How to make money from rental properties on Airbnb

Winning the lottery is not a financial plan – as great as it sounds! Investing should be a key part of your future to ensure you and your family’s financial security. Learn the secrets known by only a small percentage of the population.

Want to learn how to make money from rental properties on Airbnb?

I made a decision many years ago to only ask questions of people that were actually where I wanted to be. Surely you wouldn’t go to a marriage counsellor that has been divorced several times? With investment advice, I have found the best information was sourced from those who have actually achieved what I was looking to do. Accountants aren’t always good for this, although they are a key part of the process.

Purchase only high yielding investments – What does that mean?

The yield on an investment is the return (income) compared to the purchase cost.

For example, a property purchased for $500,000 with a rental return of $20,000 pa yields 4% return (20,000/500,000 x 100) or (yield % = income per year / purchase price x 100). Many investors only achieve 2-3% return.

How to achieve a high yielding investment…

Now that we know how to calculate high yielding, what should you be expecting in property? Long term rent offers stability, however, often it won’t be able to achieve an acceptable yield. Personally I never go below 5% return and have achieved much more than this with the right research, marketing and property management team. If you are looking into high yielding short term property rentals, some of the key aspects are:

  • Strong demand for rental within an area, choosing prime location instead of the outskirts of a good area.
  • Find out what these renters are seeking, such as close walk to beach, ocean/mountain views, cafes, restaurants, etc.
  • Layout and configuration – which layout has the biggest demand.
  • Holiday house renters want at least a ‘better’ house than their own home. To them, to attract the right kind of renters, modern and updated furnishings, kitchen/bathroom, is a must.

Don’t ask the selling agent for rental advice. As with all endeavours, to seek advice in life you need to remove conflict of interest on the advice. You can ask the renting agent in the same office and you will be surprised at the difference of opinion by removing the conflict of interest. Check the history of actual or similar rented homes. Visit these at open for inspections and ask the agent what renters are looking for.

High yield investments can lead to scalable investment opportunities.

Why is high yielding important? It prevents you from pouring your hard earned money into a investment that purely relies on capital growth to see a good return. More importantly, a high yielding investment looks after itself and becomes a scalable investment decision. You don’t tie up your money looking after one property and can buy multiple properties. I have purchased a sizeable portfolio by learning how to make money from rental properties on Airbnb. Capital growth is still important; without it, your investment won’t yield a good end result. See next section on how to get strong long term capital growth.

Converting a dud – one of my favourites…

By understanding market drivers and having a strong property management team, you can find gems that others won’t see. We did this with the Phillip Island Waterfront House. This was owned by 8 families (originally 10) and was only rented out by the local real estate agent a few times a year. The local agent provided extremely poor customer service and outdated marketing/processes. This affected the yield and therefore the sale price. By having the right property team, one that provided a full service of branding, marketing, customer service and maintenance, we achieved unbelievable returns within the first month of operation and continue to triple the yearly rental income budget.

How to make money from rental properties on Airbnb

Capital Growth

This is the most significant aspect of your investment decision which will see you gain the most out of your investment over the long term (+10 years).

Finding the right property with scarcity. That is the single best piece of advice which can make literally millions of dollars difference. Finding a property that is going to have upward pressure this year and in 10, 20 years. Find something that can’t be easily replicated thousands of times, reducing demand. Scarcity comes in many different forms, it is not restricted to a certain area or group of attributes. For example some of our portfolio is located adjacent to significant parklands next the CBD and others are city beachfront which is hard to replicate.

Leverage

Leverage is a secret not understood by many. One of the biggest benefits of property investing is the ability to leverage, which is your borrowing power; for example, banks love to lend against high yielding properties in prime areas. However from an investment view point (not lifestyle choice), I don’t recommend purchasing a scarce property that won’t yield a good return. You may be able to afford or borrow for this one property, but it will tie up your finances and restrict your lifestyle and future investment decisions.

How to make money from rental properties on Airbnb – Conclusion

A rental property purchased at $500k may be able to return 5-10% pa, which in turn means the property pays for  it itself. My Guesthouse Pty Ltd has been able to achieve even higher returns for our clients.  If we take the long term average capital growth in Australia over the last 100 years of ~8%p.a., the average capital growth will be $57,946 p.a and increase in 10 years to $1,079,462 (gross profit of $579,462)! Now you have a scalable business model, you have an opportunity you can add more properties to increase your net return by potentials millions of dollars.

Contact us today to learn about our journey.

 

Disclaimer on how to make money from rental properties on Airbnb:
This is not financial advice but our testimony and what we have found works for us. Please seek professional independent financial advice before making any decisions. Do your own calculations and don’t trust the bank! Work on conservative yields (half that of the forecast) and protect for increased interest rates (I normally add 4-5% to the current rate) to ensure you can always service the loan. If you really want to learn how to make money from rental properties on Airbnb ask people who have actually done it!