MIJ MICHAEL SEP 10, 2021
You can enjoy good returns on that holiday home or investment property by listing it on Airbnb, for a short-term or permanent basis. But you will still need to first calculate the risks and see if it is worth your while.
The latest income and occupancy rates through Airbnb in Australia shows Sydney (NSW) with 29,367 active rentals, with an average daily rate of $230. The average monthly revenue is $2,965 with an occupancy rate of 65%.
Using an Airbnb platform to rent your property can be a lucrative strategy, but it also comes with its own problems. For some investors, it may be easier and more profitable to just rent the property to a single tenant.
Renting puts your eggs in one basket, with one tenant. This is good if the tenant is financially reliable and stays for a long time. But if they miss any payment[s] or simply disappear into the night, then you lose on rent. This is not easy to immediately replace. You can counter these issues by using a property management service.
Airbnb means you collect income from different tenants on a regular basis. Each renter makes up a small percentage of your total income. This means that if any of them cancels at the last minute or doesn’t pay, then it might not have much of an impact. Using an Airbnb platform can help reduce this risk.
Pros and Cons
Here are some pros and cons of using Airbnb and short-term rentals as an investment strategy.
- Renting through Airbnb could be more lucrative than renting to a long-term tenant, depending on your location. The more attractive and highly sought after areas provide for a better return on investment.
- Your costs may be higher if you rent through Airbnb, you will be expected to provide furnishings, keep the place clean, and pay fr the utilities.
- It may take a while to start earning money from Airbnb, as bookings come mainly from your reputation as an owner.
- Your monthly income will likely vary more if you rent through Airbnb.
- It’s free to list, with an Airbnb service fee of around three percent when you have a booking.
- The income you make through Airbnb is often taxable, so it pays to check in with the Australian Taxation Office to ensure you keep the correct records and pay the right amount of tax. You may also be eligible for some tax deductions related to running your rental, this includes the money you spend getting your property set up and marketed.
Do your research
Before investing time or money into transforming your property into an Airbnb rental, ensure you research what is currently on offer in your area. This will give you an idea of what guests are looking for and what people are paying for a similar property as yours.
You will also be able to see your competition and work out what needs to be done to make your property stand to be able to attract a premium price or higher occupancy rate.
The location and size of your home will have an impact on people’s decisions. Being near the beach means carpets and rugs will create additional work for guests, but an outdoor shower will make it easy for them to keep the place clean.
Couples are more likely to book small apartments, so a luxurious and romantic setting will be more appealing. Larger houses in a family friendly location will need enough bathrooms, barbeque areas, separate living rooms, entertainment spaces and plenty of kitchen tools.
Having good quality pictures is a must to show off your property and remember to avoid any misleading snaps which will cause disappointments and bad reviews. A comprehensive list of amenities and offerings is also needed, the more detailed, the better!
You must ensure that you read through your Airbnb contract carefully and ask questions about anything you do not understand.
It’s also important that you ensure you have ticked all the legal boxes, as each State has their own specific requirements and legislation which must be approved in advance. Failing to adhere to the requirements can cost you considerable fines, with a load of associated stress.
So be proactive from the start, do your research, get the relevant approvals and read your contract before signing on the dotted line.