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How to Set Up an Airbnb

Strict new rules on tenants are driving some property investors towards short-term rentals. Yes, they can be more profitable, says Diana Clement, but there are also fish hooks.

25 May 2022

There’s money to be made from hosting guests in Airbnbs. And short-term guests are often a lot lighter on a property than regular tenants.

It can be lucrative. Landlords who have turned their properties into short-term rentals can double their net yield from, say, 2 per cent to 4 per cent, depending on their location, says Matthew Harris, managing director of Lighthouse Financial.

But short-term rentals may not always be a licence to print money.

Running an Airbnb is hard work. A single hair left in the bathtub between guests can lead to a negative review – and Airbnbs live or die on their reviews, says Stefan Nikolic, who runs Zodiak, a property management company just for short-term rentals.

“Between stays the property must be perfect. Cleanliness is very important in terms of getting good reviews.”

Your property

Short-term guests can be handy for certain types of property. Airbnb hosts often let out sleepouts, baches, or other property that either isn’t permitted for long-term tenants or would otherwise be used by their family.

And investors sometimes buy properties or repurpose them from the long-term rental pool, furnish them and turn them into Airbnbs.

The property doesn’t need to be in a high traffic tourist location. Guests have all sorts of reasons to stay in suburbia or small towns. They might be located near an airport or a large employer.

An example of a busy Airbnb in suburbia is this listing, “Entire residential home hosted by Andrea” in Burnside, Christchurch, near the airport.

At NZ$130 a night, the home is almost always booked, says Airbnb. The median weekly rent in Burnside is NZ$493, says Tenancy Services market rent data.

It’s even possible to make money with Airbnbs without actually owning the property, known as arbitrage. A tenant can rent a suitable property and then sublet it with the landlord’s permission to Airbnb guests.

But if they do it without written permission, the landlord can claim back the tenant’s profit through the courts.

Set it up

Unless it’s a Kiwiana-style bach, short-term rental guests often expect a high level of furnishing and amenities – and consumables such as tea, coffee, shampoo and conditioner.

Between guests, these need to be replaced and the property cleaned to within an inch of its life.

As for facilities, guests might just want a comfortable bed for the night.

In other locations, a pool or spa might make it more appealing for a relaxing getaway or a family holiday.

Regardless of whether you are renting out a bargain-basement room or top-end apartment, both communication and housekeeping need to be perfect. Sometimes it pays to outsource this.

Nikolic says his clients want a totally hands-free experience, using Zodiak to arrange bookings, manage all communications, screen out undesirable clients, clean the property, remake the beds, freshen the towels, and top up the guest amenities.

How to advertise

Here’s the rub. The Airbnb hosts who do the best advertise across a variety of platforms including Holidayhouses.co.nz, Booking.com, Bookabach, Expedia, and often through local i-SITE offices.

Guests have different preferences when it comes to the booking sites they use.

It’s better for business to use multiple platforms. It’s also safer.

Many an Airbnb host has found themselves removed from the platform thanks to unproven claims from disgruntled guests, even claims of undisclosed cameras on the property.

When you’re advertising on multiple platforms it’s pretty much essential to use an online property management app such as Guesty or Lodgify that syncs your calendars, closing the others off when a booking comes in.

Tax

You do have to pay tax on all short-term rental income. Even if it’s just a room in a house you’re letting out, it doesn’t come under rules intended for a tax-free “boarding” situation.

For self-contained rentals, your tax position will be different depending on whether the unit or house is let exclusively to guests or used by family and friends for some of the year.

This comes under the Mixed Use Asset Rules, says Harris. Also, if a host earns more than NZ$60,000 a year from a short-term rental, they must register for GST.

What about insurance?

One in seven Airbnb hosts experience property damage or theft, says AA Insurance.

Airbnb has now launched a new free insurance cover called AirCover for hosts, but the details are sketchy.

In any case, if owners are letting their property on more than one platform, they’ll need their own cover in New Zealand with access to local dispute resolution services.

Let your insurer know you’re letting the property short term, says Rene Swindley, co-founder of Initio insurance.

Be aware that regular home insurance or landlord cover doesn’t protect against all the risks of short-term rental homes.

A specialist holiday home insurance policy such as Initio’s will cover all the usual risks to a home as well as damage or theft by guests, such as intentional damage if a wild group of teenagers holds an unsanctioned party.

It will also cover the resulting loss of rent from a valid claim.

Nikolic says Zodiak handles hundreds of bookings a year and says problems are rare. Usually the bookings are made by “decent” people who confess if they’ve broken anything.

If things should go awry, Zodiak can help during the Airbnb insurance claims process.

There are risks

The list of risks of owning a short-term rental are lengthy. Tenants can host parties, sneak in pets, or deliberately damage properties. Some attempt to scam the owner for a free stay.

There is also regulatory risk. The government or councils could crack down on unpermitted properties being let to guests, which could make the business uneconomic for hosts.

Despite the hard work and the risks, many Kiwis make good money letting rooms, sleepouts, and standalone dwellings on the short-term rental market.

But being informed is key. Anyone who is considering becoming a host should sign up to hosting groups on Facebook and other platforms so they can learn from experienced members.


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