This growth hasn’t come without scrutiny - commentators are increasingly pointing the finger at short stay accommodation as a factor in New Zealand’s rental squeeze. But should you get involved? In this article, we take a look at the opportunities and the potential downsides of listing your spare space on Airbnb.
The Promise of Profit
If you’ve travelled at all, you’ll know that short term accommodation can be pricey. No matter what kind of room or space you’re looking to share, Airbnb suggests that it’s easy to get started as a host - and to make money. A little back of the envelope maths - such as five nights a week at $150 a night - can lead to some exciting conclusions about your property’s earning potential.
Of course, these predictions don’t always live up to reality. With Airbnb, hosts lose out on the security that a long-term tenant can provide. A busy season summer could be followed by a slow winter, or an extended period of poor weather could mean that potential guests stay away. Airbnb hosts work on the assumption that this lower occupancy is easily offset by a high nightly rate. In other words, even with lower occupancy, you might still expect to earn more than a long term tenant might pay.
An Attractive Location
Some towns are a more attractive destination than others. Airbnb provides rough estimates of earning potential across New Zealand, although quality hosts and properties routinely achieve better results. If you’ve got a private room for one person, you might expect to pull in $400/month in Upper Hutt, $900 around Piha, or even $1,300/month in Queenstown. On the other hand, if your place is the only Airbnb listing in your area, you might be able to up the price slightly.
Of course, your location isn’t the only factor that determines what prospective guests might be willing to pay. Investing a little bit of money to renovate your space could help attract higher-paying guests and increase your booking rate. A Harmoney loan could be a good option to fund a new paint job, to buy guest furniture or even to purchase a sleepout for the back lawn.
Inviting Strangers into Your Home
A common concern among people considering Airbnb hosting is the risks of inviting strangers into your home. If you’re renting out an entire place, you’ll need to be comfortable with the idea of strangers being in your home without you present. If you’re renting out a spare room, you’ll have to get used to the idea of sharing a roof and, in some cases, a bathroom with a range of mystery guests.
Aside from the potential for awkwardness or discomfort, you’ll also need to consider risks such as theft, property damage and drug use. Airbnb currently offers its New Zealand hosts a $1.3 million host guarantee, but it comes with exceptions and you might have difficulty claiming if you can’t identify a specific guest as having caused a problem. So, for example, you might struggle to claim compensation for drug use or damage that is discovered weeks or months later.
Is Hosting a Good Use of Your Time?
Time is scarce, particularly over summer when Airbnb stays peak. Listing and running a successful Airbnb business typically involves investing a lot of time and effort - hosts often have much more work than they expected. Over time, experienced hosts can get it down to a fine art - particularly by confirming bookings months ahead and outsourcing cleaning. But even experienced hosts have to be on call for emergencies and guest questions.
Another potential time sink for Airbnb hosts involves dotting the ‘i’s and crossing the ‘t’s. Making sure you have the appropriate insurance in place, keeping track of your earnings and expenses and filling out a tax return every April can be exhausting.
For most of the 20,000 or so Airbnb hosts in New Zealand, hosting guests from around the world is exciting and financially rewarding. But using the service involves getting comfortable around strangers and taking on a bit of risk. If you’re looking to get your place set up for Airbnb, consider whether a Harmoney loan could help you make your place a more attractive option for guests.
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Or, if you are not quite ready to make that next move check out our Personal Loan Calculator to get a quick estimate on how much you could borrow and what your repayments could be like.