Short term rentals have become a common part of the Australian accommodation market. They are particularly popular in major cities and tourism areas.
For property investors, the potential to charge higher nightly rates can make short term accommodation appealing. However, there are additional costs, responsibilities and risks to consider.
It’s important to understand these before deciding whether a short term or long term rental is right for your investment.
Can short term rentals generate more income?
Short term rentals can potentially generate higher gross rental income than a traditional long term lease. This can be particularly true in locations with consistent visitor demand.
However, a higher nightly rate doesn’t necessarily mean a higher overall return.
Occupancy can change throughout the year. Cleaning, furnishing, utilities, maintenance and booking fees can also add to the cost of running the property. More frequent property management may be another expense.
Investors need to consider income and expenses across the entire year rather than focusing on the nightly rate alone.
What rules apply to short term rentals?
The rules for short term rentals can vary depending on where the property is located. The type of property you own can also make a difference.
Local council requirements, planning rules and strata or community title arrangements may affect how a property can be used. There may also be requirements relating to safety, noise and the behaviour of guests.
Before purchasing a property for short stay accommodation, check the requirements that apply to the property and its location.
Short term or long term rental?
There isn’t one option that will suit every property investor.
Short term accommodation may provide greater flexibility and the potential for higher gross income. However, it can also involve fluctuating occupancy, higher operating costs and more active management.
Long term rentals generally provide more predictable rental income. A tenant occupies the property under a residential tenancy agreement for an agreed period. Long term rentals can also involve fewer ongoing operating costs for the property owner.
The right approach will depend on the property and its location. Expected costs, rental demand and your longer term investment goals should also be considered.
If you’re considering an investment property in Adelaide, understanding the local rental market can help you make a more informed decision.
The AMKAR Real Estate team can provide local property and rental market insights when you’re considering a long term rental investment.
This article provides general information only and does not constitute financial, investment or legal advice. You should seek independent professional advice appropriate to your circumstances.