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Airbnb's approach to renting out property is tempting some landlords

Landlords

MyPropertyLife 07 Feb 2017

airbnb-renting-out-property-159141-edited.jpgAirbnb has also opened up a new opportunity for property owners who are ditching the traditional long term tenancy route, in favour of a high yield income. We explore some of the positives and negatives of adopting this new approach to renting out property. 

 

What can be gained?

There is a financial incentive. Renting out a furnished property as short term accommodation will bring in more income on a per night basis than a normal, long term rental would. Some experts even say it can even result in double the revenue than a regular tenancy agreement - an attractive prospect for many. Complementing this is Airbnb's global audience which allows landlords to present their property to a much wider audience.  

 

Where do the risks lie?

The first think to be aware of is that there is no guarantee of how often your property would be rented, and for how long - meaning there is no income security. For first time investors this is probably way too risky as often the weekly rent is paying for the mortgage on the property. However, more experienced investors may be able to better manage gaps in occupancy without too much impact on cash flow.

The second risk you run by choosing to rent out your property through Airbnb, is that you won't be protected under the Residential Tenancy Act. Of course insurance will still cover many of the risks that come with opening up your property to casual letting, but it will be extremely important to understand everything about the policy you take out to ensure you are adequately covered.

Renting your property through Airbnb is obviously quite different to the usual long term tenancy agreement, so there are a few other things to consider; the accommodation will need to be furnished (including linen, kitchenware etc), offer WiFi, a phone, and it will need to be cleaned between guests - everything you’d more or less expect if staying at a motel.  

 

Tax implications

With a regular rental income it is easy to project what your earnings will be annually, however with Airbnb you won’t always be able to accurately forecast this (particularly in your first year). If income generated exceeds $60,000, then you will be required to register for GST. However, if the accommodation is offered in a commercial premises, or is part of a Trust, then GST is automatically required. You will also need to be aware of the rules that govern mixed use assets (assets split between personal and business use) as this will have tax refund implications.

 

Some landlords may see Airbnb as too far of a stray from traditional renting - despite the potential to significantly increase income - but there are some success stories out there.

 

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