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Why Airbnb is riskier and less rewarding than a Northland property manager

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Going with Airbnb is supposed to be away to make money from a spare room or house in Whangarei or the Far North. Books, websites, pop-up adverts and news stories all give the impression that Airbnb is a quick and easy way to get maximum income for minimum tenant hassle.

After all, there is a “superhost” in Queenstown who made $2.9 million in the year to October accommodating short-term stays across 19 properties, according to AirDNA, which is the wing of Airbnb which gives statistics about Airbnb usage.

Everybody needs a place to stay, including transient tourists and workers, and as numbers of visitors and median rental prices climb steadily, renting out a room or a home via a platform that everyone knows about could seem ideal. Yeah, nah.

A report commissioned by Airbnb from Deloitte in 2017 found while Airbnb contributes more than half a billion dollars annually to the Kiwi economy, Airbnb hosts only earn $4400 a year, judging by Airbnb’s own median income figures. In contrast, a property manager leasing a rental home for 50 weeks a year at a conservative $350 a week would earn almost $20,000.

There’s also the social cost of families potentially having their home, school and work affected by fewer rental homes being offered. Cities such as Berlin have appreciated this and prevented landlords from leasing entire properties to tourists because rents were being driven up too high.

Does AirBNB money even stay in the local economy?

Like property management companies, whose fees tend to be a small proportion of the weekly rent charged, AirBNB doesn’t take terribly much money off landlords, with just a 3% service fee charged. However, the money all ends up overseas, to San Francisco, where AirBNB is based (Airbnb had revenue of $2.6bn in 2017, operating income of $450m and has 3100 employees.)

While it sounds alarming that tens of thousands of homes have been turned over to Airbnb (there are between 9000-12000 active rentals available in Auckland and 20,000 nationwide), luckily there remain an estimated 450,000 private rental properties in NZ, and around 500 properties handled by Rentals.co, ensuring that good people can usually be matched with good rentals reasonably promptly.

The numbers: not much money in Airbnb

AirDNA’s MarketMinder report suggests the average daily rate commanded by Northland’s 506 active rentals in the Whangarei District fluctuates between $90-$140. However, occupancy rates are low, usually hovering at 20-30% in the middle months of the year in Northland – compare that to a standard property management arrangement, with occupancy up above 90%.

Median weekly rent in Whangarei has hit $400, as has Kaipara, and it’s hit $370 in the Far North. So anyone who wants to rent out their place would need to achieve about 2.5 nights of occupancy each week and charge an average of $150 a time to meet the median. Having three different sets of tenants each week is a headache.

As a landlord, if anything goes wrong and you’re wanting mediation when in a disagreement with tenants, you’ll want the Tenancy Tribunal to adjudicate. However, when a house you own is used as a holiday rental, you’re not covered by the Residential Tenancies Act. Standard rental agreements simply don’t apply.

For guidance about how a property manager can minimise worry and maximise rental yield while you’re off somewhere like Singapore (read Venus Chan’s story), get in touch with the friendly team at Rentals.co, 9-11 Reyburn Street in Whangarei.