5 tips for short-term rental success
The property investment market is booming in Australia – and whilst many overseas investors are grabbing a slice of the action, native Australians are also turning to property as a way to generate additional income for now or the future. Now various new funding opportunities have opened up, including using Super or other trusts and investments to pay for a property that delivers dividends for you and your family. The downside to property investment is that it can be complicated and confusing for newbies – and there’s huge potential to lose big time if you get it wrong. Here we share specific advice for those looking to profit from the highly popular short-term rental market.
Attract tenants quickly
When you’re investing in the short-term rentals market timing is key. Just a week or a month vacant could cost you hundreds or even thousands of dollars. Intelligent, informed marketing and a professional approach will play a significant role in attracting quality tenants quickly – bear in mind that effective advertising requires investment. Consider this when purchasing property – as any repairs, renovations or refurbishments will eat into your profit and could take months (even a year) to recover from financially.
Think like a tenant during the purchasing process
One of the smartest ways to purchase a short-term investment property is to think like a tenant as you view and consider each in turn. Think about the type of demographic you’re likely to attract. Peak demand areas for renters tend to fall within urban and CBD locations – so look at inner city properties and survey any amenities close by. Are public transport links available? Is there a green space nearby? Has the area got trendy boutiques and cafés? Think like a tenant and imagine yourself living there in their shoes before you buy.
Maximise tenancy opportunities
Open up your pool of potential tenants by buying in a popular area. It may cost you more initially, but it will ensure that you can rent out the property quickly – and could secure a higher monthly rental rate, too. Tenants are happier to spend more for a property in a desirable area, so consider this when purchasing to maximise your potential profit.
Balance rental value with capital growth
Many say you must choose when purchasing for investment purposes. Are you a property developer, buying to do up and sell on for a higher price as the market improves and the property itself becomes more desirable? Or are you making money each and every month in the long-term from short-term tenants? The truth is, it is possible to achieve the best of both worlds – but it certainly isn’t easy. It’s a balancing act – achieving fine equilibrium between a healthy rental return and good capital growth. Determine your priorities early on and be realistic about how you’ll make money from your investment. It’s worth ensuring you’ll at least make your money back should you need to sell unexpectedly for any reason – as this offers an insurance policy, especially for fledgling investors.
Consider the short-short-term – at your own risk
There’s short-term, and then there’s the short-short-term. The rise of Airbnb and other home rental apps has opened up a substantial market for investors who are attracted by the relatively high returns attached to a few days’ or a weeks’ rental – sometimes more. The issue with this kind of approach is two-fold – it’s unpredictable, and it’s hard work. You’ll need good management of some kind (unless you’re happy to greet guests, take care of marketing and sales and clean the property yourself), and there’s no guarantee that your property will be full for months on end and in turn yield the same amount as a regular monthly rental. Investigate this option thoroughly and make sure you explore and educate yourself on the pros and cons before plumping for this option. If possible speak with someone in the same position renting in this way in the same area – as this will give you an accurate and realistic impression of how it could play out for you financially and practically-speaking.