If there is one real estate winner emerging from the pandemic, it is regional real estate, with special mention for the short-term rental market which is currently reaping the rewards of the closure of national borders. . Although vacation home owners will cash in this summer, experts warn that this form of investing is not a get-rich-quick scheme.
Anna Porter, founder of Suburbanite, said there was no doubt that COVID-19 had increased interest in the vacation home market.
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“They are now much higher on people’s wish lists. It’s a solution for people who want to get out of town on weekends while doubling their investment, ”she said.
“But a vacation home won’t perform as well as a traditional investment. In many cases, however, buyers will sacrifice the performance of the investment to have a vacation home. You can’t always have both.
Ms Porter said many buyers are aware that the COVID-induced influx into domestic tourism will not last forever, but are banking on long-term changes in the market in the short term.
“The interest comes from behavioral changes in our work environment,” she says. “People can now work remotely and companies are encouraging remote working.”
Investors who want to make a living from short-term rentals should research the market before embarking.
“It’s a full-fledged business and it’s a lot of commitment. Not everyone is cut out for this, ”Ms. Porter said.
“You have to manage reservations on the platforms; late night and weekend inquiries and be prepared to provide high level customer service. If you get a few bad reviews, you risk losing income. “
She said the next step is to figure out how to price.
“People fall when they don’t understand how much supply and demand is in an area,” she said.
“The key is figuring out how much there is already in the area, how well it is rated, and what positions are vacant at certain times of the year.”
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There are well-documented disaster stories, so investors should read the fine print on rental platform policies or consider tailor-made insurance. But Ms Porter said there were additional hurdles.
“We often hear that people haven’t kept their receipts or tracked their income to submit to their accountant,” she said. “It’s still under the jurisdiction of the ATO as a taxable income and investment asset.”
The market is subject to government regulation and laws may change, with some advice limiting the number of days a property can be rented on a short term basis.
James Algar, a broker at Mortgage Choice, said lenders tend not to lend if they believe an investor will be dependent on unpredictable rental income.
“The bank says, ‘If we end up owning this, we’re not going to put it on a site short term for $ 1,000 a week,” he said.
“We’ll put it on a long-term lease for $ 500 per week and use those calculations to decide if we’ll give you the money.”
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Mr Algar said future Airbnb owners also shouldn’t trust that a home has a great track record as a short-term rental.
“Banks are more interested in you and your ability to leverage that asset in the same way. Just because someone else did really well, doesn’t mean they might have 10 other properties.
“There are professional owners who can say they have three other Airbnbs with rental yields of 10% or 5% and they can take advantage of that,” he said.
When considering this type of investment, Mr Algar said lenders might ask for a larger than average deposit, a higher service capacity threshold over a shorter loan period, or a rate of higher interest.
“Just make sure you understand all the costs compared to a traditional rental.”
Simone Mathews and her husband Ben ventured into the vacation home market when her work as an interior designer fueled her desire to share her skills with more than one client.
The founder of soulhome.com.au also maintains the How To Guide for Online Vacation Property Owners which she says has seen a dramatic increase in listings since COVID-19.
“People have achieved the welcomed lifestyle balance with remote working and want to move or invest out of cities,” she said.
But she said there was more to it than just buying a house, decorating it, and waiting for the money to come.
“It takes a lot more planning, setting up and marketing to get there,” she said, adding that another lie is the idea that a vacation home should be in a tourist hotspot. .
“If you own a property in a lesser-known area, you make it the destination – the reason customers should be going there.”