STRs or something like that
People are buying these million dollar homes for a str .
It’s going to bust . Something is gonna happen to the economy and the strs will be empty long enough that they will have to sell at a loss or walk away as prices will drop as the home building cools off and home sells slump .
Maybe another virus or worse.
Our life here in the USA is like a house of cards , it’s very delicate , it will not take much to cave in the house .

Luckily , our 3 strs are paid for , we will survive a down turn , but not the collapse of the house of cards . :grinning:


I have a friend doing this right now. What a train wreck.

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Thank you Annet3176 for the call out! I took 3 years to set mine up just right to get the right appreciative types of guests and they all are! Our booking for July are still real slow, however. Hopefully when Air changes the website back to more normal, which I’ve heard that they “will do” things will look up again!

Thank you Casailing lady!
Frankly I’m a terrible business person and Tiny Tiki is the 1st success I’ve had after trying many times! It is built with plenty of dreams, inspiration, much much stubbornness, willingness to do something completely different and love (see reviews). I remember those three years well, all my free labor, and I was trying to hide how much $$ was going into it, and spending my (freelance patternmaker) paycheck on all the small and medium sized things, only our savings on big things!

We are very blessed to have gotten this amazingly cheap view property and been able to improve it. I have more floor-plans ready for a 750 sq ft tiny house adu partially inside the 850 sq ft garage, and a 350 sq ft Outdoor kitchen with “storage” ie w/c, living and br… but also a husband who hates big projects!

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I’m also a terrible business person. It seems to be common among us creative types, hence the term poor starving artist.
My daughter is always telling me I should charge more for my upholstery and sewing work, but when I add up the labor and materials it always seems like so much money. I have to remind myself that the people who order stuff from me aren’t poor at all.

The only reason I had my own house in Canada was just due to a lucky set of circumstances 40 years ago, not because I had a bunch of money to spend on a house. And then sold that place after living there for 20 years, to buy a lot and build in Mexico. If it wasn’t for that lucky break, which I am eternally grateful for, I’d probably be one of those people who could never afford a place of their own.


When my husband and I were looking to buy a house five years ago we noticed that the price of a single family home was the same as a two family flat. We are both self employed and decided to purchase a two family flat and str the upper apartment to help diversify our income. We bought well below what we were approved for and did almost all of the work getting the space ready ourselves.

We can pay our bills with zero bookings, so we don’t have the stress of having to meet quotas to keep the lights on. While early in the pandemic was stressful, at least we were never worried about paying our bills. Even with the lower bookings this summer I’m just viewing it as time to work on some small upgrades. There’s no shortage of projects/maintenance with a 100 year old home, haha.


I have multiple listings on Airbnb. My costs are low enough so the occupancy is not an issue. However, I am doing this to make money. I am in ski country. I am near a major resort so I get the driveby traffic and eyes. I do allow pets (and I charge $60 per stay) for a pet. The nearby resort does not allow pets and people want to bring their dogs to say nothing about being cheaper that a kennel. My properties are attractive. I am adding a nice sign in front of my properties directing them to my website. In my website I give the direct Airbnb URL to each of my properties. The advantage of this is that they can book online and see availability. My concern is that I now understand through this site that if I get a lot of looks without books, I will drop lower in the Airbnb search for those not knowing my website and just looking on Airbnb. I am still thinking I will be better off with the website links and putting the website on my new sign…but who knows.