What can short-term rentals earn?
This is one of the most common questions we get asked at BnB In Style. Of course, the answer depends on a variety of factors such as the type, size and quality of property, the location and the competition in that area. Having said that, there are many examples of short-term rentals outperforming long-term rentals in terms of income by 30% or more. Especially during peak seasons. That is why this short stay accommodation sector has grown and many investors are choosing this modern and agile strategy.
In Australia, the traditional route for property investors has been long-term tenancy. In the right location with the right property and a good tenant there is merit in this approach. As property investment strategies changed and the short-term rental market matured, it became obvious alternatives to traditional tenancy were emerging.
It is important property investors and homeowners are clear on their investment goals before property choosing either a short-term or long-term rental approach. Is the decision solely based on rental returns? What other factors need to be considered? And what are their investment needs and timeframe? For example, is the owner keeping the property for ongoing income or looking to sell with a smart income stream in place.
Short-term rentals require more work for the property owner if they choose to run it themselves. If they outsource the property management to a company like BnB In Style, then there is virtually no work. The potential for higher rental returns and having 5 star ongoing care for your property certainly make it worthwhile.
BnB In Style can provide you with a free assessment of your property’s earning potential based on your local area and the competition. Not every property is suitable for short-term rental accommodation, but many investors are happily surprised at the difference it can make to their rental returns.
Access to different markets with short-term rentals
The short-term rental market is supported by a variety of online travel companies and booking platforms such as Airbnb, Booking.com, Expedia, Trip Advisor and HomeAway. These companies have global reach which means they enable holiday makers and travellers from all over the world to view a property listed online. They may choose your property if it looks great and fits their needs. You also gain access to interstate holiday makers and business travellers looking for alternatives to hotels and motels.
Greater demand for properties means higher prices, particularly for peak seasons such as beachside towns like Coffs Harbour or speciality areas like the Hunter Valley in NSW. A professional property manager can devise a pricing strategy to optimise the rental returns according to local factors and time of year.
Long-term rental attracts local people from the Australian market and rental increases are done annually at best. Having access to a wider market can help reduce the risk of not securing a good long-term tenant after the previous one left.
If you have a property located in a tourist frequented area, chances are your property could be transitioned to the Short Term Rental Model. Tourists are increasingly looking for alternatives to hotel rooms where they can spread out and enjoy the comforts of home without being at home, or potentially live out their dream in a luxurious space.
For example, niche markets like Pet Friendly Accommodation are seeing a surge in interest and can generate a premium rental fee. This type of accommodation allows guests to forgo the challenge of finding boarding kennels for their animals and factoring in the additional cost for their holiday.
What are the costs and risks with short-term rentals?
Like any investment, there are risks with short-term rentals. There are also set up costs if the property is unfurnished and needs a secure lockbox for keys. Having identity checks and vetting guests reduces risks of unacceptable behaviour. Having appropriate insurance and a property manual for guests helps reduce risks of accidents and incidents.
If you live in an apartment complex or block of units, it is wise to check with your body corporate in relation to renting your property on Airbnb. Ongoing costs also include cleaning, washing bed linen and towels, restocking shampoo, toiletries and some kitchen pantry items. You also need to pay the utility bills like power and water.
Running a BnB by yourself can seem like a lot of time and effort. Especially if you are already working. For semi-retired people, or those working from home or with more time, it can be a great supplementary income. Having the help of an Airbnb management company can take away much of the stress and risks.
What are the benefits?
The benefits include:
- Less wear and tear on fittings, furnishings and appliances.
- Professional cleaning and inspection after each guest.
- Owners can choose to stay in their property from time to time.
- You can choose to rent a room in your house and flexibly control when guests stay.
- You can adjust your pricing for holiday seasons, weekends or local events.
- A high performing Airbnb property with systems in place can be attractive to other investors if you choose to sell.
Summary
Short-term rentals of a suitable property and in the right location can earn much more than long-term rentals. As previously mentioned, there are risks and rewards to any property investment strategy. Each property needs to be considered as a separate ‘business’ and will have pros and cons to weigh up.
Traditional investors may likely stay with long-term tenants because that is what they have always done and may be recommended by their real estate agent managing the property. The online travel industry and short stay accommodation sector is here to stay and will only grow if previous indicators are anything to go by. Exploring the options, knowing your market and keeping aware of the changes is always wise for investors.
