When it comes to Airbnb, Sydney is one of the world’s most popular locations, with the city consistently appearing in the top 10 for largest number of listings. And it’s easy to see why – Sydney’s great weather and amazing beaches are a major drawcard for both domestic and international visitors; and the flexibility and reach of the platform are extremely appealing to property owners. Investors have also long enjoyed higher than market rental returns, particularly in areas like Paddington, Surry Hills, Darlinghurst, Coogee, Bondi and North Sydney, where Airbnb properties tend to have high occupancy rates.
However, with the current focus on controlling the spread of the coronavirus (COVID-19), and the increasing restrictions on travel and public gatherings, Airbnb cancellations are on the increase. This is having a significant impact on the profitability of these properties and many owners are worried about their ability to sustain their investment if restrictions remain in place for an extended period.
Sydney Airbnb property owners are currently reviewing their options, as having a property vacant for an extended period is likely to create financial stress. Given some experts are suggesting property prices will also be negatively impacted by COVID-19, and the (hopefully) short term nature of the issue, many are reluctant to sell. But keeping the property listed for short term rental may mean minimal or no income for the next few months.
So… what’s the alternative?
Changing your Sydney Airbnb to a longer term rental
One way to minimise your losses through this difficult period is to shift your short term rental to a more traditional longer term lease.
For many investors, the flexibility and seasonality of the Sydney Airbnb market is part of the appeal. However, the ability to capitalise on the peak rental season can make or break an investment. And, while the daily rate for a short term rental – like those listed on sites like Airbnb and Stayz – is usually significantly higher, this can be quickly undone by a high vacancy rate.
In contrast, when you have a longer term rental, you are less susceptible to changes in market demand – your tenant signs a contract for a specific period and is expected to pay rent regularly. So, while the potential returns may be lower, the income is far more stable and predictable.
Longer term rentals also require much less administration. According to the Australian Short Term Rental Association (ASTRA), about 60% of NSW Airbnb properties are managed by their owner. This means that they are responsible for making sure the property is clean, well-presented, and stocked with the essentials when guests check in; and checking that the property has been looked after and nothing has been stolen or left behind when guests check out.
Whereas, if you list your property for a longer term, once your tenant has signed their lease and moved in, there isn’t much else for you to do. And the small amount of upkeep that is required – regular inspections, organising maintenance / repairs, etc. – is usually undertaken by a professional property manager.
With all of this in mind, if you are worried about the sustainability of your short term rental property investment, moving to a longer term lease could be an acceptable alternative. Even if it’s only to hold you through this tough time, finding a fixed term tenant can help minimise your losses, and allow you to return to shorter stays once the market picks back up. Also, as there is a high demand for traditional rentals in desirable areas like Paddington, where Airbnb properties are common, finding a longer term tenant should be fairly easy.
But what do I do with the furniture?
One of the main reservations a lot of the Sydney Airbnb owners have is what they should do with their furniture. While Airbnb properties are provided fully furnished, this is far less common when it comes to long term rentals.
Tenants searching for longer term rentals usually have their own furniture and prefer to lease a property without any furniture. However, having furniture can suit some tenants, like someone renovating a property or someone that has just relocated within Australia. Our advice is to offer the rental as both a furnished and unfurnished option and consider the applications you receive.
Alternatively, you could consider placing your furniture in storage (the cost of which could be tax deductable) and returning it to the property once you relist it as an Airbnb.
Want more information?
If you are worried about the future of your Sydney Airbnb property or are considering listing for longer term rental, then call Local Agency Co. on 1300 258 888 or email us via firstname.lastname@example.org.
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