Share prices allow you to track the appreciation of your property investments over time, similar to how you track your stock portfolio. To learn the basics about share prices, visit:
A few key differences exist between our vacation rental share prices and single family residential share prices. While single family residential share prices are updated beginning at 6+ months after the initial property funding, we update vacation rental share prices beginning at 12+ months.
In addition to the different update cadences, we have found that both asset types perform differently, particularly at the beginning. When analyzing vacation rental share prices, it is important to remember that they require high initial costs to start operations and a significantly longer ramp-up time to start generating income.
Unlike traditional single family residences that often start producing income within 45 days, vacation rentals can require 3-5 months before becoming booking-ready. The property needs to be designed, furnished, and sometimes renovated during this time. Additionally, staff recruitment and training (cleaning, repair and maintenance, photography, etc.) are required to prepare a property for operations. Once the property is ready to be booked, it also takes time to climb Airbnb search rankings, optimize dynamic pricing, and maximize the occupancy rate.
This may lead to a common trend of initial Share Price reduction followed by a recuperation period over the lifetime of the investment. This is because the Share Price of each property takes into account its property value and cash balance, which is reduced by the initial expenses.
Ramp time delays and the higher initial fixed costs for vacation rentals lead to a steeper version of the typical investment J-curve. As a result, the initial phases of vacation rentals often experience a much higher initial decline in share price performance than single family residential properties. While share prices react to the current market in the short term to show a rough valuation of the property's value, the expected hold time for vacation rentals is five to fifteen years, compared to the estimated five to seven years for single family residences.
Vacation Rental Investment J-Curve Strategy
Initial Investment: The property is funded on Arrived.
Renovation, Design, and Furnishing: Significant investment is allocated to renovate, design, and furnish the property to attract local travelers and stand out in a competitive market.
Increasing Bookings & Reviews: The property may initially be listed at a competitive daily rate to attract bookings and generate positive reviews quickly. This is done with the aim of achieving 5-star ratings and accolades like 'Airbnb Guest Favorite,' which can greatly enhance the property's performance.
Stabilization and Long-Term Growth: As the property accumulates more 5-star reviews, its reputation solidifies. Gradual increases in daily rates will align with the property's growing market position, optimizing revenue over time.
