Management

7 Things to Consider Before Renting Your Property on Airbnb

Things to consider before renting on airbnb

Airbnb offers property owners the opportunity to earn rental income from short-term holiday letting, which far exceeds long term rents. The higher income potential is a major reason why home owners decide to convert their long-term rental property into short-term accommodation.

Other benefits of renting on Airbnb include regular access to the property in between guests for maintenance, closer management of how guests treat your property, no issues with missed rental payments and regular cleaning to keep the property in good condition.

But, not all residential properties are suitable for short-term renting. Here are 7 things to consider before listing your property on Airbnb.

 

1. What is the change in cashflow between long-term and short-term renting

Renting your property short-term, will change the profitability of your property investment.  The income may be higher, but so are the expenses. The best way to see this change, is to do a cashflow analysis. Your investment advisor or accountant can do this for you, or if you are feeling confident we have a cashflow analysis template you can download here.   A cashflow analysis will tell you if renting the property short-term on airbnb, will offer a better return than renting to long-term tenants.

 

2. Is your property located in a town with high demand for short-term accommodation?

While most tourists like to visit the usual destinations like cities and beaches, domestic travellers are more inclined to stay out of town to visit family or explore lesser known locations. Your property doesn’t have to be based in a city or major regional town to succeed on Airbnb, but there does have to be a demand for accommodation in your area. Look at what makes your area a desirable tourist destination. Does it host major events or contain significant landmarks? Find out what makes your town popular to tourists and whether they will need accommodation when they visit.

 

3. How much competition do you have in the immediate area?

Busy urban cities offer many accommodation options for tourists. Hotels, motels and serviced apartments dominate the market, which makes it harder for independent Airbnb owners to break through the competition. The only solution is to offer lower rates than your competition to get more bookings, regardless of what Airbnb recommends as your ‘average daily rate’. Lower rates will affect your income potential over the long term and the only way to counter this is to increase rates when events are hosted by your city. Make sure you monitor competition closely, so that you are not too much cheaper than them.

 

4. Does your property require major repairs before it can be rented short term?

After years of renting to tenants, it is common to have a list of maintenance issues that need to be addressed, before your property is suitable to be rented short-term. Guests are much more observant than tenants and a minor repair, can give you a major setback in terms of lower reviews. You may even lose your Super Host status, due to having to cancel a guests booking, to replace the water heater or fix a leaking shower. Maintenance issues can be costly, but they are normally carried out over the 6-12 months of a tenancy. Before listing on Airbnb, repairs will need to all be carried out at once. This is where it can become a major expense, which may throw your property into a negative cashflow situation.

 

5. Do you need to invest money into furnishing the home to setup for Airbnb?

Most home owners do not rent their property to long-term tenants furnished. Even if that is the case, the furniture will be trashed by the time the lease is up. An investment in furniture is required before listing on Airbnb, for every room in the house, including kitchen utensils. If you have the time to setup your property, great – it can save you money. If you don’t live locally or are time-poor, the best option is to hire a home stylist to source all of the furniture and setup your property for you. Home styling rates range from $6,000 – $12,000, depending on your preferences and budget. Most Airbnb home stylers will have an idea of what works best for your property type, guest demographics and who your most successful competition are on Airbnb.

 

6. Is your city affected by seasonal fluctuations?

Are you located in a summer destination like the Gold Coast or Sunshine Coast? Chances are your city suffers from the highs and lows of seasonal fluctuations. Inner city areas are somewhat insulated from these fluctuations, due to the increased number of reasons why people visit a city, however there is still an obvious downtrend in the winter months. The income you earn in the high summer/spring season, must make up for the slow winter/autumn season when you don’t have many guests. The best way to determine what kind of effect the seasons will have on your income is to research competition. Search for hotel industry trends and find the percentage change in ‘ADR’ and ‘REVPAR’ over the course of the year.

 

7. Are there any legislative requirements that restrict or prohibit Airbnb operations?

Governments are heating up in terms of regulating the short-term rental industry. The surge in popularity of the share economy has left the property industry without adequate regulation. Some owners corporations have responded by amended bylaws to restrict Airbnb rentals. Other states, like NSW, have approved an amendment bill to reform the short-term rental accommodation laws. Keep informed with legislative changes, because there will come a time when Airbnb activities will be either banned, restricted or further regulated with licenses and permits. The last thing you need when trying to earn a higher rental income, is to have all of that extra income go to the government in fines.