1st November 2018
4 Problems with Hotel Investments that can be Avoided with Airbnb
As Auckland property investments continue to thrive, avenues of exploring income earning opportunities are becoming increasingly appealing to those with the means to purchase property. While traditional methods such as long-term tenancies and property managed holiday homes have held strong in popularity for Kiwis, Airbnb has shaken up the game and offered a new way of investing.
In combination with the high-performing property market is New Zealand’s flourishing tourism industry. The short-term accommodation sector has brought about new opportunities for many individuals and has played a huge part in the success of Airbnb around the country. For those looking to explore possibilities in the tourism accommodation industry, hotel investments have also been a viable method. They offer a way to earn without the full-time effort that becoming a landlord can often require and for many, have produced favourable results. However, they don’t always guarantee success and by nature are subject to many limitations.
Airbnb has brought about a contemporary approach to property investment that allows owners to avoid the hurdles that other short-term accommodation ventures are burdened by. In comparison to a hotel room investment, Airbnb is extremely flexible. Operating as an Airbnb host allows you to enjoy the profitability of traditional property investment alongside taking advantage of a growing industry. All of the benefits that hotel room purchases provide can be found in Airbnb without the limitations that are too frequently placed on these buyers.
There are many situations in which hotel investments can be problematic. The way these contracts are structured leave little room for movement and growth, often leaving investors feeling trapped or stagnant with their efforts. Contrasting this with the opportunities offered in Airbnb hosting show how these two different forms of investing can have varying results. In saying this, here are 5 problems with hotel investments that are avoided when choosing to go with Airbnb.
1. Hotel Investments are Slow to Grow in Value
Hotel room investments do not grow in value the same way traditional property investments will. As we have seen in recent years with Auckland house prices, homes across almost every suburb have skyrocketed in price. In comparison, a hotel investment will not offer you the same potential for capital growth meaning that you could miss out on a potential opportunity by taking this path.
One of the benefits of Airbnb is that your property investment will follow the trends of the usual paths of buying a home for the purpose of renting it out. This means that even though you are taking a different route of earning an income than bringing in long-term tenants, you’ll still have the potential to benefit from the property market’s standings when you decide to sell up.
2. The Worth of Your Investment is Often too Ambiguous
When you’re purchasing a hotel room, its cost will often be different from that of a similar freehold apartment. This means that the value of your investment can seem unclear, what are you really paying for? How can you judge the price you pay against another option? Ambiguity is never a good thing when delving into the property market. Clarity is needed to make an informed decision about your property investment and this is something that’s too often lacking on the hotel room path.
Investing in Airbnb gives you access to all the usual means of property valuation. You’ll be equipped with everything you need to know about the property before you make a purchase. Suburb choice, size, property type and a range of other factors are all free to be chosen by you, giving you the chance to secure your choice and be confident that you are making the right decision in the long-run.
3. Your Resale Options are Extremely Limited
If you decide to sell your investment property and you’ve chosen to go with a hotel, you’ll be extremely limited in your options. This means that it may take a long time to sell the room and you may have to substantially compromise on price. Have you ever flicked through the property listings in the Herald and came across a hotel room for sale? Unlikely. The reality is that owning a hotel room doesn’t leave you with an asset that is highly desirable in the same way an Auckland property may be.
4. Opportunities to Leverage Your Capital are Restricted
One of the biggest advantages of owning a property is the capability to leverage your mortgage in order to purchase a second home. This is the ideal way to grow a property portfolio and can bridge financial gaps. Hotel investments are lacking on this front because they aren’t always looked upon favourably by banks. This should be a warning sign to potential property investors.
Airbnb, on the other hand, will leave you with ownership of a qualified property to use a leverage for a second mortgage (in most cases). This means that you will be able to use your asset to further your property investment efforts and grow your income. For this reason, hosting on Airbnb is often a more favourable choice for investors looking to purchase more properties down the line. Airbnb opens doors for property owners looking to make viable and long-term earnings.
Airbnb is a Flexible, Contemporary Approach to Property Investment
New Zealand property owners are no longer at the mercy of limited available options. With Airbnb, people are able to choose an investment process that fits in with their wants, needs and plans for their property. Hotel investments and even long-term tenancies can be very restrictive. By choosing to go with Airbnb hosting, common problems can be avoided and homeowners can be empowered to earn a worthwhile profit.