Letting space via Airbnb can create good returns, but make sure to first do your homework
Airbnb can be a good income stream, but South Africans need to to do their homework carefully before buying a property specifically for this purpose, says Property Fox, an online property company.
“Not all Airbnb listings are created equal and you don’t want to be stuck with a financial deadweight. The average income quoted by Airbnb will be skewed by properties in the hottest locations in SA,” says Property Fox co-founder Ashley James.
Compared to having a long-term tenant, there is a lot of extra work involved in running an Airbnb property. “I’d recommend a goal of securing at least 60% more income from an Airbnb property than you would from a long-term tenant.
Anything less than this and you should consider very carefully whether it is worth it.” He says a rigorous feasibility study is the best starting point, particularly if you aren’t in one of the country’s hots pots:
1 Have a look at Airbnb research online. Sites like Airdata provide area-specific Airbnb data, with details on the number of hosts and rentals in the vicinity; occupancy rates; average prices; revenue per room type, and price shifts according to seasonality. Nested released an encouraging report which found South Africans could recover house value faster through Airbnb than via traditional rental options. Joburg was ranked 5th, while Cape Town came in 12th out of 75 cities, with investors set to recoup value in 50 months. In Durban, however, it indicated investors could recover value in just 18 months. But don’t be fooled – this assumes 80% occupancy.
2 Read the map Spend a few hours on the Airbnb site investigating your area and competition. Remember to extend your time period across a few months when inputting the length of your stay, otherwise booked rentals won’t show up. Have a look at the map alongside the listings to see where clusters of rentals pop up and what their prices are. This indicates popular areas and the regions which command the highest rates. 3 Look at the listings. Choose five or six places that are similar to your prospective offering. Create a spreadsheet charting what each place offers in terms of amenities and the prices. Work out the average rate to give you an idea of what you can charge. You can also determine what price will undercut the competition. 4 Check occupancy rate. Click through to each of your chosen properties on Airbnb, select the “check availability” option, and have a look at their calendars. Record their levels of occupancy – how many days are booked each month? Do they have any serious dips due to seasonality? This will give you a strong indication of what kind of occupancy you can expect and whether this makes your investment feasible. 5 Think through all expenses and legalities involved. Check your accommodation complies with zoning restrictions and apply for permission from the council, should you be renting an entire dwelling for short-term lets. If your property is in a sectional title block or development, check whether Airbnb and short-term lets are allowed. Airbnb does provide host-protection insurance but read the fine print, so you can get supporting coverage. Tax-wise you will need to declare your additional revenue. Once operational, additional costs include a cleaning service and welcoming gifts for guests, which go a long way to getting you good reviews.