San Sebastian, Palermo, Rome, Madrid and Sydney are some of the cities I used Airbnb before I was asked to research Airbnb investment opportunities in my hometown of Melbourne.
Airbnb creates an opportunity to invest in blue-chip suburbs at yields that can be more than double that of the traditional rental model - provided you select the right type of property.
What is the right type?
- Different types suit different suburbs - e.g. 2 and 3 bedroom apartments in suburbs within 7km of the CBD are a hot spot for Airbnb in Melbourne as they offer a significant discount relative to hotel accommodation providing 2 or 3 hotel rooms.
- Brand name suburbs that are familiar to non-residents such as Albert Park because of the Grand Prix coverage and St Kilda which features in numerous TV programs and films.
- Decorated in a way that invokes the feeling of staying in your stylish architect or actor friend’s place rather than a corporate serviced apartment.
- Easy walking distance to public transport into the CBD and close to cafes/restaurants and retail.
I was surprised to learn that the largest % of Airbnb room nights are not interstate or international tourists staying two or three nights as I had suspected, but instead corporate travellers on multi-week assignments. Nonetheless, there’s a market for all sorts of travellers, so choose your property carefully so that it stands out to the market you have in mind.
While Airbnb apartments are often seen as a yield play, I advise my clients to firstly focus on the quality of the asset and how it will stand out for your market and its long-term capital growth potential rather than focussing solely on yield.
For example, there has been a rush of Airbnb focused investment into Melbourne CBD apartments. For many visitors, the CBD is the default search location which guarantees a volume of enquiry however the inherent lack of scarcity in that type of property puts pressure on capital growth and makes it harder to stand out which could reduce yields.
Investing in Airbnb property has all of the risks of normal property investing as well as a few others such as regulatory risk e.g. zoning, tax implications and property damage risks so be clear on those and have a plan for mitigating them.
- Get an architectural photographer to take the shots for your listing - a picture is worth a thousand words in your listing advertisement
- Unless you have significant spare time engage an Airbnb management company e.g. and chill
- Talk to your bank or finance broker about how the Airbnb rental income is going to be treated when you apply for finance.
- Reliable, high-speed internet is a must have – it's more important than running water to many travellers!