Short term IP rental club

[antistar]

Hi everybody

Just thought I start a thread for any other investors like myself that have IPs and rent them out on short term basis. I have been doing so for over a year via a Melbourne CBD apartment and below are some learnings I have to share to get the discussion started:

Positives:
- returns on short term are 2.5 to 3 times what I would get from a normal rental
- by not having a long term lease I have possesion of the property and can use it anytime it is not booked. Or if I need it (family coming over etc) I can cancel any bookings with fair notice and use it as I wish
- maximum depreciation due to apt being furnished and can add anything from tea and coffee to toilet paper to my tax expenses
- serious positive cash flow

Negatives:
- not exactly 'passive' as I meet and greet each guest in person and do a monthly mega wash of about 6 sets of sheets and towels. Cleaners come in and go on request
- banks don't recognise the money in as income until it becomes a part of your tax return the following year. Which is ok as you just need to be patient.

In short on the upside you get supercharged returns and on the down side you still have to 'work' for 1-2 hours a week.

Anyone else have any experiences with short term rentals out there? Would love to hear some more stories / thoughts and tips.

Many thanks

 

[Jen_PFR]

We do short(-ish) tern lets in the Perth northern suburbs - min lease term is two months, but each property is completely self contained. There are definitely a significant number of positives - our capital base is substantially more than it would have been if we had 'normal' negatively geared, longer term properties, for example.

There are negatives - agree 100% about the washing! We wash everything when tenants leave, including pillows and doona inserts. This can be tricky in winter - while sheets and towels can go in the dryer, doona inserts have to hang somewhere inside for a week while they dry.

Generally it's an approach that has worked well for us. That said, I think we are reaching our limit with the number of properties we would be prepared to take on - seven is about enough, given we self-manage and also both work full time (and I teach the flute 2x afternoons per week as well).

 

[Ausprop]

yes I am a big fan of it. it can turn a lousy neg geared property into a cashcow. there are greater risks but I find it quite enjoyable on the whole.

 

[Ausprop]

Hi Jen_PFR I just looked at your rates - are you achieving much more than if you let long term? particularly by the time you pay the utilities?

 

[Brady]

Assuming that you're not claiming 100% for all the expenses?

If it's not tenanted and available due to being used personally or 'friends' wouldn't be able to make claims. So 50% availability would then only see you being able to claim for 50% of the costs. That's my understanding, not a professional in that area but more then happy to be corrected.

 

[antistar]

Hi Brady
Correct, you only claim for the period it has been rented for.
For example if in a year I have occupancy of 300 nights, I can only claim interest, depreciation and expenses for that proportion of the year.
Last year was about 320 nights which I consider quite good.
Jen mine is slightly different with that I do much shorter term rentals - minimum stay is 3 nights so it is quite fast paced. I am fortunate enough to live and work very close by so sneaking out for a check in is not ever a problem.
Melbourne has very little to offer when it comes to exciting hotels in the cbd so I am seeing more and more people choosing private stays options over hotels.

 

[Ausprop]

if it's available for rent then there is no problem claiming the deductions

 

[neK]

Does this not cause issues with the long term tenants in the building?

Here's an article about a property in Sydney doing the same thing.

http://smh.domain.com.au/real-estat...tterm-letting-to-tourists-20140523-38udw.html

 

[Elliotte]

Consider a commercial laundry or even a local laundry doing washing for you. Nothing beats crisp sheets coming back. Of course then it pays to get sets that are designed for a commercial wash process. I use hotelproductsdirect.com.au for my orders - one of the only places that dealt with me when I had a few rooms. and it did take me a while to find a commercial laundry to do one or two bags a month only. My laundry is picked up and delivered too. I also use virtual assistants to manage calendars and bookings sometimes (websites like keepmebooked.com are handy). Trying to get as hands off as possible.

There are even things like key systems activated by smartphone I think now so you don't have to do key meet-greet. Or just a locked box is what I use too.

 

[antistar]

Eliotte great tip, will have a look into it.

neK - interesting point. The private short term rental industry is fairly new in Australia with the recent introduction of websites like Airbnb and Stayz. In places like New York where this sort of thing has been happening for a while these sites are illegal to use and you require a special permit to provide any stays under 90 days.

Having said that there is definitely a need for an alternative to hotels - all of my guests have expressed this during their stay. In the CBD you can stay at an average small room at the Hyatt, Stamford etc for a minimum of $275 a night or you could have a private stay in a homely apartment with a kitchen and everything else you need for less than that. The international guests love it in particular as they get a further insight into Melbourne by staying in someone's apartment rather than an international chain of hotels that are the same in every country.

Regulation may come in the next few years but for now there is a major demand and opportunity for anyone interested in providing private short stay accommodation.

 

[Mr. Fabulous]

antistar, have you thought about doing it full time? As in, specialising in property management for short term rentals in the Melbourne CBD?

Could be a good business opportunity.

 

[Mr. Fabulous]

Consider a commercial laundry or even a local laundry doing washing for you.

antistar, there is a laundry in St Kilda that can offer this service and they are GREAT. The women that work there are super awesome, as well. I get my shirts washed and ironed there and do my regular laundry there, too.

If you're interested, I can get their contact deets for you.

 

[antistar]

Hi Mr Fabulous, yup please feel free to send through the St Kilda laundry details via PM. Do they pick up and drop off? Really appreciate the tip.
In regards to running it as a business - for me it would only be worth it if working with my own properties, I wouldn't want to manage others' apartments. I know of quite a few people in Melbourne that are running 5/6/7 apartments on airbnb full time and are grossing $300-400k p/a from doing this alone. And it's not much work. But you do need the initial capital (or patience to accumulate the capital slowly) in order to build up the portfolio in the first place. Once you have more than 3-4 properties you could employ someone to do the running around for you, with only 1 or 2 it's just not worth it.
I'd encourage anyone interested in this to have a look at Airbnb Melbourne listings and check out some of the calendars - some bookings stretch as far as March / April 2015 already.

 

[BLTN]

This is an insightful thread - I would have thought it would be a lot of work, but it sounds like it really isn't that bad at all (and not much worse from dealing with normal tenants really - especially if you are self managing).

 

[Mr. Fabulous]

antistar, next time I go past there, I'll grab the deets and find out if they do pick up/delivery. I know they do (they do laundry for a lot of restaurants, etc.) but not sure if they offer it for something like what you are looking for.

 

[antistar]

BLTN - correct, I recommend you give it a go especially if you are already self managing. Keep in mind location is absolute key so this strategy works best for CBD / seaside / hotspot properties

 

[Ausprop]

Keep in mind location is absolute key so this strategy works best for CBD / seaside / hotspot properties

this is true, it doesn't work for generic stock

 

[Jolly123]

Guests come at odd hours

Antistar, just wondering if you ever get any guest come at odd hour. This could happen with international visitors. Also, have anyone called for repairs at odd hours. I'm thinking that some of the guests might be more demanding than others.

 

[Richard Feynman]

I have a friend who owns a few $mil of places within 5-10min walk from Central Station in Sydney. She's making a motza doing short term rentals. Very high occupancy rates and fairly passive income (she employs cleaners, has relationships with nearby storeowners for guests to pick keys up from upon arrival etc).

I know a few others as well. Those doing really well (lots of places, and fairly full) all own in and around Surry Hills, Darlinghurst, Kings Cross, Potts Point, Redfern etc.

 

[antistar]

Hi Jolly123, I have check out and check in times set at 11am and 2pm firmly on the listings so guests expect to get in at 2pm just like they would in a hotel. Sometimes interstate guests ask whether they can check in later (normally 8/9pm on a friday for the weekend visitors) which is fine most of the time and this doesn't happen as often. Generally people are happy to check in at 2pm.

Richard, no doubt, there is a huge demand out there and if the location and space is right there is very little risk of vacancies not filling. Well done and good luck to your friend