How to make short-term rentals work in the long term

Short-term letting was once the golden goose for property investors, but many are now scrambling to make sure they don’t have too many eggs in one basket.

At a time when cash-strapped Australians are cutting back on holidays and weekends away, the vacancy rates for homes let on short-term platforms like Airbnb and Stayz are rising in various locations, and income is plummeting.

“In some areas, bookings are as much as 25 per cent down,” says buyer’s agent Scott Levoune, founder of Wealth Through Property.

“Then, in places like Batemans Bay on the NSW South Coast, the nightly rates are dropping, from $250 to $200, because of both the lack of demand with the rising cost of living and interest rates, and [market] over-saturation.

“I think the problem is that, in the past, many people just bought property, put it up for short-term rental and hoped for the best, rather than doing all the necessary research into the location and market, and treating it strategically as a proper business to ensure good returns. Now, many are struggling.”

But there are still ways to make short-term rentals work in the longer term. Levoune suggests re-pricing the rent dynamically by season with reference to what’s being charged by hotels, motels and other accommodation, dropping prices overall, making sure you’re on all booking platforms and adopting a more affordable “book direct” deal.

Another option is shifting to another space in the short-term market. Kasey McDonald, director of the Property Management Training Academy and Queensland state manager of CoreLogic, says this could be as simple as switching to a corporate rental with a three-month – or longer – lease.

“We’re also seeing a lot of short-term rentals moving into long-term residential rentals, often because rents have gone up so much it’s now a viable alternative,” she says. “But we’re also seeing a lot being sold off as, even though rents have increased, they haven’t risen enough to make up for the hikes in interest rates.

“Prices are recovering in a lot of areas, so we’re seeing people going more for capital growth than rental yield, too. The message … is that you should carefully consider all your options.”

Moving from short-term rentals to the longer term can be attractive for many, says Adriana Dendrinos, licensee-in-charge and head of the leasing and property management division of Richardson & Wrench Hurlstone Park.

“But property owners have to make sure they’re on top of the different regulations and laws governing residential leases, including their length and the requirements when they want to put up the rent or give notice,” she says.

“They should also start thinking about that now to be ready for the January market when so many people are looking for new rentals.”

However, Dendrinos adds, “if they want to stay in the short-term market, there are things they can do to improve their chances of a better return and more business, like making sure a property is in good condition, improving the facilities and presenting it in its best possible light with great photos”.