Short-term rentals, long-term exposure: The hidden risks behind the airbnb boom

by Prof Sergio Guerrero Rosas

Few real estate trends have transformed the market as dramatically as the rise of short term rentals. Platforms like Airbnb created opportunities that, only a decade ago, seemed unimaginable. Property owners became hospitality operators, investors achieved higher yields than traditional leasing, and entire portfolios were built around nightly rentals.

The attraction is easy to understand. In many destinations, particularly tourist and lifestyle markets, short term rentals can significantly outperform conventional leases. Yet while investors often focus on occupancy rates, nightly pricing, and return on investment, they frequently overlook a different question: what risks are quietly accumulating behind that success?

Across the world, governments are paying closer attention to the sector. Concerns about housing availability, neighborhood impact, and tax collection have led many jurisdictions to impose new regulations. Registration requirements, licensing obligations, zoning restrictions, occupancy limits, and enhanced reporting are becoming increasingly common.

For investors, especially those operating internationally, the challenge extends far beyond regulatory compliance.

What begins as a passive real estate investment can gradually evolve into an operating business. Multiple properties, cleaning services, maintenance teams, property managers, and guest related liabilities create layers of legal and tax exposure that many owners never anticipated when they acquired their first property.

In our experience, one of the most underestimated aspects of a successful short term rental portfolio is the ownership structure itself.

Many investors spend considerable time evaluating locations and financial projections, yet very little time assessing whether the assets are held through the right legal vehicle. As portfolios grow, that decision becomes increasingly important.

Is the property personally owned or held through an entity? Are other family assets adequately protected from operational liabilities? How will rental income be taxed today and transferred to the next generation tomorrow? What happens if local regulations suddenly affect profitability or restrict operations?

These questions become even more relevant when properties are located in different jurisdictions. A portfolio that spans multiple countries may involve distinct tax systems, inheritance rules, reporting obligations, and succession challenges. What started as a real estate investment can quickly become an international wealth planning issue.

The lesson is not that short-term rentals are becoming less attractive. On the contrary, they remain one of the most dynamic segments of the real estate market. The real lesson is that long term success requires looking beyond revenue projections.

The most sophisticated investors are no longer asking only whether a property will generate income. They are asking whether the structure behind the investment can withstand regulatory changes, tax scrutiny, liability risks, and generational transitions.

Because in today's market, the true value of a real estate investment is measured not only by the income it produces, but by how well it is protected for the future.

Prof Sergio Guerrero Rosas, Managing Director at Guerrero y Santana, has over 25 years’ experience advising companies from SMEs to multinationals, as well as individuals, on tax and estate planning. He is also Global Vice Chair of the GGI Trust & Estate Planning (TEP) Practice Group.

Real Estate Mexico Guerrero y Santana Hospitality