Joining the list of emerging trends in today’s property market is renovation for short-term accommodation. How will this strategy affect the wealth creation of investors?
For renovation expert Naomi Findlay, regardless of the reason behind the decision to renovate, every renovation project comes down to creating wealth.
“Everything around renovating is all about creating wealth, whether that be financial wealth, lifestyle wealth, contribution wealth, whatever it might be. And, for me, the ultimate version of wealth is fluidity or the freedom to make choices about what you do each and every day,” she said.
Apart from the common reasons for renovation, including renovating to flip or renovating to increase rental return and create equity, a lot of investors are also dipping their toes into a relatively new strategy – renovating for a short-term let.
According to Ms Findlay: “It’s working great in a lot of markets that have a not-so-good vacancy rate on long-term leases or aren’t showing amazing returns on properties at the moment because of where they are in the magical property cycle.”
“If they’re in the right location, there can be quite a decent return – at a minimum, it would be equal to what they would get from long-term tenants.”
Following renovation, most of these short-term rental properties are then made available through digital platforms such as Airbnb and STAY, which make them more accessible to a wider pool of prospective tenants.
Tenancy in this short-term lets may range from a six-month accommodation to a week-long holiday destination or even a two-day conference venue.
Renovating for short-term rental properties entails a “different formula” compared to the traditional renovation projects, the property expert said.
According to her, it’s important that investors take the time to consider every amenity per room.
“Depending on whether you’re going to renovate to rent the entire house out or whether you’re going to renovate each room… there will be different security precautions. Then, if you’re looking at really short stays, maximum of a week, you will have to look at your storage differently, or the bathroom,” Ms Findlay highlighted.
“Accessibility is huge on short stays, so you need to think about that, too... Picking up keys from someone else, disabled access – all that sort of stuff.”
However, despite the great potential for significant returns, she advised investors to take precaution before implementing the new strategy.
As in most wealth creation strategies in the property market, renovating for short-term rental properties does not fit every investment journey.
In fact, Ms Findlay recommends this strategy only to those who already have “a bit of scar tissue” or an experience in identifying demand and riding the movements of the market.
She explained: “No matter where you’re starting, you always have to know your target market at the end… For me, making that decision, that’s part of finding the right property for wealth creation purposes.”
“You need to understand, in the area you’re looking at, is there short-stay ability? Are there more owner-occupiers or investors? Are they all leased? All of these questions come into play, including even your exit strategy.
“It can’t be compartmentalised from my perspective. It all actually has to mesh together.”