Are most people losing money on Airbnb?

For example I see some apartments right in the middle of Sydney city renting for ~$100 a night for the whole apartment, discounted rate $70, this wouldn't even cover the mortgage or come close to covering the total costs, and would probably be better off and less work renting long term? I don't see the logic here but there seem to be a lot of people doing this. Is there something I am missing such as tax write offs or other expenses?

 

There's a lot of people in the hospitality space including Airbnb. The problem with most people is they follow the crowd. If "everyone" is doing something, that drives down the price fairly rapidly, particularly if you see a flattening, or drop in tourist numbers.
For some reason, most people think hospitality is an easy way to make money. It's a hard won way to make money at the best of times. Too many operators and it becomes impossible to make money for most. The market contracts, and the few and hard working, are left with the profit.
I wouldn't assume that all properties on Airbnb are mortgaged, some may be owned outright, and/ or bought when the prices were lower. I also wouldn't assume that most investors and business people check to see if they can make a profit before they do something. Plenty of people wait until the bank forces them to stop.

 

I don't think you are missing anything. Airbnb is just another way to rent out a property. Now that many more people have jumped on the Airbnb bandwagon, the returns have dropped. And the new rules in Sydney have made it even tougher. Plenty of people give it a go and throw in the towel after a year or so.

 

Long term rentals are for the most part more profitable, and it doesn't seem like the majority have them available for the entire year:

What Sydney's Airbnb hosts made last year

and..

Bubble bursting? Why Airbnb is falling out of favour with Melbourne landlords

 

Sounds like an expensive lesson if all these properties are going to get slapped with CGT as well now...

 

You've also got to remember that it's a discount rate only for that one night. There might be nights where they can charge $500 for a night, they are simply dropping the price last minute just to get someone in.

That being said I think most people don't really know what to expect when airbnbing and get a shock after a year of how little they have made when they take into account all there expenses and the time it takes.

 

My personal.experience has been the complete opposite. But I'm not based in Sydney.

 

Am not a air bnb expert but after doing somr basic figures I Thoguht it was way too risky.

For example.
400 per week property. Can be sublet out 100 per night. 2 rooms.

Obviously need to rent it out 4.5 rooms to get a better return.

Csnt imagine every week having 4.5 rooms rented out.
In top of that you have to go in and drop and collect keys. Pay for cleaning

Plus I'd hate to be dealing with insurance and am not surprised there aren't many "help, my air bnb trashed my room and now insurance won't pay"

 

yeah it's probably easier to make money.in a smaller market where not as many people are doing it

 

Market smaller, yes, but the ratio is a lot higher for the number of visitors per resident so these people would have to stay somewhere.

Just some quick stats I found for year ending 2017:

Sydney population 5.13m and domestic and international visitors 13.2m

Cairns population 163,814 and domestic and international visitors 9.05m

The average person per dwelling is similar where it's around 2.X.

I realise these stats wouldn't be a true indication of number of holiday rentals but not sure where to look to find the information (if it's even freely available) where it shows the number of available accommodation. But I would hazard a guess that the ratio in Cairns is a lot higher than Sydney.

The market here is heavily saturated by accommodation and highly competitive but I think it's a matter of having the right product that is attractive to guests to get the bookings and income.

 

Not everyone on airbnb are doing a commercial venture

Some are genuinely just renting out a spare room when they can (they might not be able to go into a long term lease as that room may only be available for short time etc)

 

I'm in LA right now. This person has done something interesting. They have in this one apartment, put 8 beds in a room (4 bunk beds), and in the living room put 6 beds (3 bunk beds) for a total of 14 beds. Get the beds filled and they'd be rolling it in.

Now you can think WTF, but actually this is one property where it doesn't feel overcrowded (the apartment feels clean and comfortable) and the prices are affordable. I do not know the legalities of it (Fairly strong chance perhaps its not legal) but it feels like a privately owned hostel and they have a guy onsite to manage it.

Also, I believe the host could be running more than 1 of these around here....

 

How do you even put 4 double bunks in a room??

 

If the room is big enough, easily. 2 bunks along each side of the room. Note, they are all single bunks.

 

What do the new rules in Sydney say?

 

If you are an onsite host, there are no restrictions. If you don't live in the property you have on Airbnb, you can have guests a maximum of 180 days per year. That's the main one.

 

Yep, usually comparing Airbnb to a hotel, it's often cheaper for the hotel so I don't see the benefit much of the time. However in some cities, there can be a shortage of hotels at particular times, or the ones in the central city are quite expensive. An Airbnb with a short bus or train trip can sometimes be much cheaper, or at least available.

Also if it's a couple of families visiting the same place it can give you options as double Queen rooms are not always available in many Hotels.

 

I chose a hotel with a pool over AirBnb for my last stay in Launceston. Good service, cheaper and a pool and gym. Easy choice.

Airbnb can be great for booking unique locations off the beaten track though.

 

I know a couple of guys doing it in Melbourne currently on several properties (mostly inner city apartments) and reckon it's well worth it for the moment. They do think that it is on borrowed time though, for many of the reasons above (changing body corporate agreements, increased competition etc)