Is Airbnb the Secret to Re-Performing Mortgage Notes?

Could Airbnb be the best tool available to help investors turn NPLs into more valuable, cash flowing reperforming notes?

My team has done a lot of crazy things to help out our borrowers over the years. We’ve acquired tapes upon tapes of non-performing mortgage notes. We’ve been able to maintain an extremely high workout rate. It’s great when you are able to help someone keep a roof over their family’s head. Especially when that also creates a win for all of the investors involved. That can take going above and beyond, and we do that.

We’ve helped delinquent borrowers find resources to get back on track with their utilities and get their monthly finances in order. We’ve even helped them get jobs.

Airbnb

Airbnb is expected to be heading for an imminent IPO, with a valuation of almost $40B. They have millions of listings and hundreds of millions of guests each month. According to Airbnb’s own stats, the average rent per night in some cities is $214. In many cities Airbnb reports that property owners can achieve 90% to 106% of median area monthly rent for a whole 2 bedroom apartment, just by renting out one spare room on Airbnb, around 60% of the month. Remember that median rents are now frequently much more expensive than mortgage payments.

Meanwhile, in New Jersey, 1 in every 499 housing units was in foreclosure in June 2019. Statewide, those foreclosure numbers may be down month over month and year over year, but they’re still looking very much like 2008 numbers.

In other places like Naples, FL, bank owned properties have recently surged 150%.

At the same time we are just coming off peak home values and equity in this cycle. That’s something no homeowner should want to lose.

The Fix

So, think about it. If a borrower could rent out a spare room and cover 90% of their mortgage payment, wouldn’t that be an incredible win-win?

That would get most mortgage borrowers back on track. Especially if you can modify their loan and roll in any delinquent amounts.

That converts a loan that is on the brink of, or in foreclosure and headed into legal hell, into a strong cash flowing note and more valuable asset for the note holder. It can be kept, or seasoned and resold for great profit thanks to the value add bump.

In other cases, it may even be renting out an air mattress or room on the couch on Airbnb, or renting out the entire home if it is already vacant.

The Challenges

Why aren’t all borrowers doing this already?

Awareness is still a big one. Many don’t know they can do it or haven’t thought of it. So, education is key. Some haven’t really laid out the decision between the inconvenience of renting out a room some of the month, versus losing everything and having to beg to stay on someone else’s couch themselves.

Some may feel it is a management and hosting issue, but there are companies that handle that too.

It’s worth bringing up, and considering. How many homes and notes could be saved this way?

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Image by InstagramFOTOGRAFIN from Pixabay