TypingDogParticipant@typingdogJoin Date: 2020Post Count: 0
I’m a newbie to this forum, so if this is in the wrong place just shoot me a DM and I’ll remove the post.
I’ve been scouring different options to maximize yield and have come across Airbnb as potentially optimal.
After taking into account a higher vacancy rate and cleaning costs, the yield works out to be ~8% (across a few properties in Melbourne). This beats almost any residential property in Melbourne, what am I missing? Higher insurance costs?
Thanks in advance for any responses.
Typing Dog.BennyModerator@bennyJoin Date: 2002Post Count: 1,376
Hi Typing Dog,
I don’t think you are missing much at all. I ran my own airbnb for a number of years, and its return was very good despite the high vacancy rate. Alongside that, it allowed for tradies to come by through the week if needed (saved expensive weekend callout rates) and it also allowed us to take our own holiday times when it was not in use (you don’t typically get these benefits with a standard rental). Our return was also around 8 – 9% – it varied year to year. Some months would be thru the roof, while others would be low.
What it does entail is a heap more management. It sounds like you are paying for cleaning costs so perhaps you don’t involve yourself?. The other big item is management. Are you paying another group (RE agent?) to do all of the work of arranging the rental days/weeks? Or are you doing it yourself. See, if you do it yourself, you can save heaps, but it bites into your own time. If you are paying someone else to manage it AND still getting 8%, then really well done. Of course, the location and the offering makes a difference (e.g. if your airbnb is on the Gold Coast by the beach, then you may well have a relatively low vacancy rate, so better income but also higher costs). But if it is available for inner-city rental, for short-stays for visitors, there may be less take-up, but also less cleaning and less management costs.
In a nutshell though, an airbnb-style operation would usually return a far better rental than a standard residential rental.