Airbnb returns - is 10% net normal?

I spoke to one of my agents today and he just bought a property near the Gold Coast in QLD for $750k. He is going to turn the garage into a studio and based on 60% occupancy it will return $100k pa.

Assume management fees at 12% and maintenance/council rates/insurance etc at $8k that's an $80k pa net return. Assuming he spends $50k to furnish it and get it set up, that's a 10% return. And he's assumed 60% occupancy but Airbnbs in the street are booked for the next 9 months.

Is this a typical return for an airbnb?

What is your airbnb achieving?

How do banks assess the income when refinancing etc?

Thanks

 

My 1br apartment near Sydney would rent $1000/week on Airbnb.

Furnishing isn’t so expensive and you employ someone to clean, it’s not so expensive.

For rental assessment though, the banks would assume it’s a normal rental at normal rents.

 

100k pa from a 60% occupancy rate?. By my maths that means this garage is going to rent for >$450pn on the nights it is let. It must be one hell of a conversion!!!!!!

I know what sort of hotels you can get up there for that, so im intrigued as to the type of person that rents an airbnb studio conversion for the same money. Unless of course he/she is being a tad generous with the facts.

 

I think it's on the assumption that tourism - domestic and/or international, returns to pre-Covid levels. I wouldn't be comfortable with that assumption for at least the next 2-3 years upcoming.

It can be lucrative if you have a property in the right locations for short term rentals. But I can also foresee potential disasterous consequences with damages that insurance won't cover as many are averse to these short term rentals.

 

They are renting out the house and the studio as 2 tenancies, not just the studio.

 

My partner started an AirBnB a few months before Covid hit. Business has actually been very good. Due to border closures, people have been holidaying at home. In the first 6 months of this financial year, the AirBnB made more than the previous annual rent.

 

Opposite here airbnbs have shutdown due to no tourists, no travel from anywhere international & domestic. Consequently rental prices have dropped a lot with market flooded with ex-tourist apartments.

My medium term tourist rental is still ticking along luckily at 15% discount, 1yr non resident tourist was already in the country before bans, gross return is about 10%. When they leave I could be up the creek though.

 

Can anyone else comment about what returns they are getting from Airbnbs?

 

I'm probably getting around 4 to 5% net. I'm not necessarily maximising my profitability though - I manage it myself and do things like a 3 night minimum just to make it less hassle for myself.

It's been a pretty busy year on my end. Lots of domestic travellers.

 

I would not really be able to say until July, due to a 2 month booking at the end of last year. As a guide, the first 6 months of the financial year took more than double the previous annual rent.

 

Ah illegal conversion. And I assume no application to Council ? Thats a $8K+ GCCC fee last time I saw one to create a dual occ. Cancelled occ cert otherwise and fines. No lease as they arent "tenants" and contrary to QLD law - Just short stay. No insurance ? Neighbours will report when the first guest is a PITA and then maintain a record even for good guests. You cant win.

Cost for cleaning and changeover / linen etc will be significant. Wear and tear and consumables will really mount. Plus electricity, gas, water, internet and so on. Airbnb fee is 15% and thats just to host the booking.

 

Location, location, location. I see some really strange Airbnb locations and the host questions why they dont get more bookings. Others print money (eg Bondi Beach) . You want to be competitively priced and make yours seem unique with extra features. Competitive doesnt mean cheapest. Many see airbnb as a get rich option but its 10 times the effort and making it shine above other listings is key.

And a year round destination is going to fare far better than something seasonal. If its central eg opposite beach along sunshine coast. Where is it on a map ?

 

I have got 10% a month, well 40% in 4 months, on ABNB shares acquired by LOC on property where long term tenant is responsible for all maintenance and outgoings, much easier, less hassles.

 

I agree, I think airbnb only works with very select properties in certain locations. Otherwise it's probably not worth the effort and wouldn't get much more money than a normal rental.

And then there's the issue of legalities and risks too. I imagine most people are doing it illegally in some sense.

Mine's 100% legal and has planning approval from the council. I don't think many hosts can say that.