Long-term rental VS short-term rental, which is the next Australian investment trend of real estate?
If you have a vacation villa or an investment house which is often vacant, and you now want to use it for profits, then, rental mode is definitely the first question you need to consider.
Is it good to choose a long-term rental or a short-term rental? This troubled not only many tenants, but also many landlords. Which will be the better choice? Let us carry out the pros and cons of analysis.
What is the long-term rental?
Long-term rental, is also the traditional and the most common rental model. The literal understanding is the long-term lease of housing. In general, the landlords take months as units to collect fees from tenants. And in this common rental model, landlords and the tenants need to be sign an agreement contract.
In Australia, there is no legal requirement on the term of the lease, however, the common term is usually based on 12 months, even though it can be adjusted according to the specific situation of tenants and landlords.
What is the short-term rental?
Short-term rental is a kind of rising trend in recent years, This kind of rental model is paid by the day. Because the short-term rental often takes days as units, so it is also known as the daily rental.
The term of this kind of rental is not fixed, so it’s usually changeable from 1 to 90 days. The most common short-term rental platform is Airbnb.
Airbnb, which was founded in San Francisco in 2008, has expanded to 191 cities, providing more than 2 million rental properties. The landlord can put his own house (or a room, or even just a sofa) on the website without being charged, indicating the available time, the requirements for customers and fees. Aribnb charges a 3% commission for each book and charges up to 12% from tenants.
At present, Australia has more than 70,000 properties on the Airbnb website for rental. Owners get profits though this kind of short-term rent.
Advantages of short-term Rent
Many landlords said that their 6-month income got through Airbnb was basically the double of traditional rental income. Thus, it is easy to see one of the most obvious advantages for short-term rental is more income.
Australia’s two largest cities, Sydney and Melbourne, are the world-famous tourist cities. There are many tourists. With the opening of Australian ten-year tourist visa, there must be more people coming to Australia for short trips.
However, the number of hotels in these two cities is far behind the number of tourists. The Bureau of Statistics suggested that the number of people for short-term visits / trips per year is as high as 8.35 million. And the accommodation needs mainly concentrate in Sydney, Melbourne and Brisbane. As a result, Australia’s short-term rental market has a high occupancy rate. There is much potential in this market.
In addition, the other advantage of short rental is its flexibility. Assuming that you need to use the house one day, then you do not need to inform your tenant or the platform, you only need to leave the date unavailable on the website. And this is the convenience for many landlords who rent holiday house.
Disadvantages of the short-term rental
Every coin has two sides. When Short-term rental brings more income for landlords, it’s disadvantages come hand in hand.
Firstly, not all kinds of properties are suitable for short-term rental. Those properties which are far from the urban areas or far from coast lines can hardly find a way to get more money though short-term rental. After all, the mainstream for short-term rental is holiday crowds, and the urban area which has convenient transportation and the beautiful seaside, are the first choice for holiday people.
Secondly, the landlords need to pay more funds and labor for short-term rental. Under the long-term rental mode, the landlord can lease the house without any furniture or decoration. But the short-term rental is different, in addition to commonly used furniture such as refrigerators, washing machines, beds, sofas, tables and chairs, the landlord also need to provide customers pots and pans, toilet paper, tableware, drying racks, towels and other daily necessities.
The landlords also should bear the responsibilities for many services such as cleaning, wash bed sheets and others.
The third disadvantage of the short-term rental is that the risks to be taken by the landlord will be greater. In the case of a long-term rental, the landlord will sign a residential lease agreement with the client, while the landlord can purchase Landlord Insurance and Home Insurance at the same time. But all these are not applicable for short-term lease.
Although in this model, the landlord can have more flexibility and has the right to ask the tenant to leave immediately without any notification before. But at the same time, this behavior is defined by many insurance companies as business activities. Therefore, short-term insurance can not be comprehensive. Common short-term rental insurance does not include public liability. If the tenant damaged the public facilities, the landlord could not get compensation through insurance.
And finally, and most importantly. The biggest disadvantage of short-term rental is that there is a legal problem in itself. Under the current conditions, the short rental model is still in the gray area of the law, and there is no clear legal provisions to regulate it. Many tenants engaged in long rents or even short rents, and release the house secretly.
In addition, the property management of the apartment building has the right to formulate the relevant short-term rental requirements. A spokesman for the Australian Property Management Association said that many property management companies have received complaints from the landlord that more and more short-term rental will bring noise, personal safety and other issues. Therefore, the property company has the right to manage the short-term rental landlords.
Located in the heart of the Melbourne CBD, Skysea International Group was founded in 2006 with a very clear vision in mind, to provide local and international property investors with superior customer services unmatched in the industry. We aim to shine in every area of our business. As an integrated enterprise, we apply our insight, experience, intelligence and resources to help clients make informed real estate decisions. We have multiple subsidiaries providing a wide range of services to our valued clients, consisting of buying and selling of real estate, investment advisory, property and building materials development and immigration planning. With a dedicated team of investment advisors and sales professions, we listen to you, respond to your needs and work in partnership with you to achieve your real outcomes.
Phone: 0434 183 780 / 0422 060 234
Address：Level 11, 180 Russell Street, Melbourne
Email: sales@skyseainternational.com.au
Website：www.skyseainternational.com.au
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