Sydney and Melbourne have both experienced a steady increase in vacancy rates in recent times, statistics published by the Real Estate Institute of NSW show that the average vacancy rate in Sydney was around 3.4% in August 2019 – well above the goal range of 2 to 3%.
This is partly attributed to a large influx of units in the market and the availability of more affordable inventory elsewhere, says Quirin Schwaighofer, co-CEO of the short-term rental housing management company and partner Airbnb MadeComfy.
"We are currently experiencing an excess supply of long-term accommodation in some places, which is driven by a greater release of new apartments," says Schwaighofer.
"Several infrastructure projects have been completed or are about to be completed, especially in Sydney, which allows people to buy or lease properties further away from the CBD. cheaply and move easily. "
Rental rates for conventional leases are declining along with this, and conditions are not expected to improve over the next 12 months.
"Many short-term hotspots in Sydney, Melbourne and Brisbane are around attractions like the CBD and the beaches"
"I expect long-term rental rates to continue at this level for at least another 12 months, if not to fall further," predicts Schwaighofer.
As a result, it may be the perfect time for homeowners to take advantage of the growing trend of short-term accommodation. According to REINSW, this sector has exploded in recent years, representing more than $ 30 billion in business in 2016 and growing. For homeowners who are able to capitalize and get a steady stream of renters, the rewards can be immense.
Being very touristy cities makes Sydney and Melbourne ideal short-term rental markets.
"Many short-term hotspots in Sydney, Melbourne and Brisbane are around attractions like the CBD and beaches like Bondi, Manly, St Kilda and Broadbeach," says Schwaighofer.
"They are also near sporting and entertainment venues such as Melbourne's MCG or Rod Laver Arena, Sydney Olympic Park and Moore Park, or Brisbane's Gabba and Suncorp stadium. . "
He adds that these are not just popular tourist destinations where short-term accommodation can thrive; With short-term rentals, a wide range of tenants are attracted to the pool of tenants, including vacationers, relatives, visiting families and executives who must travel to work.
"Thirty to forty percent of urban short-term rental bookings are driven by companies or executives who prefer to be close to their office in the CBD or other office neighborhoods," says Schwaighofer .
"An additional 20 to 30 percent is driven by medium-term tenants who stay for about 21 to 180 days. These tenants prefer a trendy suburb like Fitzroy, Newtown or West End. "
Managing a short-term lease smoothly
With the sheer volume of short-term rentals, you may be wondering how to leverage this strategy to your financial advantage. It all starts with making sure your property stands out – and the way you market your property is vital for that.
"To generate strong returns and high occupancy, you want your ad to be at the top of the search list for reservation channels."
We learned from our partnership with Airbnb that high-performance Airbnb ads stand out from the crowd with an original or colorful property, "says Schwaighofer.
Part of the lure of short-term accommodation is the unique experience that it promises to renters compared to hotel stays. This does not mean that you have to turn your house into a user-friendly igloo for Instagram in order to catch the tenants, but what you need to do is make it very presentable – especially for the camera.
Customers will browse the property online, and they are more likely to stop and revisit when they see a neat, clean, bright and open place. For this reason, you do not want to bother to get very good photos because you want to show the best of your property.
Although renting a long-term property usually means that you hand over the key and basically let the tenants on their own, with short-term rentals, you have to play the host – and play well.
"A high-performance Airbnb generates five-star ratings by providing a great customer experience, and part of that experience lies in basic elements like pillows, mattresses, a sofa, chairs and high cutlery. quality. They are also well maintained, the owner / host acting promptly on requests or maintenance issues, "says Schwaighofer.
Although this does not mean that you must provide everything a customer may need, you must ensure that there is a sufficient stock of necessities such as bath products, toilet paper and towels. Being able to remove this simple charge from customers' shoulders can help you get repeat bookings because Airbnb listings rely on stellar reviews to generate new bookings.
Being able to respond quickly to customer needs also shows that you pay attention, and they will often show their appreciation of the right way – through positive reviews that serve to increase your ad.
Installing Good Management
All this may seem like a lot of work, which is not very attractive for busy investors juggling a day job, family and social commitments in addition to their investments.
That's where real estate managers like MadeComfy come in, because the right property manager will certainly pay long-term dividends.
For investors accustomed to hosting long-term tenants, it can be difficult to adapt to the different mindset of managing a short-term rental. According to Schwaighofer, long-term rentals are more like amenities, while short-term rentals are performance-oriented. The property manager you hire must therefore be able to understand the complexity of managing a short-term rental.
"It's not because you change agents that you will be able to increase your long-term rent from $ 750 to $ 950 a week. However, by changing the agent, you could save 1-2% on management fees, about $ 400-700 a year, and you could receive better service, "he notes.
"It's a different story for short-term rentals, where your agent needs to provide a night rate that generates high occupancy and rental returns while maintaining high quality service for customers to ensure five-star ratings for more than 60 bookings. per year. "
"To generate high returns and high occupancy, you want your ad to be at the top of the search list for reservation channels"
The quality of the agent you get for your short term rental can have a strong – and immediate – impact on your earnings, he adds.
"An agent who charges you a commission of 12% will only be able to generate bookings averaging $ 700 per week with low customer reviews, while an experienced agent with a commission of 20 to 25% could be able to deliver over $ 1,000 a week on average, "says Schwaighofer.
For this reason, he advises investors to choose wisely a property manager, according to their ability to effectively attract tenants.
"Do not just believe a marketing argument, but look at the infrastructure and their experience.A short-term lease manager needs to understand his ability to manage bookings, provide a high level of service to his clients and to guarantee total transparency, "he explains.
While other long-term homeowners struggle with high vacancies and low yields, Schwaighofer adds that depending on the location and quality / configuration of the property , MadeComfy customers "achieve between 20% and 70% better returns, net of our fees".
Transforming your property into short-term rental housing can be tricky, and it may require you to change the way you think about renting a property. But the profit you could earn in a climate of increasing vacancies could be worth it!
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