Air BnB vs normal rental

Discussion in 'Airbnb & Short Term Letting' started by Firefly99, 7th Jan, 2021.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Firefly99

    Firefly99 Well-Known Member

    Joined:
    24th Jul, 2020
    Posts:
    1,727
    Location:
    Qld
    Ok so apologies upfront about some pretty basic questions I have, this is the first time I’ve looked into Air BnB so very much a novice.

    We are moving overseas for a few years, I’m still a little in shock!!

    Anyway, so need to rent out our PPOR. It’s a large, newish home 200 m from the beach in a very popular tourist area. With a pool etc. We are not taking our furniture overseas and therefore the house can also be left furnished.

    I’m weighing up if Air BnB (or similar) would be worthwhile. Other houses in our street are on Air BnB so I can see what prices they rent out for in peak and off peak periods but have no idea of vacancy rates. The rates are around 3.5 x normal rents in off peak and around 7 x normal rents in peak periods.

    1. Are there any websites etc which could give an idea of likely vacancy rates?
    2. Aside from management fees, cleaning, additional insurance costs, electricity, gardening and replacement of worn/broken furnishings, are there any other costs associated with Air BnB?

    I don’t want to chase a few extra dollars for a large amount of risk. This is our very loved PPOR :) But if the rental return will be significantly higher then happy to go the Air BnB route.
     
  2. Kesse

    Kesse Well-Known Member

    Joined:
    14th Jun, 2015
    Posts:
    891
    Location:
    Cairns
    If you have too much emotion invested in the property than don't do it. The wear and tear is significantly higher. You will need to emotionally detach from the property and look at it as a business.

    Look at comparable properties on the booking sites ie airbnb, home away, trip advisor and look at their calendars to get an idea of occupation rate. Won't be completely accurate as, if your area is anything like mine, people book with minimal notice but will still give you a bit of an idea.

    Airbnb et al take a cut of your income, also add internet costs to your calcs too.
     
    Firefly99 likes this.
  3. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    I’d actually say the wear and tear on a well-run short stay is significantly less than a normal rental imo.

    Except for a few provided things like linen and kitchen stuff which really should be thought of as almost consumables.
     
    jbv likes this.
  4. Firefly99

    Firefly99 Well-Known Member

    Joined:
    24th Jul, 2020
    Posts:
    1,727
    Location:
    Qld
    I’m not too concerned with wear and tear - even if we just got normal tenants we would probably repaint and get new carpets when we moved back in. Same with furniture, happy to get new stuff if something gets pretty worn (eg couch).
     
  5. Gockie

    Gockie Life is good ☺️ Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    14,735
    Location:
    Sydney
    This is great. I would actually say, go for it, but make sure you take out insurance to cover it. People often don't know how to use your stove or washing machine or dryer etc. Dishwashers may need servicing very often (that's what I found at least). Hope your appliances are straightforward to use.

    Use a manager recommended by others (or someone you know would possibly be ok too). Get a gardener in every fortnight or so to keep the outsides tidy. You'll need to get someone to maintain the pool too.

    If a friend of yours is an Airbnb host, get them to give you a referral - they should get a benefit from Airbnb, and maybe they'll share it with you :)
     
    Firefly99 likes this.
  6. unicorntears

    unicorntears Well-Known Member

    Joined:
    4th Nov, 2020
    Posts:
    271
    Location:
    Sydney
    There are heaps of dedicated Airbnb property managers out there. I spoke to a few when I considered this a few years ago.

    Pros:
    - potentially higher returns
    - more frequent cleaning of your property
    - you can move back in with minimal notice

    Cons:
    - inconsistent income
    - all utility bills paid by you
    - high management fees of about 20% (some charge this on gross income vs net income)
    - service fees charged to both the host and the guest reduce your net income
    - high cleaning fees of $200-$450 each turnover "paid by the guest" also effectively reduce your net income
    - fixed fees to replace consumables each turnover
    - some of these companies have gone bust and disappeared in the past few years

    Ideally, you'd get someone you know to manage it for you. Either way, couldn't hurt to give it a go and if it doesn't work out, lease it out as a furnished long-term rental?
     
    Last edited: 7th Jan, 2021
    Careca and Firefly99 like this.
  7. JLC

    JLC Well-Known Member

    Joined:
    2nd Jan, 2021
    Posts:
    96
    Location:
    Aust
    I'm also unsure of the air bnb rules but am curious about the difference between being able to rent out a section of the house via air bnb vs longer term rental of the same space. My question specifically related to whether by being longer term it is considered multidwelling occupancy and therefore requires fire walling etc, as air bnb doesn't seem to require the same regulations.

    We have a large downstairs bedroom with full ensuite with seperate entry that we can close off from the rest of the house that we occupy. We could possibly do a small basic kitchenette there (extra sink plus benchtop oven/microwave/fridge) without anything built-in except sink and benches. We are close to a major hospital so could rent it out fairly well I think as air bnb but I would probably prefer to do a lease agreement if it's possible. What are the rules around this?

    We will also be putting in a non attached granny flat so multidwelling is not possible.

    Thanks
     
  8. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    I don't really understand what your question is?
     
  9. JLC

    JLC Well-Known Member

    Joined:
    2nd Jan, 2021
    Posts:
    96
    Location:
    Aust
    Apologies for being tangential. What I'm unclear about is that I have a normal residential block and am getting ready to submit to council plans to put in a gf. We are trying to get setbacks changes so will require a da.

    I would also like to convert the other bedroom to self contained accommodation and I think would be ok as air bnb, but I'm not sure if I could rent it out as a long term rental, given my block's low density Resi zoning (would this be classified as multidwelling or boarding house type of situation?).

    I don't think it would be an issue though to Airbnb, providing its registered as required by Fair trading. Therefore I think I could rent it out as short stay accommodation through them. However I would prefer a long term rental.

    Can I have 3 separate residential spaces (our separate main house, the unattached granny flat and the self contained bedroom with its seperate entry that is attached to the main house) in a low density zoning? I'm not sure if the self contained bedroom could be classified as a "flatmate" situation (although separate from us) and this would be allowed in that capacity.

    Thanks
     
  10. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    What are you basing this on? There's normally a few issues with this.

    I doubt it. Are you even in an area where you can rent out the GF separately from the main house?
     
  11. JLC

    JLC Well-Known Member

    Joined:
    2nd Jan, 2021
    Posts:
    96
    Location:
    Aust
    I'm really not sure if what I'm basing it on is correct, that's why I posted on here. I'm keen to hear hear about the issues please.

    I can rent out the gf free from the main house (NSW). Land over 450m but wanting smaller boundary setbacks so will put it through council as a da.

    I'm just trying to understand what I'm able to do with the block. I "think" I might be able to rent out the bedroom through Airbnb (but I'm not sure about this). My preference would be to rent it out as a longer term lease to maximise regular cash flow, but TBH I'm not sure this is even possible under the circumstances.

    I am trying to maximise my cashflow.

    Thanks
     
    Last edited: 9th Apr, 2022
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Much will also depend what is an approved use and structure. No insurance could be a deal breaker. The room may already be a GF and NSW law or the LGA may restrict a further GF on the lot.