9 hidden costs of running an Airbnb
Using an investment property as a short-term rental, such as Airbnb, on the face of it may seem like a profitable option.
However, a deeper dive into the operating costs suggests a short-term rental may not be quite as lucrative as first thought; as well as the general costs associated with ensuring the property is up to short-term rental standards, such as safety regulations, there are other costs that property investors may not have considered:
- Repairs and maintenance
With increased foot traffic, there is an increase in wear and tear on the property; furniture, appliances, and fixtures may require repair or replacement more frequently.
Property owners need to be aware people tend to be less careful when they are in a holiday rental, or short-term rental; they haven’t made the property into their home, and there also isn’t the emotional attachment a long-term tenant gets with the property.
- Utilities and internet
Airbnb hosts are responsible for all electricity, water, gas, and internet services, which can spike significantly during periods of high occupancy. While many guests are energy conscious, there are also guests who aren’t going to worry if they leave the air conditioning or heating on for extended periods of time; in their mind, they’ve already paid for this when hiring out the property.
- Furnishing and decor
To remain competitive, property owners may need to invest in higher-quality furnishings and appealing decor. This upfront cost may range widely but can easily surpass several thousands of dollars for a small apartment, especially when aiming for a distinct aesthetic or luxury appeal. Furthermore, as styles change and items wear out, ongoing investment will be needed.
- Insurance
Standard landlord policies may not cover damages or liability claims that occur as a result of renting out your property as a short-term rental. Hosts may need to purchase a specific short-term rental insurance policy or add a rider to their existing insurance, potentially increasing expenses.
- Additional fees and administration
Airbnb property owners must also register and abide by the NSW Short Term Rental Accommodation (STRA) Regulations. Prospective Airbnb hosts will also need to do their research for any local regulations.
- Additional marketing and promotion
While listing on Airbnb gives some exposure, to ensure maximum rental returns, effective marketing requires additional effort and investment. Additional costs include paying for professional photography, or other paid advertising and promotion.
Then there’s the ‘point of difference’. Many guests now expect a ‘welcome hamper’ or at least a fridge filled with some basic provisions.
- Occupancy fluctuations
Many new hosts do not account for the variability in occupancy rates, especially in a seasonal market. Your bottom line will be impacted in off-peak seasons where some property owners may face weeks or even months of fewer bookings.
- Increased cleaning costs
Maintaining a clean and welcoming environment for guests is crucial for positive reviews and repeat bookings. Whether you hire a professional cleaning service or dedicate time to clean the property yourself, these expenses can quickly add up, particularly during peak seasons when turnover is high.
- The cost of time and effort
Many hosts underestimate the time and effort required to manage a holiday listing. For those unable or unwilling to take on the task, hiring a property management company can come at steep cost; depending on the level of service provided management fees for this type of service can be up to 30% of the rental income.
With all the above in mind, wouldn’t it be better to have a long term rental giving you peace of mind of regular income?
Once tenanted with us, generally you’ll know your income for at least the next 12 months and can budget accordingly. And you leave everything to us – finding and managing tenants, making inspections, organising maintenance, ensuring your property meets the latest regulations so your tenants are in a safe property and everything else which goes with managing a rental property.
This frees up your time to do the things you want to do. What’s more, our fee, which is less than an Airbnb management fee, is a tax-deductible expense.
Having been in the business for nearly 50 years, we also come up ways in which we help maximise your rent. If you are looking for a property management agent, come and talk to us.
As a family run business we treat each and every one of the properties we are entrusted with like our own and our team is constantly looking for ways to get the best out of the properties we manage.
We’d love you to get in touch to tell you more, and also tell you how our property management services can make your life easier.
Drop into the Cardiff office or give us a call on 02 4956 9777. Or send us an email at mail@newcastlepropertymanagement.com.au – we’ve helped many people realise their financial dreams through property and we’re keen to help you.