I had a call from an old client this week, that went along the lines of “Tom, I’ve got a unit close to town, I have just finished doing it up, its fully furnished, can I holiday let it on AirBnB or something?”
Short answer – yes, he can. But in this case at least, he probably shouldn’t. Depending on which side of the fence you sit on, AirBnB and similar platforms are either a money making gift from above, the root of the pervasive national rental crisis, or somewhere in between. Certainly the advent and the expansion of holiday letting has had a bit impact on the property market either way.
In certain cases, short term accommodation can yield a significantly higher return for an owner than a traditional rental would. This is typically at the premium end of the market - beachfront or close to it, inner city apartments or those special “destination” style addresses that offer privacy, luxury or a combination or both. While there might be few people in a position to pay $1000 per week on a 12 month lease, for something really special, there may be a much broader market of those willing to pay $500 a night, which in conjunction with a well-managed occupancy, can give those wild returns. On the more affordable side of the scale, I have seen studios which might have previously returned $300 per week, crack a more consistent $500 or $600 with those actively managed short stays.
With great returns, comes great(er) responsibility though, and the costs of managing a short stay property are certainly a lot higher than your typical lease. Toiletries, consumables and sundries can add up, as can the cost of cleaning (during and after a stay), linen and any extra wear and tear on a property. Management fees can also be a lot higher due to the more hands-on expectations, anywhere up to 3 or 4 times the typical fees charged on long term management. Externally, we are now seeing some Councils charge a premium for short term rentals, with higher council rates (sometimes by a multiple), in addition to Material Change of Use costs as well in some instances.
In this particular case, the higher costs and concerns around occupancy in a semi-industrial area weighed heavily against a holiday use-case, though I have certainly seen other properties benefit from the change, to the tunes of sometimes hundreds of thousands of dollars.
As always, when you are making the call on your next investment, do your sums, get some advice and go light on the assumptions.