Long-term rental housing is converted to Airbnb, and the rental return is increased by 30%?

I believe that many of my friends have lived in Airbnb, and after buying an investment property as a landlord, they will choose to rent it in the form of Airbnb in order to obtain a higher rental return.

Usually, many homeowners operate Airbnb with a long-term rental mindset. Because they are worried about empty rentals, the most typical idea is to use the same and relatively low price every day to increase the full occupancy rate.

This kind of thinking or practice is very common. Assuming that a villa used as an Airbnb is only rented for $50 per room per night, the occupancy rate will of course be close to 100%. After all, the price is cheap, but the profit is reduced.

Overemphasizing the full occupancy rate and ignoring the profit rate is a phenomenon that easily occurs to landlords in the short-term rental market. However, isn’t the ultimate goal of everyone buying investment properties and putting them in the rental market is to make money? Here we use two cases to compare the different results brought about by different pricing strategies.

Assuming that the landlords Mr Wong   and Mr Lee bought the same type of villas on the same street in Sydney, and they both used their respective villas for Airbnb, but because of their different attitudes, they adopted different pricing strategies:

• Mr Wong chose to set the rent at $100 per day, and the price is the same for 7 days a week.

• And Mr Lee set the rent on Friday, Saturday and public holidays at $200, and discounted the price from Sunday to Thursday at $90.

Many homeowners are willing to choose Lao Wang's plan, because small profits but quick turnover, and people will always live in it, which makes people feel more at ease. However, homeowners with rich experience in short-term rental usually choose Lao Li’s pricing strategy, because Lao Wang’s house is fully rented and his weekly income is $700, and Lao Li has almost completed this income in two nights on weekends. Half, once fully rented, is $850 a week. Therefore, the focus of short-term rental homestays is not the full occupancy rate, but to maximize profits through a flexible and effective price adjustment mechanism.

Short-term rental homestays in different regions adopt different pricing strategies. Taking the short-term rental of villas in the northwest and southwestern regions of Sydney as an example, the short-term rental customers here are mainly business travelers and relatives. It is relatively long, with an average of about 5 days, and a residence time of more than one month is also relatively common.

The situation in tourist areas is just the opposite. Usually the stay time is short, but the passenger flow will be very dense on weekends and public holidays. This is why it is very important to adopt the flexible pricing strategy mentioned above. Increase the daily unit price on weekends and holidays , To ensure profit margins, carry out appropriate discount activities from Sunday to Thursday to attract passenger flow and ensure occupancy rate, two-pronged approach, so as to maximize profits.

As the top tourist area in Australia, and the local Australians' love for wine, Hunter Valley has brought 2.5 million passengers per year. Therefore, the local hotel and short-term rental market has generally formed a "hidden rule". The price of accommodation from Sunday to Thursday is the same as that of hotels in other regions, and the price of hotels and short-term rental homestays is doubled on weekends and public holidays. This local market rule automatically fits the flexible pricing strategy of the short-term rental market in tourist areas. As long as the homeowner or management team naturally makes "peak adjustments", tourists will also accept all the orders, because there is no other choice.

Considering that a large number of tourists come to Hunter Valley as a family, there are also many wedding parties in other cities or regions in New South Wales and group building activities of local Australian companies that will choose to be held in Hunter Valley.

At this time, if your house as a short-term rental homestay can not only provide sufficient living space, but also satisfy tenants from different families or companies to live in at the same time without disturbing each other, it will become a unique advantage over other short-term rental houses. In addition to attracting more Tenants can also bring rental income to themselves at a better price.

Today we bring you a 5-bedroom, 3-bathroom, 2-parking room design that can fully meet the above needs.

First, as shown in the picture below, this type of apartment has a double garage, plus a Drive Way space, which can park at least 4 cars. Most of the tourists who come to Hunter Valley come by car, and sufficient parking spaces are rented. Customers choose the factors that are prioritized here.

Second, the house type is divided into two parts, front and back. The front half has 3 bedrooms and two bathrooms, and the back half has 2 bedrooms, a bathroom and a large space that can be used as a game room (Rumpus). The area is separated from the living room. If you make a little custom modification in the game room (for example, make a sliding door that can be locked), it can become two non-disturbing three-bedroom, two-bathroom and two-bedroom, one-bathroom at the same time. The living needs of the family.

Third, if the tenant is a large family with a large number of people, or many colleagues from the same company, you can open the sliding door at the game room to allow the family or all colleagues to walk around, communicate with each other, and have fun.

/1. How to ensure the occupancy rate/

Usually, if the occupancy rate of a house is lower than 70% to 80%, it may mean that the daily unit price is too high. At this time, the landlord or Airbnb management team only needs to flexibly adjust the price to ensure that the occupancy rate is within the range of 70-80%. Guaranteed profit margins.

/2. Wear and tear of furniture and facilities/

Many friends worry that the wear and tear of short-term rented houses will be more serious than long-term rented houses. In fact, the reality is the opposite. Due to the frequent turnover of short-term rented tenants, both landlords, especially the management team of Airbnb, will regularly clean and check the wear and tear of facilities every week situation. Such maintenance and inspection can effectively control the loss of short-term rental housing.

In addition, short-term rental homestays will have special services provided by many insurance companies. In the event of major damage, insurance services can also dispel worries.

/3. 180-day Airbnb limit/

In addition to bookings of 21 days or longer, properties only need to get at least 4 bookings of 21 days each in a year to reach average market occupancy and fill the remaining 180 days.

In addition, in the tourist areas with large passenger flow, flexible pricing mechanism and dominant apartment design can also greatly enhance competitiveness and increase profit margins.

Through the above introduction, I believe you must have already had a preliminary understanding of how to choose a suitable house type for Airbnb when operating Airbnb or buying an investment house in the future. If you want to know more about Airbnb-related real estate information and service consultation, please Call us today to book a free consultation.