Renting your investment property yourself through a short term rental service can be financially lucrative. At first glance, the returns seem to far outweigh that of a regular long-term rental. However, there are some pitfalls you should be aware of. 

We take a look at what you need to know before deciding whether to get into short term property management.

Think about the location

Where your investment property is located should help dictate your strategy. The importance of location is not exactly a new idea when it comes to property. If your investment property is in inner-Sydney or inner-Melbourne for example, then a short-term strategy could be beneficial. This is because these markets have year-round appeal, as they’re serviced by both a business and holiday-maker crowd.

However, if you own an outer-suburban property you run the risk of your room or house being empty for a large portion of the time, depending on demand, which obviously decreases your return. This also means your room or property has to be clean the whole time, ready for short notice stays. If your investment property is in a more traditional holiday destination area, by the ocean for example, you may be able to charge higher rates, therefore compensating for the quieter periods.

Know your rights

As with other popular sharing services, some of the laws protecting homeowners, local residents, and renters are not as clear as more traditional services. For example, some local councils can impose hefty fines for investment property owners if their guests continually cause disturbances. And these disturbances may be from something as simple as a higher volume of foot traffic in and out of an apartment. So before you sign up to an online shorter term rental service and use your house as investment, you should check the laws of your local council.

Another type of law you may need to consider is tenancy law. If you intend to rent out your property for periods of longer than 30 days to one renter, you are venturing into long-term rental arrangements, which attract the scope of tenancy law. Under tenancy law, property owners have a lot more obligations to their tenants, for example, giving written notice to vacate. So, if you think you may end up renting your property out for longer periods of time, then short term rental services may not be the best option.

Consider the tax implications

Like most investments—property or otherwise—you’ll pay tax on what you earn (it’s income after all). This will affect your taxable income, as well as the profitability of your investment. Like typical rental properties, there are ways to reduce your tax bill, such as using business expenses as an off-set, or negative gearing. Before you venture into any sort of investment, you should always seek advice from a financial planner or accountant.

Renting your property through an online accommodation service can be a great way to make the most of your investment property. However, as with any investment, it pays to do your research and speak to a professional who can find the right strategy for your needs.

Talk to a Suncorp Bank home loan expert about your options. For any home loan questions and assistance with your application, we’re here to help

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Published 10 September 2022