Investing in short term rental

Q&A

with Scott Mackey

What does short term rental (STR) mean?

The term short-term rentals (STRs) generally refers to residential properties that are available to rent for a short period, which I consider anywhere from two days to five months. Short-term property rental is quite variable as far as the amount of time that defines it.

In many ways, it is an enhanced version of holiday letting, which traditionally was used for beach holidays in Australia, but is now moving into the cities and other locations away from the coast.

There are many STR platforms including Airbnb, stayz, HomeAway, TripAdvisor and booking.com.

Most properties are fully furnished and self-contained.

Have you noticed a change in customers’ rental accommodation needs?

Customers have changed in terms of what and how long they want to rent.

Short terms rental platforms, such as Airbnb, are fulfilling many different needs… such as visitors into an area for work, family commitments, health reasons or travel.

In many cases these people prefer to be self-contained and in a more home-like environment than a traditional hotel or motel room.

People are looking for shorter leases, to make for ease of relocation as they follow jobs and careers. An STR arrangement gives more flexibility all round including not having to move furniture. And the way people value furniture has changed. It’s become more like fashion, where they’d rather have new and latest style.

It’s the ‘now’ mentality and things are ‘disposable ‘. It’s easier to move on from locations and relationships when you are in an STR arrangement.

Where are STR options more likely to occur?

They can occur just about anywhere - in capital cities, near hospitals and universities, near major sporting venues, convention centres and popular wedding locations, in regional centres attracting FIFO professionals, where there is employment through new projects and infrastructure construction, and in holiday locations and tourist spots.

Are there benefits to be had in owning STR?

The short-term rental platform may prove a more attractive option for property investors where regulations give owners certain controls over who can stay in their property. Owners can be clear and upfront about conditions of renting, such as no pets and no modifications. STRs have a more simplified process in comparison with tenancy agreements when it comes to booking start/leave dates and extending dates, while still having the risk covered for property owners. People occupying properties are paying greater amount of money upfront. A property remains sale-ready and valuation-ready in condition and appearance and is not reliant on the tenant’s taste in décor.

Overall, there is more flexibility for both the property owners and the renters who seek short stay situations.

How protected are the property owners?

I use the Airbnb platform to co-host with the landlords.

The Airbnb host guarantee protects hosts for up to $1,000,000, but we do recommend homeowner or landlord insurance in addition.

Historically, most problems like mess and damage have built up over the long term.

There is probably around ten times more chance of there being a problem with a long-term tenancy than a short-term stay.

Short stay set-up tips

Be aware of all local regulations. • Have good pictures. • Be in a desired location. • Be spotlessly clean. • Make things easy for guests. • Keep guests happy.

Are there renter checks and reviews of accommodation?

Most platforms are peer-to-peer. This is very prevalent in Airbnb, but generally not available in the traditional rental model. This insight is valuable and allows us to ask for more information or decline the guest and wait for another.

Where might I look if I want to buy a suitable property to offer STR?

One major difference for the investor in short term rental over traditional is that when you are buying position it is really proximity over position that you are looking at. The STR user is more likely to be happy to embrace the buzz on the strip and is not necessarily seeking the quiet cul-de-sac. STR guests will often be attracted to accommodation experiences such as rooftops, attractive gardens, quirky interior design, unique architecture and historical appeal.

Short-stay hotspots include properties that are in close proximity to CBDs and commercial hubs, tourist hubs and cultural precincts, transport hubs including airports, and the expected coastal areas.

Are there features I should look for if I want to buy a property to offer STR?

While common facilities can be highly desirable for short-stay guests, such as swimming pools, sauna rooms, gyms or even tennis courts, they don’t have to be a resort. They just want everything they need to be there so that they can just settle in. And, once again, think ‘proximity’. ‘Must haves’ tend to be practical, like good air-conditioning, high speed Wi-Fi, quality shower heads, spacious bedroom and comfortable indoor and outdoor furniture. Having a sofa bed for extra guests is a drawcard.

About

Scott Mackey’s real estate career spans close to 25 years, with 17 years as business owner. He built a 400-strong rent roll at RE/MAX Precision in Bundaberg, Queensland but sold it to further expand his short-term rental (STR) business, incorporating Airbnb, which he began in 2016. His other business interests include a Queensland-wide body corporate business.