Episode 6: Why Airbnb Is A Game Changer For Renovators
On today’s episode,
Bernadette gets into the major reasons how having your newly renovated property up in Airbnb will help you get a foot on the property ladder, and shares her learning experiences from her very first Airbnb listing to her most current short term rentals.
Listen to Episode 6: Why Airbnb Is A Game Changer For Renovators
Podcast: Download (Duration: 18:04 — 16.54 MB)
- How her very first Airbnb listing started and earned $850 a week
- Tips and facts about Airbnb to help you if you are considering the platform
- The main difference and benefits of an Airbnb listing from long term rentals
- How to make a decent 6 figure income as an Airbnb host
- What approvals you need to get for your Airbnb listings
- Why you still need to do your research before you put up your property
- How her test listing of a development site helped her identify the property market in Oxley Park
- Which areas have become saturated for short term rentals and requires much better hosting and marketing skills
- Using the figures you get from Airbnb to help you when it’s time to sell
- How to get help with managing your Airbnb listings
- Best practices to get Superhost status
- The benefits of having your property listed on different hosting sites
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Hello! It's Bernadette Janson, and welcome back to She Renovates! A Podcast for women who want to create an income and a life they love through renovating.
Today's topic is one that I am very fond of. We're going to be talking about why Airbnb has been a game changer for renovators. And before I get into it, what I want to do is tell you the story of my first Airbnb listing. So it was early in the Airbnb history. About four or five years ago, when we decided to find the cheapest property that we could, to renovate, to see if we can make a profit from it.
And so I eventually found a studio in Surry Hills, a small art deco studio and purchased that for AUD$356,720.00 and the project was quite challenging. It was an old building and with all renos, things go wrong. And I was quite keen to extract as much profit as I could from the project. So once we've transformed it into a beautiful swan, it was on the market and about go to auctions.
We decided to give Airbnb a go. So the weekend before the auction, I sat down at the computer and using the real estate photos, I listed it on Airbnb. So at that stage, I was totally inexperienced with using the platform, so I had no idea really what I was doing. But I managed to get it up and to my surprise within 24 hours it was fully booked. To the tune of $850.00 a week. And this is for a 28 square meter studio. I was absolutely gobsmacked. I thought this is amazing! And it's so easy. I now know that having it fall so quickly is not ideal because it means that the pricing is not right but it was fine for that scenario.
And at the time that apartment owed us was just on $400,000. And if it had been listed on the long term market it would have returned around 450 a week. So it was getting almost double that and that's when I figured that, actually this new Airbnb thing is going to be a game changer for us.
As time has gone on, I have listed like, I've had up to seven or eight properties on the platform at one time. I've really given it a workout and I also created a training, mainly because it was just such a huge benefit to our students. I wanted them to be good at being hosts so that they could extract the most return from the platform that they could.
And so along the way I've discovered that it solves quite a few renovating problems. I'm going to talk about those for a start and then I'm going to give you some fast fire tips and facts about Airbnb to help you if you are considering the platform.
The first and most obvious thing about listing your project on Airbnb, is that it will stem the flow of cash out the door in the down periods in your project. So in the beginning we usually aim to get the planning done during the settlement period and then to be ready to start the project as soon as we start paying interest. However, it doesn't always work out like that. It takes time to resolve the plan and get it right and sometimes you have to get approvals.
So being able to list the property on short term rental covers those costs while you are getting your act together. It also fills the gap at the other end in the settlement period. With the sale and settlement period, the end of a project can amount to three months and so that's long and a lot of money to be covering. So being able to list it on Airbnb really helps to stem the hemorrhaging of cash.
The other great thing about it is you still have access to the property. So if you need to be doing inspections you can time your guests, you can block out days. So it's quite flexible. It also means that if you want to get quotes done in the beginning of the project or anything like that then you're able to get access to do that.
The second problem it solves, in most cases it enable us to renovate apartments quite smoothly. The difficulty with renovating units and apartments is that you need to have the owners’ corporation approval to do anything, other than painting really, and sometimes that can take some time.
It's been a risk factor with those sorts of projects and of course some apartment buildings won't allow Airbnb, so part of the due diligence process is to check whether they do or don't. I actually wouldn't buy a property that doesn't allow Airbnb, because I just see it as a huge negative.
The next thing is, I think it's a much better Plan B. The property market is quite thick, all that goes up and down. If you happen to hit at a bad time you don't want to be selling at a loss, just because the market's having a bit of a hissy fit. And in the past, the option was to rent the property out and that has two drawbacks.
The first one being, you have no control over the property, so you don't know what a tenant is doing in there you will get them as well as you can. But I always think, I don't want to put a tenant in my lovely new renovated property because I don't want to take the edge off it. And the other thing is, that the returns are really low even if it is really beautiful. You're not going to return enough money to cover your cost.
However, on the other hand, short term rental or Airbnb, is the exact opposite. So you know most of the people that are staying in your property are staying, are there visiting their own business. It's not like they're living their life there so they tend to be a lot gentler on the building or on the walls and so on. You get access several times a week, so you can see what's going on in there. It's clean several times a week, so it's kept in really good condition and also you're getting extraordinary returns and that is the best part.
Just recently we've completed a project and it's at a time when the Sydney market is abysmal and so we're able to list that. And on the short term market, instead of getting $900 to a $1,000 a week, we're getting between $170 and $250 a night. So it more than covers the costs of holding it. It's only been listed for two weeks, but we haven't had an empty night yet. Building your skills is definitely worth the effort, because it's such a great safety net.
The other application for it is in actually building a substantial income. You don't necessarily have to own property to make an income from Airbnb, you can rent properties to list on Airbnb and I've certainly done that. So have quite a few of my students. And the reality is, it's not very hard to make a decent 6 figure income as an Airbnb host. It does require some money to set up but not an extraordinary amount. What you can do is, set one up and then once it's paid back its cost, set the next one up and just keep going on like that.
You do need to have approval from the landlord to do it and there are ways of going about that to increase your likelihood of success.
I should have mentioned I do have one student in particular who decided to turn lemons into lemonade in the Brisbane market. You would know that there's quite a glut of new apartments in the Brisbane CBD. She's now got 18 properties which she's rented in one building. So it makes it much easier to manage. And she is generating close enough to a half million dollars in cash flow.
Not everyone is that ambitious, but even just one or two little things can really transform your life. So I'm hoping you're getting some sort of idea of why I think Airbnb is such an amazing platform.
The next thing I should do is just get into some of the chips and I guess that's a good segue, because before you start going out and renting or thinking about listing a property on Airbnb. If it's a project that you've bought, that you're not going to do any research, you're just going to wack it up and get the most return you can.
However, if you are planning to list the property specifically for Airbnb in long term, you need to do some research and you need to research the potential. Now, thankfully there are quite a few ways of doing that these days, because there's lots of data around.
A few years ago, I'd just bought a development site out there west of Sydney and there was at that time, there were no other listings in the suburb. For the suburb of Oxley Park. And so my husband Stephen thought I had rocks in my head, but I thought I'm going to give this a go. Because we were going to get a terrible like $400 a week rent for this property and we wanted to be able to keep it for quite a while, because we weren't ready to develop. And we still haven't developed that. So I decided to put up a blind ad. I used the photos of the house and I put up an ad or a listing on Airbnb to check the demand. I started to get a fairly steady stream of inquiries, so it sort of reassured me that there was enough potential there to go ahead with it. And to this day we do use data, but I still do that for every listing, to make sure that there is enough demand for the property.
The next thing I need to share with you is that the short term rental market or the Airbnb, particularly in some areas has become quite saturated now, certainly in Surry Hills, Bondi, St. Kilda in Melbourne. There are some areas that are really saturated, it's not to say that you can't make really good money from those listings and we certainly do. We don't shy away from them, but it requires much better hosting and marketing skills. So you really need to have your wits about you and you need to have some skills, whereas before in the days when I just put a listing up and it filled in 24 hours. It's not the same now.
Another benefit that I almost forgot. Another thing that we use Airbnb for is, if you put that property on Airbnb before you start the project or even after you finish, you can use those figures to help sell the property. I have actually done that a couple of times. So you can demonstrate to potential buyers, that this property has incredible potential, and in actual fact that little apartment that I spoke about at the beginning of this episode that's exactly what we did. And the couple that bought it, for that reason is to list on Airbnb. It's another selling tool.
The next fact is that every property has a market. I'm yet to find one that doesn't and they don't all have to look like they're straight out of Vogue. But every property has a market, but it'll be at a price. So obviously the better the quality of the property and the better the area, the better the price.
But just to give you an example, I had a unit that belonged to my mother and that I was planning to sell. And I didn't want to put a tenant in it, but there was a period of time when it was vacant. So it was in a place called Rochester which is in central Victoria, it's got a population of 2000 had a couple Airbnb listings. The rental return on the unit was $220 a week, and I thought, I'm just going to give it a go and see how it goes. So it went gangbusters. I was getting $700 a week for that two bedroom unit. It's just amazing. Some remote areas, not all, but some remote areas do really really well.
The next point I want to make is, outsourcing is key, particularly the cleaning. I know that as nurturers and homemaker's we tend to, I shouldn't say we, because I can't say that in cleaning. A lot of the women I work with, the cleaning is their domain.
However, when you list the property on Airbnb, if you want to get it ranking quickly, you need to list it, allowing one night stays. But I can tell you a week of cleaning every day and it will finish you for life. So the guest pays the cleaning. I strongly recommend that you don't clean yourself. You get a cleaner and you can use a cleaning company but what I prefer to do is train my own cleaners. So I have some control over how the property is presented and I'm also able to manage my costs. So I'm not paying any on costs.
I also outsource the communications, back there five years ago, when I first started down this path, I had a virtual assistant in my building. She's based in the Philippines and she and I developed a communication system, basically in emails, which she manages and to this day she's still doing that. The other thing you'll find, if you've got properties on short term rental, is that your phone will ping with messages from guests, day in and day out and I found that, that did my head in. That's what Judy manages, and I just have to get involved if there's a problem, which fortunately is not too often.
The next point I want to make, is that 1% of the hosts make. This is a statistic that was published in 2016 but I'm pretty sure it's still relevant today, is that 1% of the host make 19% of the income and some of that is due to having multiple listings. But the majority of it, I think at 64%, is due to excellent hosting and marketing skills. So if you are thinking about making Airbnb an income stream for you, then it's definitely worth building your skills around that area once you get established.
Let's talk about getting established. So the main thing that you need to do when you're new to the platform is to get to SuperHost status. It's always easier to get the first time, if you lose it, it's not so easy to get back. However, if you get SuperHost status it will significantly increase your income. And so what we recommend that you do is stay on Airbnb only until you get to that point. So you consolidate all your bookings in Airbnb until you get to that point,once you get to SuperHost that is, then you can start branching out to increase your income. Start increasing your income and if you have a vacancy rate to decrease that. So list the property on other sites.
We find that around 30% of our bookings come from booking.com. But in saying that, you need to be careful, because booking.com is nowhere near as good as Airbnb. In terms of security and communication and money management. And so you need to certainly have your wits about you if you decide to go down that path.
Then the next thing I want to talk about is the guest from hell. So this is the last point I'm going to make now. A lot of people worry about having guests from hell, the Airbnb parties and the like. And what I want to tell you is that you're way more likely to get those sort of guests from booking.com, because it doesn't have the same security checks than Airbnb. And if you have an adequate screening process and communication process with your guest and you manage your property well. That is extremely unlikely. I can honestly say I've only ever had one slightly problematic situation and that was actually through booking.com.
Okay so that's it for today. But if you would like to know more about short term rental and Airbnb, we run a free training called A Crash Course in Airbnb. You'll find a link to that in your show notes and you can go and register for that webinar.
See you next week!