^{OWN THE SPOTLIGHT:}

Feature your Airbnb property for sale in STR Scout newsletter and reach thousands of potential Airbnb investors.

Hello STR Scout Members,

Stay ahead in the STR market with this week’s insights and opportunities:

🔑 STR Classifieds: Explore Today’s Top 10 Trending STR Homes for Sale.

🔦 What’s My Airbnb Worth? How to value and sell your Airbnb business and property.

🏠 News Nuggets: Trending Airbnb, Housing, and Economic News to stay ahead in today’s market.

Happy Scouting!

Andy Thoms
Editor, STR Scout

📣 Own the Spotlight!
Feature your Airbnb home for sale here next week. Reach 35,000+ Airbnb investors, buyers, and operators in each issue.

👉 Click Here to Own The Spotlight! 🔦

🌊 $244K | Smithville, TN: 2BD, 2BA lakeview cottage near Center Hill Lake. Includes fire pit, screened porch, and direct lake access. Prime Airbnb potential. View Post

🏝️ $289K | Galveston, TX: 2BD, 1BA historic home with original hardwood floors, high ceilings, and modern appliances. Minutes from the beach. Great STR potential. View Post

🛏️ $300K | Sevierville, TN: 2BD, 3BA townhome near Dollywood and Smoky Mountains. Includes hot tub, new deck, and furnishings. Proven STR income. Motivated sellers. View Post

🌟 $419K | Sautee Nacoochee, GA: Popular rental in prime location. Priced $100K under comps. Seller can manage for new owner. Great STR potential. View Post

🦅 $869K | Waynesville, NC: Strong performer with $105K gross revenue in 2024. Fully furnished and turnkey. Great STR investment opportunity. View Post

🏔️ $970K | Asheville, NC: Large cabin sleeping 26 with $131.5K and $122.8K revenue past 2 years. Fully furnished, turnkey. Only listed on Vrbo. Strong STR potential. View Post

🏨 $1.25M | Albuquerque, NM: 7-unit SFR boutique hotel model with $180K gross, 91% occupancy, 11% cap rate. 2865 sqft, 7BR, 7BA, designer interiors, high STR potential. View Post

🏠 $1.599M | Austin, TX: 3BD, 3.5BA STR with $200K gross revenue in 2024 and $230K+ potential for 2025. 2047 sqft, 4.94-star reviews. Prime investment opportunity. View Post

🌴 $2.8M | Panama City Beach, FL: Two 4BD, 4BA homes with shared backyard oasis and large pool. Fully furnished, no HOA. Turnkey STR opportunity. View Post

🏝 $2.85M | Cape San Blas, FL: 6BD, 6.5BA luxury beach house with gulf and bay views. Heated pool, firepit, 6 decks, game room, and elevator. Ideal high-return STR. View Post

Need an STR Loan Quote? Vincent Jacobbi at Host Financial.

How to Value a Short-Term Rental Property: DSCR Loans, Commercial Appraisals, and Business Value

Short-term rental (STR) properties like Airbnbs have two key sources of value: the property value itself and the business value created by operating it successfully. Understanding how these are assessed is crucial for STR owners looking to sell or refinance. Here’s a clear breakdown of how STR properties are valued under traditional appraisals and DSCR loans, compared to commercial income approaches, and how you can capture the business value in a sale.

This article is brought to you by STRScout.com, your trusted source for short-term rental insights and strategies.

1. Property Valuation: DSCR Loans vs. Commercial Income Approach

How DSCR Loans Determine Property Value

Debt Service Coverage Ratio (DSCR) loans are popular with STR investors because they focus on the income generated by the property to approve financing. However, when it comes to determining the property’s value, DSCR loans use traditional residential appraisal methods:

• The property’s value is based on comparable sales (comps)—nearby homes of similar size, features, and condition, whether they are STRs or not.

• The appraised value does not increase based on how much cash flow the property generates.

Example:

• House A: Generates $60,000/year as an Airbnb.

• House B: Identical home, used as a primary residence.

• If local comps value 3-bedroom homes at $400,000, both House A and House B will appraise for $400,000.

What STR Income Does: While STR income doesn’t increase the home’s appraised value, lenders use it to show the property generates enough cash flow to cover the loan payments (Debt Service Coverage).

How the Commercial Income Approach Differs

In commercial real estate, the income approach directly determines the property’s value based on its cash flow:

Formula: Property Value = Net Operating Income (NOI) ÷ Cap Rate

Example:

• A property generates $60,000 in annual NOI.

• With a market cap rate of 6%, the value = $60,000 ÷ 0.06 = $1,000,000.

Unlike DSCR loans, commercial lenders tie the property’s value directly to its income, which can lead to significantly higher valuations.

2. Understanding the Business Value of an STR

While residential appraisals focus on the property itself, the success of a short-term rental could potentially add separate business value. This includes tangible and intangible assets that drive the property’s income.

What Makes Up the Business Value?

• Furnishings & Decor: Fully furnished spaces ready for guests.

• Future Bookings: Pre-booked reservations that provide immediate cash flow.

• Repeat Guest List: Loyal guests who rebook consistently.

• Operational Systems: Processes for check-ins, cleaning, and dynamic pricing.

• Amenities: High-value features like hot tubs, smart-home tech, or game rooms.

3. How to Sell the Business Value Separately

When selling an STR, the property value and business value can be structured as two separate components:

1. Real Estate Sale: The home is sold at its appraised market value using a standard residential purchase agreement.

2. Business Sale: The STR business assets are sold separately through a Bill of Sale.

Example: Valuing and Structuring the Sale

Let’s assume the appraised property value is $500,000. Here’s how you could value and price the business assets:

Total Transaction Value = $500,000 (property) + $35,000 (business assets) = $535,000.

Steps to Finalize the Sale

1. Real Estate Sale Agreement: Standard purchase contract for the appraised property value.

2. Bill of Sale for Business Assets: A separate agreement listing:

   • Inventory of furnishings and amenities.

   • Transfer of future bookings.

   • Guest contact list and operational systems.

3. Payment Terms:

   • Full payment for business assets at closing, or

   • Seller financing for the business portion (e.g., $35,000 over 2 years at 6% interest).

4. Final Takeaway

When selling a short-term rental property:

1. Your STR Home Value: The home’s value is determined by traditional appraisals based on comparable sales—not its rental income.

2. Your STR Business Value: The business assets—furnishings, bookings, and systems—can be sold separately through a Bill of Sale.

But here’s the key: The total price ultimately comes down to what a ready, willing, and able buyer can get a loan for (property value) and what they are willing to pay above that for the business assets.

This article is brought to you by STRScout.com, your trusted source for short-term rental insights and strategies.

Mortgage Rate Watch

As of December 17, 2024, Freddie Mac reported the following average mortgage rates:

Mortgage rates have continued their downward trend for the fourth consecutive week, offering further relief for homebuyers and investors.

For the most competitive DSCR loan interest rates, contact our trusted partner Host Financial for a quick quote.

Short Term Rental

🏠 Build-to-rent homes are booming. Developers are increasingly focusing on constructing single-family homes specifically for rentals, catering to the growing demand for flexible living arrangements. This trend highlights shifting preferences in the housing market. Build-to-rent growth.

🔍 Portland tightens Airbnb safety rules. The city has closed a loophole and now mandates safety upgrades for short-term rentals, prioritizing guest security and compliance with local regulations. Portland Airbnb rules.

🛑 Airbnb introduces anti-party technology. To combat unauthorized gatherings, Airbnb has rolled out advanced tech tools, fostering safer neighborhoods and better relations with local communities. Airbnb anti-party tech.

🏡 BRRRR strategy saves investors money. Real estate investors are turning to the 'live-in BRRRR' method—buy, rehab, rent, refinance, repeat—to maximize returns while enjoying tax benefits. BRRRR strategy.

🗣️ Palm Coast neighbors call for oversight. Residents are demanding tighter regulations on short-term rentals, citing noise, safety concerns, and the impact on their neighborhoods. Palm Coast STR concerns.

🌎 Airbnb expands its global dominance. As U.S. cities tighten regulations, Airbnb is pivoting to markets in Brazil, China, and Japan to sustain its growth. Airbnb global expansion.

Housing

🏦 Zillow and Fannie Mae split on 2025 housing predictions. While Zillow anticipates rising home prices, Fannie Mae expects declines, leaving experts divided on the market’s future. Housing market outlook.

📉 Mortgage rates lock sellers in place. With homeowners reluctant to give up low mortgage rates, housing turnover remains stagnant, deepening inventory challenges. Mortgage lock-in effect.

🔮 Fannie Mae forecasts five trends for 2025. Expect mortgage rates above 6%, slow home price growth, and a modest rebound in sales as affordability remains a concern. Fannie Mae housing trends.

💰 Five types of homes face sharp price drops. From luxury properties to vacation homes, experts predict certain market segments will see price corrections in 2025. Housing price declines.

🔑 Pocket listings face new scrutiny. Exclusive off-market home sales, often reserved for wealthy buyers, are under fire for reducing transparency and access in the housing market. Pocket listings debate.

Economy

💰 Investors sit on $7 trillion in cash. Economic uncertainties have sidelined massive amounts of capital, as risk-averse investors wait for clearer market signals. Investor cash reserve.

📉 U.S. debt worries escalate. A mounting fiscal reckoning raises alarms, with long-term concerns about sustainability and economic stability. U.S. debt concerns.

🌎 Emerging markets grapple with debt. A staggering $29 trillion debt burden is weighing on developing economies, creating risks for global financial systems. Emerging market debt.

🛍️ Retail sales beat expectations. November's strong consumer spending signals economic resilience heading into the holiday season, boosting growth outlooks. U.S. retail growth.

📊 Quantum computing could transform investing. Google’s latest breakthrough in quantum technology may revolutionize financial markets by enabling ultra-fast data analysis and decision-making. Quantum investing.

Destinations

🌴 Tulum faces a vacation home glut. Oversupply in this once-hot Mexican market is driving prices down, creating opportunities for savvy buyers. Tulum vacation homes.

🏖️ Cape May County leads vacation markets. Known for its charming beach towns, Cape May has emerged as the top vacation home destination for 2024. Cape May appeal.

🌆 Golden Visas drive real estate investments. Programs offering residency in exchange for property investments are booming in countries like Portugal, attracting global buyers. Golden Visa programs.

🌲 The Burl treehouse stuns with unique design. Located in the woods, this architectural gem blends modern aesthetics with nature, making it a dreamy short-term rental destination. Burl treehouse.

🌐 Top expat destinations for 2025. Panama, Portugal, and other countries rank as favorites for Americans seeking affordable, scenic, and welcoming lifestyles abroad. Expat destinations.

🏄 El Salvador rises as a travel gem. Known for surf towns and cultural richness, this Central American nation is captivating travelers looking for authentic experiences. El Salvador attractions.

✈️ Detour travel trends gain momentum. Travelers are now prioritizing off-the-beaten-path experiences, seeking unique destinations far from the crowds. Travel trends.