Holiday and short-term rentals: Does your property fit the bill?

If your investment property is in a highly desirable location, you may want to explore alternative ways to rent it out. It is common in some mining towns throughout Australia, northern USA and southern Canada to rent out properties at nightly rates, for near-ludicrous rental returns. These properties can command such high rates and rental structures due to their remote location and general lack of housing stock required to house the growing mining industry working population.

For those not familiar with Airbnb and Flipkey, it is worth visiting both websites to educate yourself on these enormous global rental listing sites.

In short, both services enable property owners to rent out their property, fully furnished, at nightly (or sometimes weekly/monthly) rates, direct to their tenant. For well located and well serviced properties, the profit possibilities are far greater than the conventional way of renting a property out in Australia (i.e. via a real estate agency who sources a tenant who pays a fixed rental rate for a six or 12 month term).

I actually recently returned from a trip to Hawaii where I enlisted both of these services, as a holidaymaker/short-term tenant, and was very pleased with the entire experience.

Introducing this for an investment property in a non-resources town location however, can be quite challenging. There are two major components that you must carefully consider components to doing this.

Location and property type – Is your property relevant?

You should consider all of the following before offering your property for rent on such services:

-          First and foremost, if your property is a unit and not a house, you need to check with your strata committee the rules on operating your investment property in such a way. Some building strata by-laws will not allow for an Airbnb-style approach to tenancy.

-          Location needs to be genuinely awesome. The two major users of these services are holiday makers and travelling business people. Short-term student stays would arguably be the third user persona. All users have a high expectation that the property is in the best location to either enjoy their holiday hotspots, commute to business meetings and offices, or close to the campus or facility where their student program will be based.

-          Users also have high expectations regarding the quality of the property and features. Holidaymakers do not want to spend time in anything less than a property that, well, makes them feel like they are on holiday. Similarly, travelling business people expect to pack less in their suitcase and have everything they need, laid out for them.

-          So, cheap second-hand furniture bought from Gumtree likely will not cut it.

-          In line with the above, this means that properties will need to have fresh linen either fitted or neatly presented for the tenant (towels, sheets, kitchen cloth).

-          AV facilities should include TV/Blu-Ray player/stereo/free wi-fi internet access. Additionally, a folder that serves as a local guide is also a smart move. Include local restaurants/attractions, directions to transport and fun things to do, in the folder.

-          Tenants expect a fully functional kitchen stocked with quality working applicances. If parking is possible, instructions for how/where they should park their vehicles need to explicitly laid of for them.

-          A bit of a wow factor. This is important as negative reviews online will hurt your continued success on the service. Future users simply won’t book. In this way, it is typical to see welcome champagne/chocolates with a nice welcome card for tenants, sometimes fresh flowers, and sometimes a cute ‘guest book’ where tenants can read about the previous tenants holiday trips.

-          Other handy tips to help make your property a more unique and special experience to consider would be a little bowl of local spices or products in the kitchen. For international travelers, you’d be surprised at the positive response to supply local delicacies such as Tim Tams, Vegemite, or Manuka Honey can provide. You can even go one step further and leave a note requesting a positive review if they’ve enjoyed the place/service

Service commitment – Do you have the required ongoing time spare to commit to it?

To commit to ongoing, often daily, changeover of tenants, you need to have your property serviced frequently. You can either do this yourself, or hire the services of a maid/housekeeper, which is an additional operating cost. These are just some of the many considerations to keep in mind. All of them obviously add to the time you will be spending managing this property:

-          Security maintenance. Typical setups usually enable tenants to access a little pin-coded lockbox on the exterior of the dwelling. Inside are house keys. When they leave/check out of the property, they simply put the keys back in and pin-lock the little box. Tenants will never meet the next tenant, so this is how keys/access is usually passed along. You may be up for upfront costs to install such security necessities.

-          Above mentioned maid / housekeeper costs. Typically, Airbnb properties are run where the tenant(s) check out by 12pm, and the new tenants check in no earlier than 3pm, allowing a three hour window for the housekeeper to come and perform a set roster of duties. You must set the roster and practice it through with the housekeeper prior to the first tenant stay. 

-          Site listing maintainance. Not only do Airbnb service costs need to be taken into account, but keeping the listing up to date and securing as many positive reviews as possible, also requires significant time investment.

Cameron McEvoy is a NSW-based property investor and maintains a blog, Property Correspondent.