Property investor: My house makes extra $1100 a month on Airbnb

Wednesday, 4 December 2019

Now you can live a lavish life like the Crawleys, even if just for one night.

Property investor Steve Goodey decided to turn one of his three-bedroom Petone houses into an Airbnb holiday let after a bad experience with tenants who did not clean the property.

It turned out to be a good financial decision – he now makes $4200 on average a month from the property, compared to $3100 when it was a long-term rental.

It used to be let for $700 a week but now pulls in an average of just under $1000.

Goodey said he had thought: 'How hard could it be?' The process of transforming the property from a tenant's home to holiday accommodation was not difficult.

* Govt data indicates renters should be feeling richer

* New Zealand's rental squeeze: Something in the Airbnb**

Steve Goodey's three-bedroom Petone house, which he's converted to an Airbnb short-term rental, now generates significantly more profit.

'I had most of a houseload of furniture I could put in the property so it came down to the fiddly little bits of sheets and towels so that I could turn the property over in a couple of hours for when I had guests leaving and new ones arriving the same day.'

He shifted the power and gas into his name and had fibre broadband and Sky TV installed.

The property opened for Airbnb listings last month.

'I loaded my listing on Airbnb's app as a new host answering all the questions about availability and my expectations of what I would like per night in rent and then I waited.

Tony Alexander said caution about Airbnb letting was growing.

'I offered a 20 per cent discount to my first couple of bookings just to get happy people to stay at the house and to rattle the bugs out of the system so to speak, which was a good move as I had forgotten a couple of minor things like coat hangers and paper towels.'

Goodey said he had worried about damage to the house or theft but it had not been an issue.

Steve Goodey said short-term tenants treated the house well.

'Most people have been really great and treat the property much better than a 12-month tenant will.'

He said he soon started to receive solid bookings.

'I haven't had an empty single day in a month and December and January are mostly full and running at a 70 per cent-plus occupancy rate for February and March.

'With that in mind I started doing a two-night minimum, increased my daily rate and have spiked the Fridays and Saturdays upward as they tend to book out first.

'I also opened up my calendar 12 months in advance to allow for long-term and advance bookings.'

Goodey said he had a colleague who rented his Auckland house for 120 days next Christmas for a total bill just under $50,000.

The house is already 70 per cent booked through February and March.

He had already been renting the two bottom bedrooms of his house for an amount that paid the mortgage on the whole house, Goodey said.

Other landlords have reported similar success with the switch - Emma Hagen said her Havelock North property went from earning $290 a week to $4000 a month when she switched to short-term letting.

Steve Goodey said Airbnb made sense for many properties.

Data from Airbnb and Homes.co.nz showed that, assuming 15 days' occupancy a year, homeowners in Wanaka would pull in the greatest profit in a year - at $6109.

But in yield terms, Wairoa homeowners would get the best return on their money. There, a house rented for 15 days a year would generate just under $3000 a year but that was a yield of almost 23 per cent on the median house value of $152,000.

A Ministry of Housing and Urban Development regulatory impact statement written ahead of the introduction of new minimum rental standards warned that more landlords might shift to Airbnb as a result.

But economist Tony Alexander said he thought that migration had already happened. There might now be some caution about short-term lets, he said.

'Inland Revenue have said they are on the hunt for short-term accommodation providers and even made some comment regarding tax being payable on the sale of properties which were used for Airbnb.

'Plus there is the growing risk of a structural easing in global tourism in response to warming concerns. I think a lot of the scarier stories of new tenant legislation causing landlords to leave the tenancy sector are overblown.'

Another economist, Benje Patterson, said people would need to understand the occupancy rate they were likely to achieve, and not rely on the 50 per cent rate suggested in the Homes data.

'Unfortunately Airbnb is rather guarded with its occupancy data, so it is incredibly difficult to get a true feel for occupancy. Before making a decision to invest, it would be wise for potential buyers to have a chat to neighbours in the area doing Airbnb to get a feel for realistic occupancy. However, beware of fishing tales.

'Although Airbnb now makes up a rather large share of New Zealand's accommodation stock, there are few parts of the country where it has encroached on the rental pool to the extent where it is causing big distortions to the rental market. The main areas are tourism hotspots, where housing is already in relatively short supply compared to demand. These areas don't just include known hotspots such as Queenstown and Wanaka, but also up and comers like Twizel and Raglan further north.'

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