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Is there better cash flow in short-term rental markets?

Is there better cash flow in short-term rental markets?

by Bianca Dabu | July 20, 2017 | 1 minute read

The emergence of online hospitality services like Airbnb has given way to the rise of short-term rental markets in different parts of the world, giving property investors another option for moving their journey further forward.

Cash
July 20, 2017

But could these new marketplaces actually give investors better cash flow compared to the more traditional long-term rentals?

Business partners Quirin Schwaighofer and Sabrina Bethunin of MadeComfy agreed that the same basic investment principles apply in short-term rental markets, particularly the end goals of good cash flow and capital growth.

However, there are different sets of dynamic for determining success in short-term rental markets compared to long-term rental markets.

"[In] long-term rental, you have the same cash flow every month, if you like. When you look into [a short]-term rental, the cash flow depends on the seasonality, [and] the date. If you look within the month, the pricing changes depending on the day of the week, depending on the season as well," Sabrina said.

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"As an overall exercise... for a full year period, we have noticed that the yield for our property investors has improved significantly. So we are talking about increases from 4 per cent to 6, 10 per cent. So if you look at a whole-year exercise, effectively, the yield improves significantly."

Property investors looking into exploring the short-term rental market must consider supply and seasonality when putting their properties out for lease. In the same manner, they must also be prepared for any type of fluctuations during the low-season.

"Obviously, if the property is located close to the beach... for example, if your property's in Bondi or if your property's in ManlyManly, NSW Manly, QLD, you are going to have high demand in the hot months. But then in winter, the demand is going to drop significantly. So as a property investor, you need to be prepared to face... low-season months," Sabrina said.

"It also depends on the supply... [For example], Blacktown is an area that has really low supply of short-term rental, so the occupancy rate is suspected to be high, because it's not only for travellers... [it] is also used for people that are effectively coming for work, for people that are renovating their properties, or also for people that want to be close to their family if they are coming to Sydney."

Simply put, because rates are largely dependent on demand, areas with very little short-term accommodations available will usually have higher rates than areas with an oversupply of properties open for short-term rental.

As in the case of any property investment venture, self-education, mentorship, and a good team can help an investor in the short-term rental market to manage his asset well and ultimately succeed in the business of creating wealth.

Tune in to Quirin Schwaighofer and Sabrina Bethunin's episode in The Smart Property Investment Show to know more about their insight into the key differences between short-term versus long-term rentals, as well as how property investors can ensure they’re getting the most out of their portfolio.

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