Rethinking short-term property in the face of Covid-19: Yabonza's Mark Trowell

Rethinking short-term property in the face of Covid-19: Yabonza's Mark Trowell
Rethinking short-term property in the face of Covid-19: Yabonza's Mark Trowell

EXPERT OBSERVER

There are some challenges coming that are going to reshape our industry. I’m not trying to panic anyone, and I’m not being alarmist. But the impact of what we’re all going through with the virus and the pandemic that’s spread across the world is hitting the economy, and it’s going to keep on doing that.

Over the next six months, we’ll start to understand just how the country will recover financially, and what shape every industry will be in.

But in the short term, there are some questions a lot of people will be asking themselves.

One of the first is going to be around short-term vs. long-term gains in property, and what the right moves are from a strategic vantage point.

The Airbnb problem

Owners who have been planning on investing in or who already have built up a portfolio of short stay properties for guests using Airbnb are going to be worrying right now. The drop in travel, both domestically and internationally, is already being felt by the airlines, and it’s being felt by the hotel industry, and it’s being felt by individual owners too. Airbnb properties are designed to cater to a short-term stay, and when those guests dry up, the asset dries up too. 

Owners are going to be looking towards longer term rental options and wondering if that shift will be the right one for their portfolio. The higher nightly rate that Airbnb rentals can bring in is always going to be attractive, and it’s what drives many owners to embrace that option in the first place. What it brings with it, unfortunately, is that instability that we’re seeing in times of a downturn. If we’re anticipating that the current downtown could last a while – and at this point, we’ve got no idea of when international travel will pick up – the nightly rate becomes far less attractive when you can’t get guests into your asset. 

The stability of a longer-term occupancy gives you the chance to start recovering a lot sooner.

Longer-term rentals are still growth assets

The flexibility of the Airbnb market does appeal to owners who want to work on their property actively and push their income from it. But short stays aren’t the only way to do that. In fact, when you are able to rely on the longer-term occupancy of your tenants, and they are reliable, and they are dedicated to their living space as a home, you can actually do so much more. Where you could make minor experience, cleaning and fee adjustments on an Airbnb to change the real-time cashflow, if you invest into a longer term property in a smart way, making improvements and working with your tenants to better understand their needs, you can often increase your gains far more, over a longer period. A 12 month increase in rent that you know will last, is worth more than a spike over a few weekends.

Longer-term right now will need some patience

Yes, the longer-term rental market is going to be more stable. It’s a fact. Australian residents and local residents need a home, and renting is going to be the option. But with the downturn in the economy, you might find that you’ll need a little patience, a little empathy and space for tenants who might be hit hard financially, and the room to wait it out, in exchange for the longer-term wins and steadiness. But if you’re able to do that now, you actually have the chance to build a lasting and trusting relationship with good tenants who will stay with you for years, support rental increases in-line with your own investments in the property, and take care of it themselves while they do so.

You won’t get that from an Airbnb guest.

MARK TROWELL is the cofounder and CEO of yabonza 

Tags: 
Rental Property Rental market

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