Why home buyers should reconsider buying investment properties for Airbnb

NYC real estate bouncing back after coronavirus pandemic

Bess Freedman, CEO of Brown Harris Stevens, discusses the real estate industry’s post-pandemic resurgence in big cities.

Think twice before buying a home as an investment property in the post-pandemic real estate market.

That’s what real estate and personal finance experts are advising, considering home price offerings are surging up to 50% over the asking price amid ongoing bidding wars in the competitive market. 

Think twice before buying a home as an investment property in the post-pandemic real estate market, finance experts suggest. (iStock)

And with such low inventory and high demand, some home buyers are even waiving inspection contingencies.

"Buying a home at the top of the market is bad enough. At least you'll live in it – hopefully for many years — before you sell at a profit. But if you buy an investment property for top dollar, you risk bottoming out," Howard Dvorkin, a New Jersey-based Certified Public Accountant and chairman of Debt.com, told FOX Business. "You're assuming the red-hot market to buy property will also stay a red-hot market to rent a property. That's a painful amount of risk." 

The average price of a home in the U.S. is up more than $33,000 or 10% in just the first five months of the year, and $63,000 since the beginning of the pandemic, according to a report from data analytics firm Black Knight.  And May’s 2.1% monthly increase in home prices is the most significant increase to date, according to the same data. 

Dvorkin notes that buying property specifically to rent it with vacation rental companies like Airbnb or VRBO could also be risky, given the losses many experienced during the pandemic with cancellation rules that cost its hosts thousands of listings.  

US HOME PRICES CONTINUE TO RISE AT RECORD HIGHS

"If you're going the short-term route, be careful. Airbnb hasn't had the best track record lately. First, your profits are at the mercy of a big company. During the pandemic, Airbnb flip-flopped its cancellation rules, which cost its hosts thousands of listings. While the pandemic is over, Airbnb's control remains. It can alter its policies and that can torpedo your profits,’" Dvorkin said. 

Perspective homeowners eager to buy a home as an investment property may be better off renting it out themselves, Dvorkin suggests. 

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"While home prices will surely stabilize and maybe even dip, annual leases tend to stay at current rates and even tick upward each year. You have more control over your tenants and less aggravation and repair bills. Sometimes, old school is the best school," Dvorkin said. 

FOX Business’ Brittany De Lea contributed to this report 

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