This article is written to three readers: landlords who want to improve rental returns, agents who want to provide short-term rent management services, and friends who want to invest in real estate in Australia but who cannot afford to borrow without cash flow.
What is short rent? This is relative to the market common long-term rent. In Australia, there is no legal term for leases, but the market is widely accepted as a 12-month lease, which can be adjusted by negotiation, depending on the circumstances of the tenant or landlord. And short rent, usually refers to a 1-90-night rental.
So what`s AirBnB?? Friends know not to be irritable, let me not familiar with AirBnB friends briefly introduced.
AirBnB, is short for Air Bed and Breakfast in English. BnB is common in Western countries, such as Australia, which provides simple beds and breakfast accommodation, and Air Bed, also called inflatable beds, because the founders were trying to earn some money to subsidize the rent. During the 2007 San Francisco International designers Conference, three inflatable mattresses for designers who could not book hotels were named.
Yes, a great business model was the idea that two poor boy roommates were "forced" to come up with it. AirBnB`s original intention was to stop worrying about staying in strange places, and the owner of the house could introduce the surrounding cafe attractions to tenants. At the same time, homeowners can also earn some extra money, this theme can be seen from the recently launched official Chinese name "Airbnb," the meaning of "let love each other welcome each other."
The essence behind it is what we often call a "shared economy".
Founded in Silicon Valley in 2008, AirBnB has grown from three inflatable mattresses to today`s $31 billion business empire in just nine years of global geometric growth. The business value far exceeds Hilton Hotels Group`s $23.6 billion and Marriott International`s $18 billion valuation, and AirBnB`s growth rate is beyond the reach of the latter two.
Back at the beginning of the article, why do you want to learn about AirBnB? when investing in real estate in Australia
Last March, when I was director of Asia Pacific at Little Real Estate Group, I led an in-house research project. As Australia`s largest independent real estate agency and developer, the core of the Little intermediary service was rental management. So sensitive to emerging business models, through more than half a year of actual testing and data accumulation, a lot of interesting insights.
As old readers of the "Wheat talk about real estate" column may know, I have never advised you to invest in Melbourne`s CBD apartment, mainly because of the oversupply problem, which makes both the return on rent and the value of assets unsatisfactory.
Stop! If you jump out of the property market and look at apartments in Australia, there may be a completely different conclusion.
Australia`s two largest capital cities, Sydney and Melbourne, also share an important common attribute, "tourist cities", both of which are on the list of the world`s top 10 travel destinations, adding "the most livable cities in the world". Chinese tourists travel to and from China many times in 10 years, a stable social environment and a natural environment free of natural disasters make both cities attract a large number of overseas and domestic tourists each year. The number of hotels in Sydney and Melbourne is not keeping pace with the growth in the number of tourists.
In addition, Australia`s geographical location, decided that overseas visitors to Australia, it is necessary to stay, not just short-term transit, an average of five nights.
And do you know how many people visit Australia every year?
1 million, 3 million, 5 million?
According to data, the number of people visiting Australia for travel, short-term education, business and other reasons was 8.35 million in 2016 / 17, and seven hundred and eighty thousand visited Australia in February alone.
Seven hundred and eighty thousand people x 5 nights = 3.9 million accommodation needs to be met, this is only a month, over the course of a year is 46.8 million of the total accommodation needs, these accommodation needs mainly concentrated in Sydney, Melbourne and Brisbane and other cities, is a very large, And in the rising stage of the market.
Your eyes are wide, don`t worry, let`s keep looking at the data.
Among the more than 180 countries and regions providing AirBnB services, Sydney has the eighth largest number of houses in the world; in terms of occupancy rate, Sydney ranks 8th in the world; Brisbane ranks 11th in terms of occupancy rate; and Melbourne has the second highest occupancy rate in the world. Sydney also ranks in the world`s top 10 per night fee, ranking seventh.
At present, Australia`s short-term rental market is worth US $11.5 billion, and there are about three hundred thousand short-term rental units, of which there are about 55,000 units on the AirBnb platform, and 12000 units each in Melbourne and Sydney.
Even so, the number of rooms is still not enough, especially in hot areas.
Melbourne, for example, has a surprisingly high occupancy rate of AirBnB in some parts of the city centre, which is the secret to higher rates of return on rent. The data show that the average return on rent for a well-managed AirBnB apartment can be 14%. In contrast to the 4% return on Melbourne`s CBD long rent, an increase of 250%, it`s not hard to explain why apartments are so tight in the heart of Melbourne, partly vacant and partly short-rented. The number of apartments flowing into the long-term rental market seems tense.
Sydney and Melbourne are slightly different, with hot areas relatively scattered in terms of test data, but also maintaining very high rates of return on rent.
If you buy an apartment in downtown Sydney or Melbourne and the rental rate is not ideal, can you significantly increase it in the form of AirBnB? Or do you have the money in your hand to enter the Australian real estate investment market, but do not have stable income or cash flow to meet the conditions of bank loans, can not pry financial leverage?
If you are the former, this is a plan worth careful consideration, just be prepared. When the number of houses reaches 3 to 5 units, you will soon find yourself out of control and need professional management services. At present, the short-term rent management service in the market is still very irregular, most of them are half-way intermediary or guerrilla husband and wife file, very large-scale and professional short-rent service has not yet been formed, the market development space is huge.
If you`re the latter, you need to actively invest in cash flow projects, so consider short-term rent forms like AirBnB. Here`s a change: don`t think of this investment as buying a house, but buy a stable cash flow. Also based on real estate, compared to buy a fish and potato shop, fruit shop is much safer, the worst property is there. When cash flow is generated through short-term, high rent, reasonable tax returns, a credit record, and then use this income to go to the bank to make a loan, buy a high proportion of land to wait for asset appreciation, your real estate investment road begins.
In either case, industry data and intelligence are essential, can`t shoot the forehead, must use the actual data to judge.
As mentioned above, occupancy is one of the most important factors in increasing returns, so which district has a high occupancy rate? What size, a few bedrooms, what characteristics, whether there are parking apartments with the highest occupancy rate? Which location of the real estate in the short-term rent when there is no off-season throughout the year? Where is the house that makes the most money for short rent?
These answers are in the data.
If you know the secret inside, targeted real estate investment, coupled with the current market can not be delivered of undeliverable flats willing to transfer below the contract price, is a rare opportunity to enter the market.
But this piece of management service also has great progress space, the market scale is enough to accommodate several big management companies to enter or grow, these also need the information to guarantee.
In wheat`s view, the short-term rental business in the Australian real estate market has become a fast-rising market based on tourism, education and long-term multiple-trip visa conditions. What is lacking is authoritative data, industry intelligence, and case analysis of success and failure. Changes in government policy, links between upstream and downstream suppliers and service providers in the industry, and so on, I intend to continue to dig forward front-line information and up-to-date data in this area through the Australian Real Estate Institute platform, where our market research team will continue to dig in depth. Hoping to help, if you want to significantly increase the rate of return on rent, invest in cash flow real estate, or if you want to enter the market to provide professional short-term rental services and build your competitive edge, You can leave your e-mail address at the Australian Real Estate Institute`s website, http://aare.education, and we will share useful information on a regular basis.
I am very excited myself after writing this article.
Wheat
, Director of Asia Pacific, OneGlobalVenture in assn., founder and Chief Executive Officer, Australian Real Estate Institute Former Asia Pacific Director of Little Properties, with KPMG, Australia`s largest independent property group, Master of Law, MBA, School of Law, University of Melbourne Business School
