AirBnB or normal rental

Lenders put Air BnB in the same category as short term rentals and serviced apartments. Proving rental income becomes challenging and often you'll find you have to use your tax returns to demonstrate rental income.

 

That is true. However, if you are trying to get a new loan many lenders will accept rental income figures if you give them a letter from a real estate agency advising what the rent is as a typical rental. Of course, different lenders have different policies.

 

Yes, used the service, but that's not what I'm asking.

Provide evidence that Airbnb is better overall in terms of the providing that service and opportunity cost versus passive income from the same property.

I've been asking that the whole thread and all I've got is baseless comments back.


pinkboy

 

And many lenders will only accept a rental estimate if it's the property being purchased. For property already held, they want harder evidence of rental income.
For the right property in the right location, providing short term accommodation can work quite well and be good for cash flow. Whilst it doesn't make finance incredibly difficult, it does limit your finance options.

 

I have a friend in the same area who rents his 2bed apartment (equal location but inferior dwelling to mine ) for $250 a night and he tells me for about 6 months of the year he's fully booked at that rate. So that's $1750 a week compared to $750 rental he was getting. Now I think that's gross. Definetly a little more hands on but he uses a website where you can pay for work to be done eg typing, IT etc so he pays for an assistant to handle a lot of that stuff and says it runs mostly smoothly. I guess it depends on your location. .if you have a good location it seems it can be a good deal for you and the people staying endup paying less than a hotel in the same area.

It's definitely an interesting entrepreneurial business idea quite easy to trial. Thanks for all the feedback guys.

 

Lol yes thanks wylie! He has tenants the other 6 months I'm sure. His current tenant is a bit of a pain that's how I know. There are lots of ppl in this area happy to go on shorter leases I think. Even from my own past experience.

 

I do a similar short-stay let on my Melbourne apartment, but not through AirBnb. Mine is listed at $250 p/n, with a minimum 5 night stay. I would probably get $550 per week if rented out on a lease basis, so the difference is significant. I don't lift a finger; I have a company that manages everything for me.

You could look at something like this: http://www.urbankeyz.com.au/

20% may be a little steep, but it depends on how much you value your time. If the figures still work out with paying 20% to a company like this, why not try it?

 

Thanks @smokyjoe ! Appreciate your input mate. Have you worked out what's the difference in income you've made say in the last 12 months comparing normal rental to your p/n basis?

Cheers

 

Rough figures would suggest we're about $20k p/a better off. This apartment would be a dud of an investment if it wasn't for this. As mentioned, we don't go through AirBnb. We're advertised on stayz.com, booking.com etc. You generally get higher rates on these sites than AirBnb, but you pay for the privilege (advertising). My outgoings for property management, cleaning, linen, advertising etc. are $1 - $2k per month, but we're still around $2k better off per month than a long term lease.

 

Leo, if you can get $850pw during the quiet season and come close to doubling that per week for five months, it would stack up. But it will involve a bit of work.

I Airbnb a flat attached to my PPOR (Marrickville) and it works out well. It's booked 6 months in advance and I like the constant turnover of people - I've met some great people. I would get less for a permanent tenant, but I like the fact that we have a space for friends coming to town and my kids like having sleepovers up there. Being next door, it's not a problem at all to service it.
I also Airbnb a flat around the corner. It's in a strata building so I do minimum 3 month rentals and get more (but not much more) than a permanent tenant. I have someone moving in on September 1 for 12 months, which is good.
There is a real shortage of decent, modest furnished accommodation in Sydney, as Gockie has also found.
I have another flat about 500 metres away that I will be doing a reno on later this year. I think I will try for a permanent tenant, but there will be a bit of rental stock coming onto the market later this year, so if I have trouble getting a tenant I will furnish it and get someone in a flash.
Scott

 

@Depreciator thanks for your input mate. Yes I agree I had a close look at the numbers, the risks involved Vs the potential benefit and it fits my risk profile as well as my active approach to investing so I think I will give it a proper try and view it as an entrepreneurial business venture and not just something I sit back and do nothing and expect more money . I'm doing heaps of research atm to know as much as i can about it from other successful business people who have done this successfully. So I really appreciate your input.Thanks again mate and well done to you too!

 

We put our newly purchased PPOR apartment on airbnb for 6 months while we finished our lease (In Woollahra so similar-ish location)
Looking back, there was a bit of work involved but in the entire 6 month period, we had three free nights and one corner of a blind snapping off was the only damage.
We could have rented it out for approximately $625 a week and towards the end (once we had put up prices, as we started out with relatively low prices to attract more people and build up ratings), we had a five star rating and were making closer to $1200 a week, for long term stays, (we started at $130 a night) more for shorter stays. We would love to continue renting it out on weekends as we love going camping (and had numerous bookings, for approximately $500) a weekend but had to close shop as our strata recently banned it (fortunately, just as we were about to move in.

Our strata community seems quite conservative but I can see their point when they had one person trying to access the unit directly below ours (thinking it was theirs) and a few people asking where our unit was- the constant trudging up and down the stairs with suitcases I'm sure isn't ideal.

One other thing you should take into account is the cost of furnishing it, including linen, kitchen stuff etc. We trawled gumtree for weeks on end, driving all over Sydney in order to collect items. Still, we probably spent close to $3000, and to buy all new furniture (assuming your place isn't already furnished) would certainly cut into the profits.

Terri Schuar (sorry spelling is wrong I know) provide good short term landlord insurance.

One thing about Bondi- be careful the market isn't saturated- you'll be competing against a lot of places with lots of reviews and you wont' have any, which makes it more difficult to attract people initially. That said, Bondi is the place to be from a travellers perspective (we advertised ours as halfway between Bondi and the City).

We started by cleaning the apartment ourselves, but ended up getting a cleaner for all weekday cleans (although that's also when we got our first complaint). We charged a cleaning fee which covered the cleaning charge). We had a key lock which we put in the postbox with a code, and just provided clear instructions so didn't need to be there for the handover (although if we were, maybe some of the abovementioned problems wouldn't have occurred!)

It's to be expected but I got a bit ticked off about some of our reviews (we averaged 5 stars for ages then got pulled down by the following for a few weeks before returning to 5 again
- I found a single hair in the bath tub. (quote unquote)
- 3 stars for location (the location is actually phenomenal and detailed in the listing- I think we were judged as we are 15 minutes to the city, but if you want to stay to the city, go somewhere else!)

Happy to answer any questions you have!

 

It sounds like it could become a lot of work to maintain without hiring extra people to help you out with it. I'm not sure if it would be worth the hassle.

 

What do you predict the CGT impact will be? (I can't remember whether it's done on valuation or pro-rated; I know it's one way for IP > PPOR and another for PPOR > IP, but can never remember which goes with which.)

 

Its very doable. I do the changeover when I can (which is the occasional evening or weekend) but the rest of the time, (when i'm travelling, at work or simply have some out of work activity on) I get people to do it. I have about 6 people I offer the work to by text and whoever gives me the first willing acceptable reply gets the job. I then pay them into their bank account once its done, after they send me photos of the place.
And yes, I charge a cleaning fee, but many hosts who rent a room at their PPoR dont.

 

airbnb is not worth it. you have to do so much work.

it only works if you are retired living there and want to host people.

 

I didn't write the article–just had a chat on the phone with a journo

Some guests have been very appreciative of their upgrade!