We’ve written in the past regarding difficulties with Airbnb. We’ve indicated that, in many cases, Airbnb is illegal in a residential premise. We have also raised the issue that, Airbnb is not licensed and takes money on trust on behalf of landlords. This leaves the consumer open to detriment on a high scale. In other words, if another organisation created an Airbnb type of model, and they had taken considerable amounts of money over Christmas time, they could easily take the money overseas and never be found again. Unlike Real Estate, there is no property services compensation fund to protect the consumer.

Notwithstanding this, property management and real estate agents turn their back on short-term accommodation at their peril. The returns people are obtaining from short term accommodation are incredible and ignoring them as a real estate agent may result in you not properly facilitating the investment objectives of your client.

We had a client run a trial on Airbnb for their unit in a suburb of Western Australia. It was not centrally located, nor was it in a sought-after suburb. It was a mere suburban townhouse, which had four bedrooms. By the way, all properties in Western Australia have at least four bedrooms.

In the first 12 months of her operations, our client had a return of $102,000 on the investment. The return on the investment was almost 20%. Our client has now recognized that, even if she takes large management fees, any landlord would be likely to return at least 15%.

Another business in New South Wales called Weekend Real Estate has been highly successful only working in the short-term accommodation marketplace. He has been netting 15% returns for all his clients and, running a highly successful business whilst doing it.

Short term accommodation is not new. We used to call it corporate accommodation. People used to specialise in renting out furnished apartments to corporates. Furthermore, there were people who specialised in Theatre or the Arts and provided accommodation for itinerant workers. For some years now, people have been vacating their homes on the coast and hiring them out to people whilst they have gone away.

This fledgling industry is now blossoming into an absolute business. Landlords are out there using Airbnb themselves to get the returns discussed above. There are people who are essentially retired using Airbnb as a means of maintaining a healthy income.

To the investor, it is something worth considering in your property portfolio. It isn’t for everyone and it isn’t for every property, but it is something, which should be considered whether partially or full time.

You agents, I know I’ve heard some of you say it is a pain in the ass but ignoring it is at your peril. This is an investment option which landlords can have and is best facilitated through experts. The property market is exciting because what is old is new, and it is always changing. Don’t get entrenched in old opinions. Have a real go at the opportunities that are out there.

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au or call 1300 438 538