Private Rental vs Airbnb
With AirBNB on the rise as a viable investment option it’s worth discussing the benefits of the private rental market and the AirBNB rental market. Which is the best choice for you? Which does your investment property suit best? Which market is your investment’s location best suited to? We outline the important factors to take into account here.
Managing an Airbnb property, including managing bookings, replenishing amenities and dealing with disputes is a time-consuming exercise. The financial benefit of Airbnb can be huge, but some simply don’t have the spare time. That’s why we created airSAVOY.
airSAVOY is a branch of Savoy Real Estate that specialises in the management of your Airbnb property. We market, manage bookings, replenish amenities (E.g. soaps, toilet paper), clean and replace linen, manage guests, arrange cleaning services, arrange maintenance, manage disputes, manage payments and provide financial statements. Our service is fully comprehensive, we handle all aspects of your Airbnb investment leaving you time to focus on the important things in your life and give you peace of mind knowing your investment is in the best hands.
At any point that the property is available, our clients can opt to switch their property from the private market to Airbnb and back.
While the private rental market is seen as a more stable and predictable, the financial gain is generally lesser than that of Airbnb. For example, a property in Mount Evelyn, Victoria we recently appraised could receive $400 per week in the current private rental market, and would attract about $130 per night on the Airbnb market in the current conditions. Taking these calculations further, $400 per week on the private market is $1738 per calendar month, every month. The Airbnb market may fluctuate, so, if you had the property booked for 15 days of the month, you are looking at $1950.
While the Airbnb figure is higher than the private market figure, you can’t guarantee 15 days booked every month. It’s harder to predict, but in the right conditions for the right property you can have a significant financial benefit. For example, a fully booked month of the above mentioned property could result in $3900. On the other hand, the private rental market is more stable and predictable.
Wear and Tear
In a private rental market property, the wear and tear is predictable. Aging in paintwork and carpet due to use of the property and appliances and fixtures aging from general use. Basically, it’s a steady level of wear and tear on the property when you have 2-3 year tenancies each time. Generally you would look at repainting every 10 years, replacing the carpet in the same time period, replacing appliances and some fixtures every 15-20 years and so on.
In an Airbnb property, you have to take into account the need to replace furniture items should they break due to wear and tear, expect that wear and tear on the property may be increased due to the frequent change in people staying there and general wear and tear due to age of the property. This is counterbalanced by the increase in income vs a private rental market property.
While nearly all properties are suitable for the private rental market, Airbnb properties have some prerequisites to be successful. These include:
- The best Airbnb properties are close to amenities, entertainment, points of interest or are in busy areas such as Melbourne CBD or close to or those near beaches or tourist areas (E.g. The Yarra Valley). Properties close to public transport or those that are easily accessible are also very viable.
- The best Airbnb properties feature heating and cooling, modern furnishings and have features such as views or outdoor areas/balconies.
- The best Airbnb properties are clean and tidy and light and bright. Poor presentation of the property will cause a slump in bookings.
- The best Airbnb properties have high availability. For example, properties that are available all year round, particularly in peak periods are a great choice.
Airbnb comes with some regular costs that you won’t come across in a private rental market property. In the private rental market, your regular costs are maintenance, rates, advertising and management fees. For Airbnb, the following extra costs may be incurred:
- Amenity costs (Toilet paper, soaps etc.)
- Internet/Wifi costs (If you are to provide this)
- Cleaning costs
- Linen costs
- Maintenance costs
- Advertising costs
- Management Fees
In summary, there are many factors to consider when deciding between Airbnb or the private rental market. Hopefully the information we’ve included here can help you make that decision, but should you have any questions or want to explore your options further, contact us at Savoy Real Estate and airSAVOY. Our staff have the experience and knowledge to help you make an informed decision.
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