What Can We Learn From Airbnb’s Recent $100 Million Real Estate Deal?

Vacation rental portal Airbnb just raised another $100 million in funding. What does this mean for the real estate industry, and those looking to buy homes this year?

While other startups have seen their valuations cut down by investors this year, Fox News reports that Airbnb just landed another nine figures in funding. What does this mean for U.S. housing? What great takeaways are there for real estate pros and businesses from the latest peak into Airbnb’s finances?

Airbnb is Here to Stay

After raising $1 billion in the summer of 2015, it appears the Airbnb beast is here to stay. There is far too much invested by investors with a lot of influence. They aren’t likely to be slowed down by regulation. Like it or loathe it, it is clearly time for Realtors and property owners to get used to having Airbnb as their neighbors.

Vacation Rentals are Big Business

Vacation rentals are big business. Even though still a ‘startup,’ Airbnb booked $2.2 billion worth of vacation rentals in the 3^rd quarter of 2015 alone. The company forecasts reeling in $900 million in revenues this year, on charging around 15 percent for bookings. Yet, those that have followed the coverage will know that the reservations platform is just a small slice of the business that Airbnb is planning to be involved in.

The Power of Simplicity

Our recent story on Airbnb covered how the company laid out its plans to conquer the hospitality world on just one sheet of paper. There is certainly a lot more thought and planning going on off the sheet and behind the scenes, yet this is a big lesson in keeping it simple. Far too many would-be real estate investors, business owners, and success stories are allowing their futures to be sapped and stolen by over-analyzing things. Fortune doesn’t just favor the bold on paper, it delivers real returns to those that take real action.

Billions in Investment Capital Up for Grabs

One thing which analysts are careful to point out about Airbnb is its cloudy and closely guarded financials. While the real numbers are private, the Wall Street Journal highlights that the company is expected to lose another $150 million this year. This, on top of the fact the company would even make the effort to scrape together a measly $100 million after all it has already raised, may be scary to some. After all, most real estate investors would never consider investing for a loss today. There is just no need for it. Airbnb doesn’t even project being profitable for another couple of years, and it could be much longer than that before it actually justifies its currently lofty valuation. Real estate professionals and investors should be glad that there is so much capital out there that it is willing to chase the faintest hope of future returns. It also means that those selling real estate should have a sizable advantage in offering deals that are actually profitable and provide tangible assets that can be relied on.

People Love a Growth Story

The media, readers, investors, and more all love a growth story. They love tales of big gains and people making things happen. They clearly buy into these branding stories more than the fundamentals.

The Real Estate Market Could Get Tough Ahead

With more and more real estate being priced based on Airbnb rental income, it could get tougher for regular homebuyers. Using Airbnb to offset the cost of housing could become a must for many. Of course, that is exactly what Airbnb wants. This will certainly give those with extra suites to be leased out a strong advantage in the marketplace. Keep this in mind when buying, selling, renting, remodeling, and marketing properties in 2016.

Summary

$100 million may be pennies in the Airbnb bucket, but it does highlight some major factors out there today. The blossoming vacation rental market, hefty amounts of free flowing capital, the types of branding and marketing that works, and how simplicity can actually be a very powerful tool are all important takeaways from this lesson.