In recent years, AirBnB has become an increasingly popular way for property owners to rent out their homes.

Renting out your home or investment property as a short-term rental through Airbnb is a great way to make extra money, but there are some drawbacks that most newbies often overlook.

Pros

Higher yields

If you rent out your home in a traditional way, most properties generate somewhere between 2 and 5% rental income. Click here to download our latest report pack to find Australia’s most profitable suburbs.

While this is more than acceptable to many, for those willing to put in a little more work, it’s possible to double or even triple those numbers by renting out your home as short-term accommodation on Airbnb.

This higher income potential is the main reason why most people consider renting their home on a short term basis.

Access to your property

An often overlooked benefit of Airbnb is that you can still have access to your home if you need it during any time of the year.

Short-term rental platforms allow you to choose when your property is available and use the property as you wish, without having to remove a tenant or arrange furniture at short notice.

This flexibility is a great way to either make the most of a home that is vacant for a certain time of the year or even make some money off a home you still live in.

Maintain your property

While we sometimes see stories of houses being demolished after an Airbnb party, we can honestly say they are the exception, not the norm. While there are some risks in renting out your property, the downside is that they also exist with long-term renters.

Since renters’ fees include cleaning fees, you actually have the ability to keep your property neat and tidy all year round, given the short-term nature of the tenants.

You can also keep an eye on the property and also manage things like gardens and ongoing maintenance better compared to a traditional lease. Read more about the costs of maintaining an investment property here.

cons

Time

While you can make more money by renting out your property on a short-term basis, there are some drawbacks to the process, such as the time you spend organizing the process.

To run a successful Airbnb property, you need to manage bookings, clean the property, and resolve any issues. It is also worth remembering that in addition to cleaning the house, you also need someone to wash bed linen and towels.

As a result, this type of income is far from passive, compared to long-term tenants and a property manager.

While you can hire third parties to manage all elements of your short-term rental, they also charge higher property management fees due to the increased workload. This is typically about 20% of rental income, which is much higher than the cost of traditional property management.

Cost

The other big difference with long-term renting is that there can be higher costs involved. As mentioned, you can hire a property manager to take care of many elements of the day-to-day running of the property, but you should also consider the platform fees charged by Airbnb and others.

You will also need to consider the cost of properly furnishing a home, including all the furniture and items such as appliances, TVs, and even things like tea and coffee.

Another expense that is often overlooked is that when you have a short-term rental, you are responsible for paying all utility bills, which are normally paid by the tenant.

Vacancies

The hardest thing to predict with a short-term rental is how much demand your home will have and how much vacancy you will encounter.

Job opportunities will also change between seasons, with summer being much more popular than winter. That also means that your income is not constant over the course of the year.

In addition, when you start renting out a property, there will be a lot more vacant properties than an established short-term rental with a track record of good reviews.

Suitability

It is important to understand that not all properties will be viable as short term accommodation. If you own a property in a beachfront vacation location, chances are you can rent it out.

But if you own a rental property that not many tourists or people travel to for work, it may not be suitable for short-term rental.

Airbnb and regulations

The last factor to consider is that by renting out your property on a short-term basis, there are a number of regulations as set forth by Airbnb and the Australian Government that must be followed.

If government regulations affect your ability to rent out your home, or if Airbnb removes your listing, you will lose all of your income.

Overall, Airbnb has been a game-changer for many real estate investors chasing higher yields. However, it is not suitable for everyone or for every home.

Before taking the plunge, please provide a detailed breakdown of the costs involved, conservatively estimating rental income with a vacancy rate of around 20-30%.

That should give you a good idea of ​​whether a retina will be more profitable in the short term than a traditional long-term rental.

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