19th April 2023
Double Your Yield with Short-Term Rental
The difference in rental yields between Airbnb rentals and traditional tenancies
Property investors are being hit with increased expenses due to rising interest rates and the loss of interest deductibility this year. Focusing on growing rental returns will be paramount, so more investors turn to the short-term rental over traditional tenancies.
For the correct properties, the short-term rental can prove an excellent solution to increasing rental yield while reducing ongoing maintenance costs, typically higher with a periodic tenancy. Demand for short-term rental accommodation in Auckland has risen dramatically over the last year. We are now seeing nightly rates surpass pre-Covid levels consistently over the previous few months. If you’ve been on the fence about whether short-term rental will work for you, then now is the best time to get started!
One-bedroom apartments in central suburbs tend to have the highest occupancy rate and will prove to have the highest yields. Two-bedroom apartments with two bathrooms are also an excellent choice for short-term rental, especially if a parking space is included. Three-bedroom apartments and suburban houses are also excellent choices, although the property’s value tends to be substantially higher, resulting in a lower yield.
Here are some examples of yields for different types of properties so you can see the difference.
One-Bedroom Apartment (Auckland CBD)
Purchase Price = $480,000
Rental Appraisal = $520 per week (5.6% gross yield)
Short-Term Rental Appraisal = $954 per week (10.3% gross yield)
Two Bedroom Apartment with Two Bathrooms plus Car Park (Eden Terrace)
Purchase Price = $800,000
Rental Appraisal = $700 per week (4.6% gross yield)
Short-Term Rental Appraisal = $1,516 per week (9.9% gross yield)
Three Bedroom Villa with Two Bathrooms (Grey Lynn)
Purchase Price = $1,650,000
Rental Appraisal = $850 per week (2.7% gross yield)
Short-Term Rental Appraisal = $2,520 per week (7.9% gross yield)
The main thing for a property to succeed as a short-term rental, besides location, is the presentation, so the furnishings and the property itself need to be above-average quality.
If you’d like a short-term rental appraisal for your property so you can see the difference yourself, contact us today!