Airbnb™ is a term that has become synonymous with short term rental. In this post, when I refer to Airbnb™ I mean short term rental generally.
For renovators, short term rental is an absolute cracker because it solves a lot of problems and I want to share with you the ways we are using it right now in our projects.
Having the holding costs paid while you plan your reno takes the pressure off.
So, the first project is a property in Redfern, Sydney.
We have had it on Airbnb™ to cover our holding costs.
In renovating, sometimes you are forced into making decisions about your renovation quickly, because you have the pressure of the holding costs bearing down on you.
The minute that you settle on the property, you start paying interest on the full project.
By putting the property on Airbnb™, it means you have time to think and get quotes and approvals and the flexibility to start renovating when you are ready.
You don’t have to to wait for the tenants to leave.
So we’ve had this Redfern property on Airbnb ™ all year.
The Airbnb™ Returns Are A Super Selling Tool.
Now we are about to start the cosmetic renovation in Redfern on the 20th of October.
The property earns about $4,500-$5,500/month in it’s unrenovated state. Once we get it renovated, it will go back onto the short term rental market just before Christmas which is a mad time for Airbnb™.
This time it will be newly renovated, the photos will be better and it will go on multiple platforms.
We will be working to push the income on that property up, probably around a $1,000 a week.
When it goes on the market in the new year it will be presented as a fully managed, high cash flow property.
So, as a selling tool having a return like that is a real advantage.
Building financial capacity by producing income with rented properties.
The next project we are using short term rental with is to build capacity for serviceability.
Renting properties and listing them on the short term rental market to produce an income pretty much out of nothing. This is another great strategy. Some of our community don’t have good serviceability or don’t have enough cash flow to get the type of loan they need for their projects.
By building up a portfolio of rented properties that can be listed on the short term market, is a great way to produce an income. We’ve rented a property recently, once again this is a terrace house, in Surry Hills. It’s taken us just over 8 weeks to break even. So, now we can start putting the pedal to the floor and really start building the income.
Short term rental is a long game. You will have income coming in immediately but it takes time to build the income up. We have discovered that a listing’s earning potential peaks at about 250 reviews on Airbnb™. But of course it’s not the only platform and some platforms attract higher booking fees.
We’re just about to get a SuperHost status on that property and once we do that, we’ll take it on to multiple platforms and really push up the earning capacity.
The last way that we use Airbnb™ is to enable us to renovate apartments. Normally there is quite a lot of risk with renovating an apartment, because it takes time to get approval through the owner’s corporation. Of course you have to check that the owners corporation will allow you to Airbnb™ the property, some won’t. It’s part of your due diligence to check.
But if they do allow it, and it’s vacant, you can immediately furnish and get it onto Airbnb™, so you can have an income coming in straight away.
A word of warning
You must also check with your local council and owners corporation of your building before you list your property on the short term rental market.
As a side note, if you are in New South Wales, the laws are about to change.
In Sydney, it will be limited to 180 days per year for short term rental listings.
For a renovator, that’s plenty, it’s 6 months. Normally you can get your approval in that time.
The other thing to be mindful of is seeking permission.
If you are planning to rent properties to list on Airbnb™, you must get permission and a clause written into your lease to allow you to do that.
Please don’t do it illegally as it will come back to bite you.
Okay, so just re capping, there are Three Ways I Am Using Airbnb™ In Our Renovation Projects.
Firstly, in order to cover the holding costs during the planning and approval stage. And this is particularly useful when we are looking for apartments.
Secondly, to use it as a selling tool. Because you’ve got extraordinary figures and if you’ve got it setup and managed on autopilot, that’s very attractive to an investor.
And the third thing is, to help build capacity for borrowing potential by generating income from properties that you don’t own.
I hope that’s been helpful and now you have better insight into the multiple uses for short term rental.
Airbnb™ is a term that has become synonymous with short term rental. And when I refer to Airbnb™ I mean short term rental generally.