Airbnb versus Normal Rental

12 November 2018

Airbnb versus Normal Rental

Which is better?

While there is no perfect answer, I came across this website through a property Facebook group, and thought I would do the full numbers on each.  (Source:  https://zodiak.co.nz/direct-comparison-of-my-apartment-before-and-after-airbnb/)

Normal rental
 
From website, rent was $485 but included power, so say $470.   Apartment worth around $440,000.
 
So based on 52 weeks , the Gross Yield is $5.55%.
 
I have then tried to include all expenses and a fair allowance for things like repairs.  I have used 4.5% interest on the full $440,000 value, and shown as interest only.
 
The overall Cash Surplus is -$6,640, so before tax benefits, negative $128 per week!

Airbnb
 
So how much better is the Airbnb?
 
From the website, their first year rent was $49,000!!!  Over double the normal rent – WOW!
 
It is an 11.14% Gross Yield.   So from a glance, I would be expecting this property to now be cashflow positive.

There is extra insurance, power, internet, cleaning and other costs.  I have estimated these.
  
Then there are the normal expenses.   I have added the higher rates mentioned on the website.
 
The overall Cash Surplus is -$1,836, so before tax benefits, negative $35 per week!

So this Airbnb example is better than the normal rental, but still negative with full borrowings and interest only.  It is around $5,000 better.
 
I hope you found this interesting!

Kind regards
Ross Barnett