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The US News & World Report named Sydney as the second-best holiday spot in the world, thanks to the laidback beach lifestyle and other landmark attractions in the city.

Sydney receives millions of visitors each year who flock to the popular tourist spots in the city, driving up the unit prices in these areas and making them less affordable for Australians planning to buy their homes in such locations.

 
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However, owing to DIY vacation rental websites such as Airbnb and Stayz, owners are opening up their homes (or a part of it) to holidaymakers, earning some quick money to boost their savings or help with their mortgage repayments.

Indeed, the mixed bag of having a vacation home and rental income is hard to resist. However, buying a property in a tourist hotspot could turn out to be quite expensive. Considering that most holiday renters are on their dream vacation, they expect the rented property to be perfect and almost ‘hotel-like’ in terms of amenities. Thus, it falls on you to keep the property squeaky clean, well-maintained and de-cluttered at all times, as overlooking small things could lead to negative reviews, severely impacting the popularity of your place.

Leaving management issues aside, it is also important to do the Mathematics before taking the plunge. Unlike regular rental properties, vacation rentals are let out for shorter periods, and the amount of rent varies during the year. For a beachside property, the peak period lasts around ten weeks in a year, and the prices might drop considerably in the off-season.

That being said, if you would like to partake of the Airbnb economy, apart from purchasing a decently sized property (where you could shift in later if required) in a prime location, it is important that you understand how holiday rentals work.

Here are a few dos and don’ts that will help you protect your investment as you throw it open to global tourists looking for fun and a comfortable stay:


Understanding the local laws

Listing websites allow you to list your home for free, but they do not indicate whether the local laws in your area allow you to list a property as a holiday rental or not. Further, in some apartment blocks, short-term rentals may or may not be allowed. It is, thus, squarely upon your shoulders to know the local regulations and comply with them.

Additionally, you must report your earnings from a holiday rental at the time of paying taxes, which is another factor to be taken into account while comparing your expenses and incomings.


Using a verified website

While DIY home listing sites have made it easier than ever before to list and find alternative lodging for homeowners and tourists, respectively, the trend does throw up some security concerns for both the parties. For owners, as well as renters, it is pertinent to register with reputable sites that offer extra security features such as conducting background and address checks as well as providing an open forum for transparent discussions and honest reviews.

Airbnb allows homeowners to list their home for free, charging a nominal three percent commission on each booking from the owner. Other great listing sites include FlipKey and HomeAway that work on a more or less similar revenue model. Needless to say, you must choose to list on multiple sites with an accurate yet charming description of your property, accompanied by some professional photographs to improve the listing.


Communicating Clearly

The first ethos of peer-to-peer home sharing is maintaining complete honesty in your listing. Describe your place exactly as it is, down to the smallest of details such as a narrow staircase that some guests might find difficult to negotiate, especially if they return home a little tipsy.

Open communication also helps owners eliminate unruly guests before approving their rental request. Most websites allow you to chat with potential guests online, which helps in weeding out ‘oddsters’ to an extent. Asking your guests about their purpose of travel and their travel companions could be a good start.


Setting the right price

While fixing the price of your listing, take a look at the competition as well as the rates offered by small hotels and hostels in the area. Do not keep the price too low, as apart from the start-up costs, there will be ongoing expenses in the form of cleaning supplies, utility bills and maintenance costs that will add up over time (most owners charge a separate cleaning fee to cover a part of the cost).

In case you are confused what to charge your guests, Airbnb offers a Smart Pricing option to its users that recommends a price for the listing and automatically adjusts it according to the market.

Undeniably, posting your pad online could be a great way to supplement your income, especially if you have a spare room or a second house lying vacant. However, making money from a vacation rental is not as easy as it sounds. Apart from the tax considerations, buying a property in a tourist hotspot could cost you much more than purchasing a home in an upcoming suburb. Thus, it makes sense to crunch the numbers, taking into account the cost of financing and maintaining your property in relation to the expected rental income from the property before you let your heart guide you to that expensive beachfront apartment on Bondi Beach (or elsewhere).

HashChing is an online mortgage marketplace offering broker pre-negotiated home loan deals from over 60 lenders across Australia that you can compare online. We also have a panel of expert mortgage brokers who will be glad to assist you with your home loan queries online, free of cost.

 

By Vidhu Bajaj
HashChing Content Writer

 

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