6 things to consider when buying property to rent on Airbnb

The benefits of buying a property to list on accommodation sites such as Airbnb, on a permanent or short-term basis, have become crystal clear to investors; they can enjoy a satisfying return while making use of a holiday home as they wish, meaning they can have their cake and eat it too.

But like any investment, the balance between risk and reward needs to be carefully evaluated, including the following important factors, according to those in the know.

Choose the location wisely

According to Braden Walters, Principal of Belle Property Byron Bay Lennox Head, the more attractive and highly sought after the area, the better return on investment it will likely be. And while this is particularly true when it comes to a burgeoning coastal town like Byron Bay, there’s something to be said for discovering some of Australia’s lesser-known locales.

Sarah Andrews purchased the waterfront shack in 2016 when the town of Strahan was relatively unknown. Photo: Marnie Hawson

Take, for example, Captains Rest, a waterfront shack in the small and secluded town of Strahan, purchased by its owner, Sarah Andrews, in 2016, at a time when the sleepy village was relatively unknown.

“No one really visited the West Coast of Tasmania when I listed the shack in mid-2017, so I had to build my own market and promote the beauty of the area,” Andrews says.

Fast forward to today, and Captains Rest is arguably the most iconic Airbnb listing in Australia, with Andrews going on to launch, The Hosting Masterclass, where she mentors other hosts.

“I believe it’s still possible to find untapped areas and start something new; in fact, some of my most successful students have done just that,” she adds. “And not only are property prices cheaper this way, but it also pays to be the first.”

Check local regulations

Sophie Weeding, owner of Bruny Boathouse, inquired with the local council what short-term rental conditions were in place prior to purchasing. Photo: Marnie Hawson

It is crucial to look into the legalities of having an Airbnb property in any particular area, according to Sophie Weeding, owner of two popular Tasmanian listings, Bruny Boathouse in Alonnah and Raffah House in Oatlands.

“We inquired with our local council what short-term rental conditions were in place prior to considering purchasing in each region,” recalls Weeding. “We were aware that some areas in Tasmania have stringent protocols to prevent too many investment properties being purchased for the purpose of short-term rentals, so doing this research was important.”

Once this has been established, Weeding notes that applying for a permit is then a straightforward process.

Identify your target market 

Research is key. ‘You need to think about who your potential guests are,’ Woods says. Photo: iStock

The target market of any Airbnb investment property is a key factor that needs to be carefully considered, Adam Woods, sales manager of McGrath Mudgee, says.

“You need to think about who your potential guests are, how they will receive the property you are considering, what amenities are available to them, and what other factors are necessary,” says Woods. “Most investors I meet actually spend a lot of time researching online before then visiting the region to study similar niche markets to find out what they are targeting – a sort of try-before-you-buy experience.”

As for Weeding, it’s as simple as staying true to what you know and love.

“Both of our investment properties were reflective entirely of our lifestyles and what we look for when we’re booking a holiday,” she says. “This not only enables us to easily sell our product as it comes from the heart but also attracts like-minded guests.”

Go over all the finances

Mapping out all things financial is vital. Photo: iStock

Mapping out all things finance is vital, and this is true when buying any property, investment or otherwise. For Weeding, this involved speaking extensively with their lawyers, finance broker, and bank in order to cover any risks and concerns they had prior to purchasing.

“We did extensive budgets and pros and cons lists, as we needed to ensure we could cover the repayments and consider worst-case scenarios if something happened that prevented our properties being rented out, or if we could not meet repayments on mortgages,” explains Weeding. “Keep in mind all of this can take time, but it is well worth the effort.”

Woods adds that having both short-term and long-term financial plans is what you need to succeed.

“This involves looking at options in terms of how to derive short-term income from the property, how to maximise taxation benefits, and in the longer game, what can be done to add value to either cash in on, or tap into equity.”

Be prepared for the work that follows

Andrews believes that not enough thought is placed into marketing and relationships. Photo: Peter Braig

As someone who has now taught thousands of hosts how to better manage and market their listings, Andrews claims that the time it takes to manage an Airbnb property is often severely underestimated.

“I think those who are new to the game, look at those doing well and figure they will do the same, ignoring the fact that it takes proper processes, correctly setting up teams, and a tremendous amount of effort in marketing and building a following,” she says.

With so much effort and focus put into the selection, renovation, and setup of a property, Andrews believes that not enough thought is placed into marketing and relationships.

“It doesn’t matter how incredible your property is; if no one knows about it – and you’re only getting found by chance – you won’t do well in this market.”

Develop the willingness to adapt

Like all investment ventures, there are many risks that come with buying an Airbnb property, particularly during these uncertain times; however, according to Walters, the key to success is adaptability.

“Always prepare for the worst, especially after these past 18 months, and while snap lockdowns are still possible,” he says.

In response to these challenges, Andrews now offers guests a 100 per cent refund for any border closures, therefore allowing peace of mind for those looking to make future bookings at Captains Rest.

Meanwhile, Weeding has come to utilise social media to announce cancellations for Bruny Boathouse, posting about changes in availability on Instagram when lockdowns take place, targeting other Tasmanians who are keen to explore their own backyard.

“The flexibility that owners have in their property will help get them through the ups and downs, and knowing that the quicker they react to situations, the better they will be,” adds Walters.

The post 6 things to consider when buying property to rent on Airbnb appeared first on Domain.

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