Short Term Rentals Can Still Be Profitable

• Short term, long profit: Short term rentals have been struggling lately but with some careful attention, these niche properties can still be profitable.

• New creditor in town: FICO has a new model that lets lenders license credit scores directly, cutting out credit bureaus.

• Chicago’s curse: The office vacancy in Chicago has hit a new high as tenants seem to only be looking for the most prized office locations.

• Multifamily webinar: Centralization is helping apartment owners cut costs, reduce risks, and improve resident experiences. Sign up

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Perspectives

Short Term Rentals Can Still Be Profitable

Short-term rentals have become more competitive, and the days of simply listing a property on Airbnb and waiting for bookings are over. Many smaller operators are struggling, but experienced hosts who approach STRs as a business are seeing higher profits than ever. Success now depends on strategy, tools, and a disciplined approach to finding, operating, and marketing properties.

Operators should begin by identifying their target market and finding good markets outside of large metro areas. Amenities are highlighted as a crucial differentiator, with examples showing how investments in unique features can significantly boost nightly rates and occupancy.

Professional design, quality photography, dynamic pricing, and guest management systems round out the formula. Together, these steps create a system that can be replicated across multiple properties, allowing operators to scale their businesses. While casual hosts may be pushed out, the rise of professionalized management is positioning STRs as a serious, sustainable asset class with high earning potential for those willing to treat it like an investment, not a side hustle.

Overheard

FICO’s Direct Licensing Is a Challenge to Credit Bureaus

For decades, FICO has been the silent gatekeeper of American credit. Its scores determine who gets a loan, what rate they pay, and increasingly, who qualifies to rent an apartment. Now, the company is rolling out a new pricing model that charges lenders based on how much they use its scores, a change that could ripple through the entire housing finance system. While the shift is framed as a modernization, it raises questions about how concentrated the credit scoring market has become—and what happens when the price of that concentration rises.

Lenders have long relied on FICO’s near-monopoly as a standard, even as alternative scoring models emerge. With higher costs, some banks may accelerate adoption of new tools that incorporate rental payments, utility bills, or alternative data to reach credit-thin borrowers. A shift in credit scoring models could even expand or contract the pool of qualified buyers and renters, directly impacting demand.

At a moment when affordability is already stretched and the real estate industry is closely watching every move in mortgage origination, this pricing shake-up is more than a financial footnote. It’s a reminder that a single company has an outsized influence on who enters the housing market, and that any shift in its model reverberates through both Main Street and Wall Street.

Chicago Office Vacancies Hit Record as Tenants Flock to Trophy Towers

Downtown Chicago’s office market continued to struggle in the third quarter, with the central business district vacancy rate climbing to a record 28%, up from 27% midyear, according to CBRE. Availability has more than doubled since the start of the pandemic, fueled by weak demand, higher interest rates, and companies cutting back space—2.3 million square feet over the past two years, nearly twice the losses seen during the Great Recession.

The downturn, however, is not uniform. Class B buildings are suffering with vacancy nearing 35%, while Class A space is holding steadier at 21.4%. Tenants are gravitating to trophy towers, pushing rents at top-tier properties up 26% since early 2020, compared with just 1% growth across the broader market. Recent deals by firms like Kilpatrick Townsend at BMO Tower and Wind Point Partners at Salesforce Tower underscore the “flight to quality.”

Overall demand remains negative, with net absorption down about 51,000 square feet in the quarter. Expansions by JPMorgan Chase and fintech firm Adyen were outweighed by cutbacks, including Evolent Health’s 124,000-square-foot exit. The story mirrors a national trend: in nearly every major U.S. city, trophy office towers remain competitive while older buildings face steep vacancy and declining values. For investors, the Chicago market may offer an early signal of where the office sector is headed—toward a bifurcation that rewards the newest and best-located assets while leaving commodity space behind.

Office-to-Residential Playbook

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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