Let’s talk about a few things…
Have you been thinking about converting your investment property to short stay accommodation?
Sites like AirBnb & Stayz have opened up the short stay property market in a big way, and higher short stay rental prices can sound alluring. Airbnb alone now has more than three hundred million listings world-wide, seen in the graphic above direct from Airbnb.
There are some important issues to consider when converting your property to short stay accommodation, and we’ve covered them in today’s post, so read on and don’t forget to subscribe for regular monthly updates from Rent Choice!
Secure Strata Properties
My brother lives in a strata complex by river the in Maylands with code operated gates and secure parking. Without informing the strata or any other residents, one of the property owners (who lives overseas) recently converted his property to short stay accommodation. Residents began noticing different people moving in and out of the building regularly, and so became aware of the change.
One of the main benefits of a secure strata complex is the security, and of course now, security codes and keys and garage door clickers were being given to the constantly changing short stay guests of this property owner and the other residents were not pleased. A strata meeting was called, AirBnb was banned by the body corporate and the property owner’s short stay set up was shut down within a month. All that work for nothing!
Set Up Costs
As with long term rental there are going to be set up costs. But with short stay, these are usually higher. The main cost is obviously going to be furnishing the property and we all know how quickly that bill is going to stack up. With such a competitive market at the moment, most aspects of your home will need to be spick and span as well.
How’s the walls looking? Do they need a fresh lick of paint? Window treatments in good condition? Your kitchen, bathrooms and laundry need to be fully equipped with all appliances and white goods, as well as televisions and internet setup. And don’t forget bedding linens and fresh towels!
So make sure you do a proper cost estimate when considering your property to for short stay accommodation.
Council Approvals & Legislation
Discussions all over the world are happening about the legality and approvals needed for people to list property on Airbnb, with councils still struggling to deal with all aspects of the issue. Some areas such as Berlin in Germany, are fining Airbnb owners up to $100,000.
Currently in WA, it will depend on what council your property belongs to. You may need to seek council approval, usually in the form of applying for “Change Of Usage” as well as extra permits as it is considered by many councils to be a ‘business activity’.
Lease agreements are also being updated to ensure renters themselves are not sub-leasing their space out to short term holiday makers against the will of the property owner.
Traditional rentals are regulated under the Residential Tenancies Act, and ensure that rental properties are safe for tenants. It includes regulations such as;
- Hard wired smoke alarms
- Two RCDs, best practice is to have these checked annually.
- Ensuring any window treatment cords are secured to the wall to prevent harm to children and animals.
- Front door needs to either have a dead lock or security screen.
- Front door light
- Windows need to be lockable
- Standard pool regulations which also covers spas. Did you also know that blow up pools of a certain size are also regulated?
According to our research and discussions with Airbnb hosts, Airbnb does not enforce any level of safety regulation. While this might sound appealing to some, we recommend reading up on the rental safety regulations and looking at your property, you may be able to avoid a horrible accident before it happens.
Good news, Airbnb covers ‘hosts’ with it’s own Host Protection Insurance of up to one million dollars per claim. So if any guests do injure themselves, you are covered under most normal circumstances. For more information on that policy, click here.
Time is arguably the biggest investment you will need to make into your short stay property. Initial setup and preparation of a property takes time. Remember to consider not just the setup of the property itself, but the time you will need to get approvals, licences, permits and organise photography.
Ongoing maintenance of the property also requires significant time investment compared to traditional long term rentals. Even before guests arrive, bookings must be managed and queries attended to. Then, every new guest arrival means a perfectly prepared residence, including cleaning, washing, fresh linens & bedding, essentials replaced, neat presentation, keys organised and information handed over. Even if you are able to hire out external contractors to look after your property, there is still significant time required to manage these contractors, as guest turnover is irregular and frequent.
Cashflow & Vacancy Periods
Whilst the potential rewards of short stay may be high, cash flow needs to be a major consideration for all potential Airbnb’ers. Consistency over the medium to long term is not realistic, as so many factors can affect your occupancy rate. Peak periods and down periods will be common, and one year’s numbers will by no means be an indicator of the next years options as trends, flight prices and currency prices all adding to the uncertainty of holiday makers choosing your city as their destination.
A quick word on competition as well. With more people listing on Airbnb every day, it is becoming a very competitive marketplace. Over the last twelve months, friends of mine who were averaging 80% occupancy have declined to around 50%, and as a result are looking to convert their property back to a long term rental.
We all know property location is important, but take a moment to consider the target market for short term holiday makers who use Airbnb and if the location your property fits their needs. Firstly, check how many other Airbnb’s there are in your area on the app itself. Usually holiday makers want to be closer to the action, or at least be close to ways to get them to the action. Is your property close to the beach? The city? Cafe strips? Nightlife areas? Or is it in the middle of a nice quiet suburb that requires two buses and a train to get to main tourist destinations? If it is the latter, it may not be a prime location for people on holiday and hence not a great property for the short stay rental market.
Who’s Coming To Dinner?
Standard rental procedures for long term rentals require background checks, employment checks, rental history checks and character references. This is not the case in short stay accommodation. Anyone who has the internet and a credit card from anywhere in the world can come and stay at your property. They might be coming for a casual holiday, but they might also be coming for a bucks or hens party you just don’t know!
Thank you for reading, and if you need any advice on any of your rental properties, don’t hesitate to get in touch with an email, email@example.com & don’t forget to subscribe!
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