“Be my guest…”
With the summer holidays looming, many property owners are looking at tapping into the lucrative short-stay accommodation market. But many will neglect to make sure they are properly insured.
The number of Australians offering up short stay rooms and whole homes to rent on sites like Airbnb, Stayz and HomeAway is surging. There are now more than 115,000 properties in 800 towns and cities listed just on Airbnb – and the growth shows no signs of abating.
Airbnb hosts earn an average income of $4,920 per year by occasionally renting out their homes (averaging 15 bookings a year), according to analysis conducted by Deloitte Access Economics. The report, commissioned by Airbnb, found $441 million was spent on homesharing in FY16 by 2.1 million people (equating to an average of $119 a night).
What started out as an opportunity to rent out a room in a home to a guest for a couple of days and earn a few dollars has turned into a business for many property owners.
The money that an owner can make from tapping into the short-stay market can be very lucrative. Research from Airdna found the estimated revenue for a spare room in Sydney was $18,472 a year, $16,115 in Melbourne, $12,172 in Brisbane, $11,604 in Perth, $10,258 in Darwin and $9,088 on the Gold Coast, based on year-round occupancy. The sums that can be realised for four-plus bedroom homes are even higher: $107,607 per year in Sydney, $86,705 in Melbourne, $72,792 on the Gold Coast and $63,945 in Brisbane.
As a result, many property owners are renting out their homes short-term, leading to a new breed of landlord. And beyond requirements like council approval, laws and tax obligations, insurance is an aspect many are neglecting.
Although accommodation platforms like Airbnb usually offer some form of protection for hosts in terms of damage, many property owners rely on their home and contents insurance to back this up – a decision that can be fraught as many of these policies won’t cover claims if the property is being used as a business (that is, being used to generate income).
What many don’t realise is that they can protect their investment with a short-term landlord insurance policy like RentCoverShortTerm which offers protection against a range of risks not covered by standard home insurance – such as comprehensive contents cover and cover for damage caused by tenants or their guests, whether the damage is accidental or malicious.
For owners with property in inner city areas or popular holiday locations, forgoing traditional leasing in favour of the short-term market can look very appealing. Recent analysis by finder.com.au revealed the average weekly Airbnb rent for a two-bedroom unit near an airport or located in a major city was $1,357. This is almost triple the $447 per week the property would fetch on a traditional rental basis, based on figures from SQM Research. The rental yield for the unit on Airbnb is 12.74 per cent according to finder, but only 3.6 per cent based on CoreLogic figures.
Landlords looking to switch from fixed-term leasing to short-term should also ensure that they switch their insurance. There are different landlord policies for different types of letting because each type of tenancy agreement has its own unique risks. (Read our story on how having the wrong policy could prove costly.)
Talk to our team about arranging the right landlord insurance cover for short-term rentals.
With more property owners looking at Airbnb as an alternative to traditional leasing, it’s a market that PMs are tapping in to as well. A proliferation of agents are now targeting the Airbnb market, either exclusively or as an add-on to their regular real estate operations, and offering professional property management services tailored to the share economy accommodation platforms – including managing listings, vetting guests, conducting inspections before/after each short-term rental, providing housekeeping services and linen, arranging post-occupancy cleaning and coordinating maintenance. Concierge services are also being offered. For PMs operating in this market, it is just as important to have your Professional Indemnity cover in place as it is with fixed-term property management.