You might have noticed the recent trend in rental property investments. Ever since Airbnb has grown in popularity, short-term rentals have become a lucrative strategy for property owners. Especially for those looking to earn some extra income with the flexibility they choose. However, there are also some fallbacks to wholly relying on holidaymakers to pay off your mortgage.
Airbnb can be a great alternative to renting but it has to be the right fit. If you’re considering it, it might be helpful to have a list of some pros and cons to help make that decision.
Pros of using Airbnb as an investment strategy
Increased cash flow above normal longer-term rates
Compared to typical long-term leasing, Airbnb prices are far higher. This means that you can charge often more than double the price you would normally get per week as a long-term rental.
If you get booked consistently, the perks of having guests stay for short durations at your property can make for a strong cash flow.
More flexibility to live in the property intermittently
If you want to still be able to live in your property, Airbnb is a great strategy to use. It provides you with the freedom to choose when you would like to rent out the property and when you would like to stay in the property yourself.
This is a great option for homeowners who like to travel.
Regular cleaning and check-ups
Regular cleaning of the property can mean you have a well looked after property. Unlike typical rental leases where you might only be able to inspect the property every 3 months, using Airbnb, you will be able to regularly check up on the property and cleaning will help maintain the value.
Cons of using Airbnb as an investment strategy
Secure income for a longer period of time
Having tenants on a lease provides you with a consistent and regular income for the property. With Airbnb, you could have months without anyone booking your property. That means that you have months without any income from the property.
This was certainly the case with COVID-19 when travel bans prevented many people from travelling and staying at Airbnb’s. With travel restrictions still in place, it looks like this might be the case for some time to come.
Relying on Airbnb means that you are relying on the demand for holiday rentals. This means that during off-peak times you might not have any bookings.
It is also important to consider the demand for Airbnb properties in your area. High holiday traffic locations could mean that there is less volatility, however, if your property isn’t located in a high holidaymaker hotspot, you might end up with a lot of vacant dates.
Greater risk of damage
Short-term stays don’t have the same consequences as long-term leases. If the tenant throws a party and trashes the house, they don’t have to live in the property for the next few months and don’t have strong repercussions for trashing the property…so they won’t care as much about leaving it in good condition.
Cleaning and maintenance costs
Constant cleaning and maintenance can be expensive. All the furniture is yours in the property, so that also needs maintenance as opposed to having a vacant property where all the expenses are mostly paid for by the tenant.
Property damage while using services such as Airbnb can also be a nightmare. Since you do not have any bond to cover damage, you are left to chase damage costs from the holidaymakers. Airbnbs are also renowned for house parties; something to consider if you are renting out your beloved family home.
It’s not a set and forget investment
You don’t get a set and forget investment with Airbnb. You are always chasing new tenants which can be stressful as opposed to having a tenant locked in for a long time. This isn’t just monetary, this is constant upkeep, and stress on whether you will get someone else in to rent the property.
Things to consider when deciding on Rentals vs Airbnb
It’s important to understand that the decision you make cannot be just based on monetary incentives. Both Airbnb and long-term rentals have their benefits and drawbacks but at the end of the day, you need to make the right decisions for you and your property.
If you would like to learn more about long-term rentals and finding renters, please feel free to contact us; we would love to help!
Want to read more? Check out some of our other posts:
- Best Suburbs In Melbourne To Invest In 2021
- 5 Things To Consider When Buying An Investment Property
- Rentals Vs Airbnb: Using Airbnb As An Investment Strategy
- 5 tips for buying a property in a hot market
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