Bernadette Janson, Founder of The School of Renovating, has used Airbnb to change her life and that of her clients. While it is not for everyone, Bernadette shares some of her insights as to how Airbnb can work. Here are some of her tips…
The Ways Airbnb May Transform Your Life and Your Income
Often I will have wait times that eat into my profits. I love to fill the gaps with Airbnb because it usually provides a much higher return plus it enables access to the property to bring in trades, to monitor the condition and even bring through potential buyers between guests.
That is just the tip of the iceberg. For property investors, the benefits go much deeper.
Here are three scenarios where Airbnb can work.
Scenario 1: The Empty Nest
Baby boomers are rattling around in the big family home after the kids have flown the coupe.
Many consider Airbnb but are weighing up their concern about the viability and safety of bringing guests into their home against the benefits of the additional income and the richer life experience.
If this is you, in the words of the great god, Nike, “Just do it”.
You will be surprised at the demand for your suburban listing and how much you enjoy the process. People travel for all sorts of reasons; weddings, christenings, visiting family, sporting events and work. They don’t stay in Airbnb just because it’s cheaper, they often prefer the more homely feel and the local experience.
The more private you can make your listing, the better it will perform.
My husband and I have a separate studio attached to our home on Airbnb and it brings in $800-$1000/week. That’s a decent chunk of pocket money!!
Scenario 2: Your Negatively Geared Property Is Chewing Up Your Cash Flow
Some negatively geared properties suck. They can put you in a holding pattern and keep you poor.
Switching to a high cash flow strategy like Airbnb seems the obvious solution but not every property is suitable.
For example, Kerry and David had a couple of mining town properties that were eating into their cash flow that didn’t shape up on the Airbnb feasibility. They came at the problem from a different direction. They worked with Louise to manage one more purchase, a run-down townhouse in Belmont Geelong for $300k. They did a reno and then listed on Airbnb. It not only added to their asset base with the increased value, but it is a top Airbnb performer. It produces $1000/week, an additional $30,000 cash flow per year to offset those cash suckers.
Scenario 3: You have inadequate income to get finance
You’re in a catch 22. You’ve got a bit of cash to invest but your income isn’t high enough to secure an investment loan. This is where it gets really exciting.
This is the arbitrage model. By renting properties to host on Airbnb, you can build a substantial income in a very short amount of time.
It is important to target properties that can produce around $2,000 cash flow (after expenses) per month.
If you start with a capital of $10,000 and build your portfolio one at a time, you should be able to build to a total of 5 in 12 months.
5 Properties at $2000 per month is $120,000 per annum. By the end of year 2, you are heading off to your broker with business figures demonstrating an annual income of $120,000.
While this might seem like a “get-rich-quick” model, it’s not. It requires commitment and good management skills. We have a number of women who are transforming their lives with this strategy.
Louise (from the Central Coast NSW) was recently separated when she started her Airbnb business. She started listing her spare room, then hosting for friends and neighbors and over twelve months built over 20 listings and a multiple 6 figure income.
Just in case you were wondering:
- Yes, you do pay tax on Airbnb income
- In the arbitrage model, you must work with a good accountant to manage the legal structure set up of your business to minimise the GST burden.
- It is important not to grow too quickly as you need to manage the quality of your hosting.
- Yes, you do require a clause in the lease to allow you to sublet
- The empty nest model can have capital gains tax implications
- Reading this you can be forgiven for thinking that Airbnb is great for every property but that is definitely NOT the case. Thorough research and due diligence is required to identify Airbnb potential.
Find out more about Bernadette and her Airbnb strategy here.
If you are interested in the Airbnb model, Bernadette is running a series of workshops in March and I will be in attendance at the one in Melbourne on Sunday, March 22 to answer any of your burning property and finance questions.
Please visit the event page now to find out more about this series, and to book your seat in either Sydney (March 15), Brisbane (March 21) or Melbourne (March 22). NB: Please use Code 20Freedom for a $20 discount off the ticket price.