Would turning your property into an Airbnb rental ensure greater earnings than a traditional rental? A recent study conducted by Nested, a London-based online estate agent, seems to support this assumption.
According to Nested’s Property ROI Index (2017), a three-bedder in Sydney would take 315 months, or roughly 26 years, to pay back if rented out to traditional tenants. However, that same property would take just under seven years to pay off via Airbnb. Similarly favourable estimates were reported for Melbourne and Perth.
These estimates take into consideration the average 12-month price of an Airbnb rental, with the further assumption that the rental would have an 80% occupancy rate.
On the other hand, experts such as Andy Krause, a lecturer in property at the University of Melbourne, considers Nested’s index to be misleading. Among other things, Krause questions the very high 80% occupancy rate, saying such a rate would be highly unusual for cities like Melbourne.
“It makes it sound like Airbnb is a better investment in all properties in all these cities and that’s simply not true,” he said.
Other commentators say it’s entirely possible to achieve such a high occupancy rate. According to Tim Medway, marketing project manager at MadeComfy, rentals in hotspots like the inner-city/CBD suburbs of Sydney have the capacity to achieve 80% occupancy. The impact of seasonality in these areas is low due to ongoing demand from tourists and business travellers.
“In suburbs outside these hotspots or such exposed to high seasonality fluctuations, the occupancy can vary quite a bit depending on the location. On average, we work to a 70 – 75% average for occupancy,” he said.
Medway said properties that are turned into Airbnb rentals can easily enjoy 20% more income from short-term guests compared to traditional tenants.
“For example, a 3-bedroom home in Sydney’s inner-south suburb, Arncliffe, was previously earning $500 per week through a long-term tenant. Now through MadeComfy’s property management, the owner is earning an average of $1,009 per week, equating to an additional $26,000 over the course of one year,” he said. “Without MadeComfy’s management, the owner would be expecting to earn an average of $739 per week renting directly through Airbnb, $270 less per week.”
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