Andrew Tan, Founder of Luxury Boutique Accommodation, shares his first-hand insight about short-term vacation rental on Airbnb.
Property owners seeking to rent out their unit and considering other types of rental with a higher yield can consider short-term vacation rental. It is absolutely normal, however, to experience some doubt about this form of rental, for example, “It would be such an inconvenience to clean up a filthy unit after each lease,” or for the less socially-inclined, “Wouldn’t it be too troublesome having to liaise with tenants every few days?”
The Situation
During the past 4 months, I’ve grossed RM26,780 through vacation rental – an average of RM3,245 per month. If I projected that forward, I’d be grossing RM38,940 per year on just this apartment unit alone.
On the surface, that sounds awesome. But first, let’s factor in the expenses.
The Analysis
As an Airbnb host, I gain RM1,288 per month after expenses. Is that good or bad? It depends. No investment is “good” or “bad” in a vacuum. Every investment should be compared to the next best alternative.
In this case, the “next best” is the rent I’d collect from a long-term rental. The apartment would rent for RM2,800 per month, which means that I’d be capturing a RM108 monthly gain. (Based on a property value of RM680,000 with a 20-year loan)
In other words, I earn an extra RM1,180 per month by running a short-term vacation rental as compared to being a landlord to a traditional tenant.
What about the demands that it puts on your time?
1. Answering inquiries is easy
I reply to emails through my phone. It’s about as much trouble as checking my Twitter account or browsing through Facebook.
2. Meeting guests is unnecessary
The Airbnb website automatically emails the guests directions to their accommodation and the location of the key. I suggest that you add an inexpensive keyless entry system to the door. The result is a check-in process that is totally hands-off.
3. Tour guides are automated
I wrote a “Welcome Guide” that offers the guests tips on the best places nearby to eat, drink, shop, etc., along with directions on how to get there by walking, cycling, train, bus and car. The guide also includes tips about the apartment (e.g. “how to operate the washing machine”) and the Wi-Fi password.
4. Cleaning up is indeed inconvenient, but manageable
The biggest hassle is turnover. In my case study, cleaning the apartment took about 1.5 hours each of the 6 times it was done. That means that cleaning consumes 9 hours per month, making the total time commitment up to 10 hours per month, including emails and other ancillary tasks.
In short, taking into account the time spent per month (10 hours), and the income per month (RM1,180), this results in an hourly rate of RM118 per hour.
The Conclusion
Being an Airbnb host might pose certain concerns. However, most, if not all of them, can be easily worked out. In fact, the short-term vacation rental model increases the rental revenue by over 30% compared to traditional long-term rentals. Moreover, if you take it one step further and rent out more than 3 units in the same building, you’d be investing the same or slightly higher amount of time, yet the income might be double or triple – not at all a shabby deal, if I say so myself!
Over to you – what do you think about short-term vacation rental on Airbnb?
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CONTRIBUTOR:
Andrew Tan
Founder of Luxury Boutique Accommodation
Email: yanhoang@gmail.com
Mobile: + 6016 2119696
