Traditional Renting vs Airbnb

People all over the world are curious to know whether listing their investment property on Airbnb for the short-term or sticking to traditional long-term renting is the way to go. We've dug into this dilemma and pinpointed the advantages and disadvantages associated with short-term and long-term renting.

What is Airbnb?

Airbnb is an online market place that allows property owners to rent out their whole property, or spare room, to guests. Airbnb hosts can be found in 190 countries worldwide and in April 2019, there were over 150 million users. The majority of Airbnb users choose to stay in an Airbnb instead of a hotel as they are often more affordable. Airbnb charges a 3% fee from hosts and a 6% to 12% fee from guests upon booking.

Advantages of Airbnb

The income you can make as an Airbnb host can equate to much more than you may make from long-term renting. On Airbnb, a nightly rate is charged (a rate that you choose), so depending on the location, size of your property, amenities on offer, and time of year, you may be able to make a standard week's rent in just a night or two. You can also block out dates that the property is not available, so you can use the space for your own needs, whenever you choose to. Furthermore, listing a property on Airbnb is free. 

Secondly, there is plenty of additional flexibility with Airbnb. Before guests can book to stay, they need your approval. You can see photos of guests, read their profile and gage what kind of person they may be. You can see what other hosts have said about them in the past by reading their reviews. This way, you can be discerning about who you allow into your home. Guests also have to pay in full before arriving.

Thirdly, as leasing your property on Airbnb is for the short-term, you are able to check on your property on a regular basis (every few days or so). You can keep an eye on your space, and keep it looking the way you like it to look. If you'd rather be more removed from the process, you can outsource the key drop and cleaning to a company who can manage it for you.

Disadvantages of Airbnb 

Airbnb requires you to be more hands-on than a traditional landlord. In order to be listed as an Airbnb Preferred Host, you'll need to respond to enquiries within 24-hours. You'll also have to be online and available to respond to enquiries from guests who are currently staying in your home, those who are interested in your space, and guests who are due to arrive in the near future. You'll also need to clean the house from top to bottom between each booking, which can mean you'll be giving your house more than just a sweep multiple times a week. If you'd rather not do the cleaning, you'll be spending money on outsourcing these services.

Secondly, your income from Airbnb will fluctuate. While there is a chance for you to make more money than having a long-term tenant, there is definitely no guarantee. If your property is off the beaten track, or in an area that is not of appeal to travelers, having your space occupied on a regular basis is not as likely. Your income in one month could be a fraction of your income the next which can make planning for the future a treacherous task. Even though a guest may book in for a weekend in the future, they can also cancel up to 24-hours before check-in. Unfortunately with Airbnb, you just never know how much income is coming your way.

Thirdly, there are some shocking stories from hosts who have found their homes turned upside down as well as hosts who have returned home only to find that precious items have been stolen. While Airbnb have a policy that covers unforeseen circumstances and damage, Airbnb always have the final say in the matter. One host said that guests spilled red wine on his $3000 curtains, and Airbnb reimbursed him $50. How frustrating that must have been. Having a thorough read through Airbnb's terms and conditions, and having a comprehensive understanding of your insurance policy, is essential. You just never know what people might get up to or what kind of damage may be caused. 

Long-term Renting

Long-term renting provides security and stability, especially in regards to the return on your investment. Tenants stay put for the duration of the contract (or longer), and if not, they pay to break it. You can rest assured that you'll be making the same profit every week, with a steady cash flow. Even though you may not make as much as you possibly could on Airbnb, long-term renting most definitely provides greater security and in that way, can reduce stress.

Secondly, you can enlist the services of a real estate agent to manage your property for you. They will handle all of the admin tasks, so you won't have to be on call to respond to issues with the property, like repairs and conversations about late payment from tenants. If this is the path you choose to go down, you'll be paying around 7% to 10% of rent to your property manager. You can be as hands-on or as hands-off as you like, depending on the contract you set up with the real estate agent. If you manage the property yourself, you'll have to be organising inspections to check on your property, respond to calls and enquiries from tenants, take charge of damage repair and chase down rent.

There are advantages and disadvantages no matter what you decide to do with your investment property. It is important that you consider which avenue is going to be most accommodating to your current situation and most supportive of your future. Having stability gives us a sense of ease and creates security. Considering this, sticking to the tradition of long-term renting may very well be the way to go.