Financial Coaching Blog,  Investing In Retirement

Pandemic Real Estate Investing: Overleveraged

Verb. โ€œ๐™Š๐™ซ๐™š๐™ง๐™ก๐™š๐™ซ๐™š๐™ง๐™–๐™œ๐™š๐™™ ๐™ž๐™จ ๐™™๐™š๐™›๐™ž๐™ฃ๐™š๐™™ ๐™–๐™จ ๐™– ๐™ฅ๐™š๐™ง๐™จ๐™ค๐™ฃ ๐™ค๐™ง ๐™– ๐™ฃ๐™–๐™ฉ๐™ž๐™ค๐™ฃ ๐™—๐™ค๐™ง๐™ง๐™ค๐™ฌ๐™š๐™™ ๐™ข๐™ค๐™ง๐™š ๐™ข๐™ค๐™ฃ๐™š๐™ฎ ๐™ฉ๐™๐™–๐™ฃ ๐™ฉ๐™๐™š๐™ฎ ๐™˜๐™–๐™ฃ ๐™ฅ๐™–๐™ฎ ๐™—๐™–๐™˜๐™  ๐™–๐™จ ๐™š๐™ญ๐™ฅ๐™š๐™˜๐™ฉ๐™š๐™™.โ€œ

Weโ€™ve talked about investing in real estate and shared some of our best tips for short term and long term rentals, but one thing we didnโ€™t discuss with real estate is overleveraging.

Currently, many of our peers in REI, in particular the short term rental market are struggling…(As are many others truthfully), but for some hosts who utilize Airbnb are furious. Recently, AirBnB enabled all guests who booked reservations before a certain date to cancel their reservations & receive a FULL refund regardless of a hosts cancellation policy. As Hosts, we can empathize with those who depend solely on their bookings for their business. However, as guests ourselves we use AirBnB when we travel too, & we commend Airbnb for issuing full refunds, especially with 27 million people without jobs who likely need that money for daily essentials.

โ€˜But you are a host, doesnโ€™t this affect your vacation rental incomeโ€™?

YEP, sure does. This time last year our rental income was about double than where we are now. But we arenโ€™t furious. Hereโ€™s why, unlike many hosts in our area, we own 1 Vacation rental cabin. Itโ€™s not uncommon for some hosts to own 3-5 vacation cabins in the Smokies. Most have mortgages. Without other sources of income, these hosts are overleveraged. They have more debt in their rentals than they can manage. (Same can be said about the US Government too).

Yes, we have a mortgage too, but we bought low, have a decent interest rate for a second property, and MOST IMPORTANTLY…an ๐”ผ๐•„๐”ผโ„๐”พ๐”ผโ„•โ„‚๐• ๐”ฝ๐•Œโ„•๐”ป!

For those of you looking to invest in RE, a cabin in particular…feel free to reach out to us for second opinions. Weโ€™re here to help. The hosts furious at AirBnB are just taking their lack of planning out on them. Airbnb is merely a platform (a business, true…but) they just provide a website that you pay a fee to use to market your space. If you enter into real estate overleveraged, you are destined for trouble. Remember, CASH IS KING.

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