Purchasing an investment property is a great move to help you build wealth and secure your financial future, but instead of renting your property out to tenants for the long-term, have you ever considered using your property as an Airbnb investment
Airbnb investing is a great way to generate great returns and it can deliver stable and long-term cash flows if approached correctly.
With more and more people across the world turning to Airbnb accommodation compared to hotel accommodation for short-term stays, you can turn your new property investment into a profitable venture very quickly.
All you require is a well-furnished apartment in a great location and you’re ready to go. So, what are the benefits of Airbnb investing
that you should be aware of?
Benefits of Airbnb investing
- Higher rental yields - An Airbnb property investment can help you achieve higher rental yields and greater returns than charging a standard rent for 6 months or a 12-month lease. The average rental yield you can expect from a traditional property investment is roughly 4.5-5%, whilst an Airbnb investment could see rental yields well into the 10% mark.
- Low host service fee - Airbnb charges a 3% host service fee for every completed booking and this fee is generally cheaper than what a Property Manager would charge you for using their services. A typical property management firm can charge the owner anywhere between 8-12% of the monthly rental value of the property, plus expenses.
- Strong demand in inner-city locations and popular holiday spots - If your property investment is situated in the inner-city or a popular holiday spot, then you could see strong demand throughout the year.
- Tax benefits - There are also tax benefits to consider when owning a property as an Airbnb investment. All your furniture, fittings and fixtures can be depreciated and if your property is available to rent for the full year, you can claim a whole year’s worth of tax deductions. It’s best to get a Quantity Surveyor to draw up a Depreciation Schedule for you so you know what you can claim from the ATO.Drawbacks of Airbnb investing
As well as benefits, there are also drawbacks you need to be aware of before you turn your property into an Airbnb investment.
Drawbacks of Airbnb investing
- Vacancy rates - Keep in mind that your property might be unoccupied for some period of time and this can hurt landlords who are ill-prepared. You will have initial costs of furnishing the property to begin with, and if you don’t get any tenants then you will have to cover the costs of mortgage repayments out of your own pocket.
- Time consuming - If you want to manage Airbnb yourself, then it can be quite time consuming and take a lot of effort to manage. This involves managing the bookings, responding to questions and phone calls as well as arranging cleaners and attending to any maintenance issues. There are some companies that can manage this process for you, but it does come at a fee.
- More wear and tear - With more people coming and going, your property is likely to see more wear and tear compared to tenants who tend to stay put for a longer period on a fixed term lease. However, you can claim this wear and tear through depreciation.
- Landlord Insurance - Keep in mind that some landlord insurance policies do not cover instances when you sub-let such as Airbnb, as it is classified as commercial use. It is therefore best to check your insurance cover before you sign up. However, Airbnb does offer Host Protection Insurance which will act as primary insurance and provides liability coverage to hosts and, where applicable, their landlords, subject to certain conditions, limitations and exclusions.
Things to keep in mind for successful Airbnb investing
If you are thinking of sub-letting your property for short-term stays, then there are a few things you should keep in mind to ensure your property investment is as successful as possible.
Firstly, you need to ensure that you buy your property in a great location close to all your amenities such as transport, retail, dining and parks. This is true for any property that you buy, not just for Airbnb properties. The properties that perform the best tend to be situated within the inner-city areas or within a popular holiday spot. You need to think of the tenant and what they are looking for. This tends to be a property that is close to attractions and restaurants in a central position close to transport. The tenant will typically be on holiday or business so want to be close to everything they require.
If you purchase an apartment, then you may want to factor in resident’s amenities. Having a pool, gym or rooftop terrace can make your property much more appealing compared to one that doesn’t. Keep in mind of the long-term though as when you do come to sell the property or rent it out for the long term, then having resident facilities can make your property much more desirable and help achieve premium prices.
Make it Modern
Buying a modern property such as an apartment off the plan will also tend to perform much better than an older property. This is because people love new, and are happy to pay a premium for the privilege of staying there. You also don’t have to worry too much about maintenance and repair issues when you have tenants staying.
Great Investment Opportunities at iBuyNew
At iBuyNew, we have some fantastic properties in inner-city areas that could make a successful Airbnb investment if you are looking to achieve higher returns than a traditional property investment. In Melbourne, we have a number of great off the plan apartments situated in suburbs like Richmond and the Melbourne CBD that have a fantastic lifestyle right on their doorstep with everything just an easy stroll away.
However, keep in mind that you should still choose an investment property wisely and hold onto it for a minimum of 10 years to experience the greatest amount of growth with properties generally doubling in value over 10 years. Airbnb investing
can generate high returns quickly, but there are also risks involved so you should ensure that the property you buy is well positioned to help avoid long-term vacancy and be prepared for times of vacancy.
To find out more about buying off the plan apartments as an Airbnb investment or as a traditional investment property, get in touch with the team at iBuyNew today to discover more. Some of our developers are even offering buyer incentives such as free furniture packages to start attracting your short-term tenants immediately. Call us on 1300 123 463
to learn more.
Published on 16th of February 2017 by Marty Stanowich