12th November 2018
How Airbnb Property Investments Can Generate Positive Cash Flow and Capital Growth
In most traditional property investment scenarios, cash flow yield and capital gains are typically mutually exclusive. With these two outcomes often dictating the strategy an investor may take, it’s common for people to choose between them when deciding on their venture. It’s generally up to the individual which route is favoured and while most people would prefer a choice that offers an opportunity for both benefits to happen, this doesn’t usually play out in reality.
Cash Flow vs. Capital Growth Auckland Property Investments
Investment strategies should be considered on the basis of a person’s unique situation. Cash flow strategies are generally pursued for the purpose of having a weekly income from a property. In the short-term, these properties present their value in regular payments by tenants – commercial or residential. The most appealing benefit of these ventures is in the capability to have the accessible cash to use for expenses on an everyday basis. This is the path usually taken by those looking to get long-term tenants into their properties and use the earnings as an income. Unfortunately, it is fairly normal for these type of investments to see little capital growth over time, depending on their location.
In contrast, a capital growth property investment strategy is taken on with the property’s capital value prioritised. These strategies will focus on an investment in a property that grows in value in the long-term. This avenue doesn’t always generate a regular income for the investor and can even result in a negative cash flow. This can be a problem for some investors as they may have to end up paying for expenses out of their own pocket and see little return on investment unless they decide to sell. A primary characteristic of a capital growth investment is that they are typically undertaken in areas of high projected growth. Cities, up and coming areas and regions with high development are favoured in these kinds of ventures.
The idea of choosing between the two strategies has historically driven New Zealand property investors’ decisions on where and what to buy. Those prioritising income have pursued high cash flow properties and sacrificed capital gains, while on the other hand, value-driven investors have passed up on a regular income in favour of seeing maximum growth from their choices.
Airbnb Offers Cash Flow Generation and Capital Value Growth
In 2018, property investment opportunities have been revolutionised by the growing popularity of Airbnb and other short-term rental platforms. With these types of mediums changing the way property owners are able to earn an income from their investments, new opportunities are rife. One of the biggest drawcards to Airbnb investment properties is their ability to surpass traditional rules around property investment. This is strikingly apparent in their ability to generate cash flow while providing capital gains growth opportunity in the long-term.
While all property investment results are subject to their location, Airbnb is unique because it provides a cash flow earning potential while being popular in areas that are best for capital growth ventures. The highest earning Airbnb units in New Zealand are situated in Auckland and Queenstown, where property value is known to grow over time. Purchasing a property for Airbnb hosting pursuits allows people to see a return-on-investment quickly in the form of a regular income. They can also experience the benefits of long-term capital value growth when it comes time to sell-up.
Choosing to go with a property investment in Auckland CBD is a secure way of ensuring strong growth rates in property value. This, in combination with the earning potential for centrally-located Airbnb hosts, is a strong way to set an investment up for success. The challenge of choosing between a cash-flow orientated purchase and a value-growth based move can be solved with Airbnb as an alternative.
For those looking to take advantage of contemporary methods of property investment, Airbnb has proven itself to be a viable method in New Zealand. Evident in the growing numbers of hosts and those purchasing property for the sole benefit of Airbnb hosting, the outlook for this platform in areas like Auckland is extremely positive. With the short-term accommodation industry growth rate at historical heights around the country, Airbnb is a way to tap into a thriving market with a secure property investment.
New Ways to Invest Provide New Opportunities
Thinking ahead and looking at the bigger picture is an important part of all property investment strategies. When making the decision to purchase a property, new opportunities should always be at the forefront of an investors mind. Airbnb has solidified itself as a key player in the market with its continued success in New Zealand. With proper research and planning, a move towards an Airbnb property investment can be an extremely profitable decision.