Pros & Cons of renting your investment property as an Airbnb
Should you turn your investment property into a short term rental?
In the ever-evolving landscape of real estate investment, Airbnb and short-term rentals have emerged as a popular choice for property owners looking to maximise their returns and have flexibility with their property.
As with any investment decision, choosing to rent out your property on Airbnb comes with its own set of benefits and drawbacks. Here’s a detailed look at the pros and cons to help you decide if this is the right move for you.
Pros of renting your property as an Airbnb
1. Higher potential income
Short-term rentals can often command higher daily or weekly rates compared to long-term rentals. This is particularly true in popular tourist destinations or locations like that host frequent events such as Fremantle. This can drive up demand and allow you to maximise your revenue.
Higher potential income is possible because of:
Peak season premium rates during tourist seasons, special events, or school and public holidays.
Well managed dynamic pricing - if you use an Airbnb Management company they will manage this for you.
Ability to take advantage of last-minute bookings which attract higher rates.
2. Flexibility for personal use
If you enjoy spending time at your investment location, short-term rentals provide the flexibility to use the property for personal vacations or family gatherings when it's not rented out.
They are also perfect for those moving out of their primary residence to work abroad or interstate for short or longer periods. This gives you a home to return to, complete with your own furniture, and makes you money while you’re away.
Flexible personal use means:
Owners can block out specific dates for their own use, providing a free place to stay whenever they’re in town.
Property owners have the opportunity to offer their place as accommodation for family and friends visiting the area by blocking out specific dates.
Short-term rental schedules can be easily adjusted around personal needs, enabling owners to plan last-minute trips without the constraints of long-term tenant leases.
Owners can experiment with living in different parts of a city or country by utilising their various properties at different times, providing a diverse and convenient lifestyle.
3. Less wear and tear on property
While frequent turnover can increase maintenance costs, short-term rentals avoid some of the deeper wear and tear that can occur from long-term tenancies, potentially preserving the condition of your property over time.
Because you or your short-term property manager is constantly visiting the property you are able to pick up small maintenance issues before they become an issue. You can also determine age limits and numbers for guests to minimise potential property damage.
Short-term rentals generally have less wear and tear because:
Guests typically stay for a few days to a few weeks in short-term rentals, which means less time for extensive wear and tear to occur compared to long-term tenants who reside continuously.
Short-term rentals are cleaned and maintained regularly between guests, which often includes professional cleaning services that maintain the property's condition and address any issues promptly.
Short-term renters are less likely to make personal changes or alterations to the space (such as hanging pictures), which can often lead to wear and tear in long-term rental scenarios.
Owners and managers of short-term rentals inspect the property regularly between stays, allowing for immediate attention to any damage or maintenance needs, therefore preserving the property's condition over time.
Short-term rental agencies often enforce rules and deposit requirements that encourage guests to maintain the property's condition, deterring potential damage.
Because guests are on vacation or business trips, their activities within the home are often limited compared to long-term residents, reducing the stress on appliances, plumbing, and fixtures.
Cons of renting your property as an Airbnb
1. Requires more hands on management
Managing an Airbnb youself can be time-consuming and more hands-on than traditional renting. Tasks such as responding to guest enquiries, managing bookings, cleaning between guests, and maintaining the property can be demanding, especially if you have high guest turnover. However, Investors who can effectively manage these demands, or those who invest in a specialist short-term property manager, often do well.
Self-managed short-term rental managers face the following challenges:
Significant time investment for activities like communicating with potential and current guests, handling bookings, and addressing inquiries and issues.
The high turnover of guests means more frequent check-ins and check-outs to manage, along with the associated cleaning and maintenance between stays, adding to the workload.
Operational demands, including maintaining inventory (like toiletries and linens), managing cleaning services, and performing regular maintenance, require constant attention and management.
Be available on short notice to resolve any issues that arise during guests' stays, such as lost keys, equipment malfunctions, or other emergencies. This is specifically important in areas like Fremantle where council regulations require a 24/7 manager on call. Learn more about these regulations here.
Handling bookings, payments, refunds, and deposit returns can become complex and time-consuming, especially when dealing with cancellations or booking changes.
Dealing with problematic guests, disputes, and enforcing house rules can be stressful and demanding.
The constant need to ensure guest satisfaction and maintain high ratings can create ongoing stress and pressure, which might not be suitable for all property owners.
This is where an Airbnb Manager comes in. They perform all these duties for you! Learn more about all the services offered to short term rental investors here.
2. Regulatory changes
There are a number of Airbnb and booking platform requirements as well as Local, State and Australian Government regulations that need to be followed when renting out your property as a short-term rental. There may also be strata or other regulations in place for your property. If changes to these regulations impact your ability to rent your property, or if Airbnb takes down your listing, then you lose all your income.
It is important to know your regulatory requirements before you list your property. Councils such as the City of Fremantle have their own specific requirements to register your property prior to listing. You can download our guide to these regulations here.
It is important to keep up to date with any changes in legislation that affect your property. If you have a short term manager they will be able to provide guidance on these.
3. Suitability for success
It's important to understand that not all properties are going to be viable as short-term accommodation. The feasibility and success of renting out your property on a short-term basis depend heavily on various factors, including property desirability, location, demand, and market saturation.
In addition, when you start renting out a property, there will be a lot more vacancies than an established short-term rental that has a track record of good reviews. It takes time to build up a reputation and a steady flow of guests. This can be minimised by using a Management company with a database of existing guests and corporate return bookings.
Minimising vacancies is important in maximising your income, so you need a property that will generate demand year round.
Your property could be a great short-term rental if it has the following:
It’s located in tourist destinations, near major attractions, or business hubs. These properties tend to attract more short-term renters due to high demand.
Being close to amenities such as restaurants, shops, public transport, and entertainment venues can enhance a property’s appeal to short-term guests.
Properties with unique or desirable features, such as a great view, luxurious amenities, or unique architecture, often attract more interest from potential renters. For example, homes with a pool, spa, pool table or impressive theatre room.
The property must be in an area where short-term rentals are legally permitted and comply with all local regulations and zoning laws.
Ensuring the property is safe and accessible can make it more attractive to a wider range of guests, including families and those with special needs.
Properties that can accommodate various types of guests, from singles to families to business travelers, often have higher occupancy rates.
A property in good repair and well-maintained is more likely to receive positive reviews, which can drive further bookings.
Having access to reliable property management services, either through self-management or hiring professionals, is crucial for maintaining a successful short-term rental. If you would like to speak to someone about the suitability of your Perth or Fremantle area property, get in touch with us here.
