Kiwi homeowners are pocketing as much as NZ$700 million a year from Airbnb and other holiday rental websites. Recent figures from Statistics New Zealand show that owners’ income from these accommodation platforms has trebled since 2013. Tens of thousands of Kiwis are letting everything from spare rooms at home to luxury accommodation. Although bach rentals have been around for decades, Airbnb means ordinary Kiwis can easily rent spare rooms in their homes to travellers. For some ‘hosts’ it can be very lucrative. Many earn more than NZ$100 a night from guest suites and granny flats that can’t be let legally under the Residential Tenancies Act to long-term tenants.

Earn five figures

Some hosts report earning five figures annually. The money’s used to supplement their income or NZ Super, pay down debt and mortgages, take holidays they couldn’t otherwise afford, or invest. For many, it’s a profitable side hustle. But there are costs, such as tax, insurance, cleaning, and depreciation. Holiday rentals are also becoming increasingly competitive, driving down nightly rates.

Is it worth the admin hassle? It can also be a nightmare when it all goes wrong. Wild parties, theft, mess, and damage. A quick Google search reveals horror stories from around the world. You likely know a friend, or a friend of a friend, who hasn’t found Airbnb a smooth ride. And, if you haven’t declared it on your home insurance policy, that may bring issues if, or when, things go wrong. The platforms can offer a relatively easy way to earn money. But hosts sometimes find that the reality isn’t as rosy as the warm friendly language used to sell the idea to them.

The guest is never wrong

Airbnb talks about ‘sharing’, but it’s really just another booking platform, which hosts are finding tends to lean in the favour of the guest when things go wrong. Some hosts find there are too many risks sticking with one platform alone. Some Airbnb owners have found themselves suddenly removed from the platform with no right of recourse, after being accused of breaking a rule. Sometimes they’re not even told the rule they’ve broken.

And your ranking is constantly at risk. So, anyone serious about making money from holiday rentals won’t just list on Airbnb. They’ll list on many booking platforms, including Bookabach, Booking.com, Airbnb, HomeAway.co.nz, Holidayhouses.co.nz and others. You can get third-party software to synchronise your calendars, so you don’t end up with double bookings.

New listings win

Airbnb’s algorithm pushes new listings to the top and regularly drops existing homes down the rankings, causing business to nose dive. Airbnb says it’s to give new hosts a chance to get established. Cynical owners, however, believe it’s to drive prices down. New hosts will undercut existing hosts to get the all-important feedback, which is crucial if this is a long-term income solution for them. Banking on Airbnb for an income can be a problem. Hosts in Auckland, Queenstown and elsewhere have found that the local council can have an impact on their operations with little notice.

Owners took a rates hit

In Auckland, the council started charging commercial rates to owners of self-contained spaces that let them out for more than 28 days a year. Rates doubled or trebled overnight for hosts who declared their businesses. When it came time to sell, some hosts found it hard to shift the properties, because the houses must be sold with the higher rates bill in place.

In Queenstown, Airbnb owners are charged a mixed rate, and the council is pursuing the idea of a ‘bed tax’. More councils may follow, with a range of restrictions. Overseas, some cities have banned Airbnb completely after too many rental properties were converted into holiday accommodation, creating a housing crisis. This could happen in New Zealand too. There are other fishhooks. Some body corporates in apartments or strata title properties forbid short-term rentals. And owners of cross-lease properties should consider whether other leaseholders could prevent them from letting their home.

Published 28 November 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.