Buyer's Agents | Property Investors | Home Buyers | Adviseable

Is Airbnb all it’s cracked up to be for investors?
Is Airbnb all it's cracked up to be for investors?

Airbnb have been accused of being one of the main culprits for our rental market mess, because many more investors are supposedly choosing short-term tenants over long-term ones.

As I have written about many times before, though, the rental crisis was nearly a decade in the making and came to be because of a plethora of poor policy decisions that stuffed up the demand and supply equilibrium of rental properties around the nation.

But is Airbnb really a better financial option for property investors? Let’s take a look to find out.

Cash flow considerations

Most of us have no doubt stayed in Airbnb’s by now and we have usually paid a pretty penny to do so during peak holiday periods.

But have you stopped to consider how these properties fare during off-peak seasons unless they are in holiday hotspots that are consistently in demand from holidaymakers?

Some interesting research shows that the annual results are not as spectacular as you might think.

According to Airbtics, the average occupancy rates as well as monthly revenue figures don’t appear overly attractive to me – and remember these figures are before costs such as management fees of up to 30 per cent. 

SYDNEY:

Occupancy Rate: 39%
Average Monthly Rent: $3,374

MELBOURNE:

Occupancy Rate: 38%
Average Monthly Revenue: $2,435

BRISBANE:

Occupancy Rate: 48%
Average Monthly Revenue: $2,972

ADELAIDE:

Occupancy Rate: 47%
Average Monthly Revenue: $3,052

PERTH:

Occupancy Rate: 53%
Average Monthly Revenue: A$2,616

DARWIN:

Occupancy Rate: 53%
Average Monthly Revenue: $4,520

Now, conversely, let’s consider the median dwelling rents in our capital cities according to CoreLogic which show that Airbnb is hardly a gravy train – remembering again these figures are medians and also before costs such as property management fees.

SYDNEY:

Median Weekly Rent: $745
Average Monthly Rent: $3,228

MELBOURNE:

Median Weekly Rent: $565
Average Monthly Rent: $2,448

BRISBANE:

Median Weekly Rent: $627
Average Monthly Rent: $2,717

ADELAIDE:

Median Weekly Rent: $565
Average Monthly Rent: $2,448

PERTH:

Median Weekly Rent: $630
Average Monthly Rent: $2,730

DARWIN:

Median Weekly Rent: $611
Average Monthly Rent: $2,647

Higher fees mean lower income

On first glance, sure, Airbnb revenue on average is higher than long-term rent, but so are the fees attached to managing one.

For example, property management fees for Airbnb’s are generally in the vicinity of 20 to 30 per cent of rental revenue, so, that reduces the monthly revenue to being well below long-term tenancies where property managers generally charge five to eight per cent, depending on the State or Territory.

But wait there is more because unlike residential tenancies which usually are unfurnished, you clearly need to furnish your Airbnb and often to a high standard if you want to charge top dollar for it.

Now, depending on a few factors, it’s fair to say that you won’t get much change from $15,000 to $20,000 as a minimum to furnish the property – and the wear and tear is likely to be significant, too, so you will need to set aside a tidy sum every year for maintenance, repairs, and even replacement of fixtures and fittings.

On top of that, there are cleaning costs, which many Airbnb hosts do charge to guests, but I think it’s highly unlikely that those charges would cover the entire cost of cleaning throughout the year.

And, finally, you pay a three per cent host service fee and some management companies will also charge a minimum monthly fee so that even if your Airbnb is vacant, they are being compensated for their time and effort – doing not very much.

With residential tenancies, investors are probably receiving 80 to 85 per year of the weekly rent, after costs and management fees, but with Airbnb it is probably only about 50 per cent of the revenue.

At the end of the day, each investor will make up their own mind on the pros and cons of Airbnb versus long-term tenancies.

But for my money, the constant churn of guests as well as the fact that you will potentially only retain half of your earnings makes Airbnb a literal poor cousin to long-term tenancies in most locations.

Image credit: DepositPhotos

More
articles

Scroll to Top