Buying to rent on Airbnb

Buying to rent on airbnbThere’s no denying that websites like Airbnb and Stayz have dominated the holiday accommodation industry and thrown a few spanners in the works for the Perth property leasing market. How these websites work is basically anyone with a property, or even a spare room, can potentially make some handy (very handy) cash just by letting people stay there for a short period of time.

If you’re thinking of buying an investment property with the intention of listing it as a short-term rental, here are some things to keep in mind.

Are you breaking the law?

Before you rush into buying an investment property and sign on with a third party like Airbnb, be sure to check you’re not breaking any laws. Check that your listing doesn’t breach any home owners’ association or body corporate rules and that you’re compliant with applicable zoning laws.

In some cities, landlords are required to obtain permits and licenses, so it is best to do your legal research thoroughly or your plans may have to do a swift 180.

Be prepared to work it!

When listing your property through a third-party website, you’re essentially playing the role of a real estate agent, which includes advertising the property, responding to emails, coordinating bookings and payments, and arranging cleaning and maintenance. If you’re already thinking that sounds like a lot of work, it probably isn’t for you.

There is an upside to this, however, as you have more control and flexibility over your property. You might decide to adjust the rental price when demand is high, alternatively you may want to use the property for your own holidays.

Don’t forget Insurance.

Just like any investment we have in life, it’s always important to protect against any unforseen circumstances. Unlike typical home and contents insurance, you will need a special level of coverage for paying guests, so it’s best to speak to an insurance broker to get all the facts and find a policy that leaves no holes.

Income vs expenditure

The purpose of an investment property is often to boost your income, whether you opt for short term or long-term tenants. It’s important to note that if you opt for the short-term option, your owner costs might only be deductible during the percentage of the year that the property is available to be rented. So, if you use your investment property as a holiday home for 2 months of the year, and rent it out the other 10 months then you could only receive deductions for the 10 months.

A short-term rental also means a high tenant turnover, so you’ll need to budget for off-peak seasons when the property is vacant to ensure you can still effectively manage the costs. Tenants of short-term stay properties also expect the house to be fully furnished, so you will have an initial outlay before you even receive any income in return. It’s advisable to speak to your accountant about creating a depreciation schedule for furniture and white good items.

There are many benefits to ‘rentvesting’, but it is important to note that these short-term rental markets are volatile – the laws aren’t always clear and they change regularly. Our advice is to do your homework, and fully understand your rights and responsibilities before jumping in.

If you would like to know more about purchasing an investment property, get in touch with one of our brokers today.

Alex KempthorneBuying to rent on Airbnb