Benefits and Risks of AirBnb
Property investors are catching on to the AirBnb phenomena as an attractive alternative option for renting out their properties. The online accommodation website is growing in popularity and in larger centers it is affecting rental property stocks, as property investors turn their homes over to Airbnb management groups to make better returns.
What is AirBnb? AirBnb is a web-based accommodation service that allows online bookings for short terms stays in a fully furnished property. Tenants can elect to stay anywhere from one night to a few weeks. Some AirBnbs are a spare room in a private home, or a private home when the owners have gone on vacation. In this article we explore properties that are offered exclusively for AirBnb – that is, they are an investment property for the owner and may have previously been used for residential rental accommodation. They are fully furnished accommodation, targeting short terms stays, most commonly travelers or visitors to Wellington city. With AirBnb we speak of “guests” and “hosts”, that’s tenants and landlords in old school renting language!
What is different about offering your property through AirBnb compared to a standard tenancy? Renting your property out to AirBnb guests offers a number of benefits compared to residential tenancies:
1. Damage control
One of the biggest concerns for landlords is the cost of damage tenants can cause, and using AirBnb is a great way to reduce the risk of long term damage. AirBnb guests are all rated by their host, and this star-rating, including a comment is publically available on the website. Guests rely on your feedback to continue to use the platform, and secure future bookings. This means that they tend to
treat the property in high regard, and leave it as they found it.
2. Higher rent.
Daily rents for short term lets are on average twice as much as those on a standard, longer term residential tenancy. Through increasing your revenue you naturally increase your investment returns.
3. Flexible rent.
Daily rents can be modified to reflect peak periods. That means that during school holidays, Wellington’s Beervana and the World of Wearable Arts you can increase your nightly charge to reflect demand. Conversely, when the weather is bad and things are quiet, you can reduce your rent to keep your occupancy steady. Before you panic, even in quiet times rents are higher on average than residential rental rates – your investment income is increased.
Yourself or your property manager will be in your property 2 – 3 times per week as opposed to every 3 months with a standard tenancy. You will receive regular and constant feedback from guests, so you will know as soon as there is an issue, or a potential issue. This allows the chance to be reactive with any maintenance as you are not relying on tenants to make the issues known.
Maybe you want to use your investment property for yourself? Or for family travelling to visit Wellington? No problem – just book the property for yourself! With no need to give tenants notice, and no long periods of down time between tenancies. Short- term letting through online platforms also enables landlords to be flexible in choosing how long they rent properties for: it can be for as little as one night. This hyper-flexible letting can easily fit around a property owner’s lifestyle.
6. Beats the hotel option
Travellers are choosing AirBnb as an accommodation option because it offers more space than hotels, is more affordable for families and can offer great extras such as coffee machines and breakfast options. There’s also great choice in terms of location. Properties can be in the midst of a tourist hotspot, off the beaten track or closer to other attractions, such as family. In some cases, unusual locations prove beneficial for owners as they can offer a service in locations other businesses cannot reach.
There are of course also some risks to offering your property through AirBnb:
1. Changing cash flow
The cash flow from short-term letting has peaks and troughs. It is less regular and more seasonal in nature, which stands in stark contrast to the certain income provided by a 12 month fixed term tenancy.
2. Banks haven’t got their heads around it!
Some buy-to-let property investors are finding it difficult to obtain the funding they need to benefit from the higher yields on offer. This is because traditional mortgage providers see lending for Airbnb-style letting as a riskier choice than more traditional buy-to-lets.
Could you be interested? Do you want to know more about our experience with AirBnb management? Trust Property Management are Wellington’s largest AirBnb property managers, and we are growing rapidly. Call us today for a free no-obligation chat, including an assessment of the suitability of your property of AirBnb.