Investing in Airbnb property

BMT team — Wed, 15 Mar 2023 23:04:00 +0000

Australia’s pristine beaches, picturesque landscapes and impressive flora and fauna are just some of the reasons people consider it one of the world’s best places to live and visit. Investing in Airbnb property has become an increasingly popular option. With over 100,000 Airbnb listings and thousands more across other short-stay accommodation sites, holiday rentals are taking the country by storm. Holiday rentals make for attractive investments; many locations are enticing year-round, they’re popular for both domestic and international travellers, and they hold lucrative tax depreciation deductions. Investing in Airbnb property or other holiday rentals is different to typical residential housing and often involves different customs and expectations for tenants and property owners In this article, we explore the following: What is short-stay accommodation and how does it work? Why invest in a holiday rental? Important things to keep in mind Depreciation eligibility How to maximise deductions What is short-stay accommodation and how does it work? Short-stay accommodation is typically self-contained apartments or houses which are rented for short periods and are available to be booked at short notice with no lease obligations. Most holiday rentals will have a per-night fee, although it’s not uncommon for these properties to also have leases available, more so recently due to historically low rental vacancies. Because leases aren’t used in short-stay accommodation, guests may be required to sign a contract or rental agreement depending on the duration of stay and the property owner’s preference. In most cases guests won’t be required to sign any type of contract – but may be asked to pay a deposit. In other cases, guests aren’t required to sign any type of agreement or contract. Why invest in a holiday rental? Holiday rentals generally offer more flexibility and may be the ideal choice for owners who also want to occupy their investment property occasionally. Holiday rentals generally yield higher daily or weekly rents than long-term leases due to price adjustments based on the duration of stay, maintenance requirements, number of guests, season and local events. Holiday rentals will receive more regular maintenance and cleaning which can improve the longevity of assets and reduce repairs and the need for improvements. Because these properties are income-producing, they generate significant tax deductions including depreciation. Costs such as advertising, repairs and maintenance, property management fees (including Airbnb fees), council rates, insurance costs, interest on investment loans and land tax are fully deductible for the periods the property is income-producing. Important things to keep in mind Holiday rentals are often managed by local property managers, however, in Airbnb properties, it’s a combination of professional and self-management. For instance, Airbnb manages bookings and provides host and guest assistance, however, everything else is ultimately the owner’s responsibility. Types of responsibilities can include finding staff to upkeep the property or doing it yourself, organising repairs and maintenance, being on call 24/7 in case of emergencies, preparing the property for the next tenant and some administrative duties. Because Airbnb properties and holiday rentals are often suitable for a specific cohort, there may be vacancies outside of peak periods, more so in areas with seasonal attractions such as snow or properties near the beach. While utility fees are generally covered by income, it’s important to be aware that these costs are the responsibility of the owner and don’t stop during vacant periods. Owners who occupy their holiday rental will not receive rental income and total tax deductions will be reduced to account for those periods. Some investors choose not to occupy their holiday rentals during peak times or stay when the property is vacant to avoid missing peak rental income. All rental properties require advertisement, however, because holiday homes are typically consistently advertised, these fees will be higher. On a positive note, all costs incurred to advertise an income-producing property are tax deductible. Depreciation eligibility Properties used to produce an income are eligible for depreciation deductions. Owners are eligible to claim depreciation deductions for qualifying assets under two groups. Capital works deductions (Division 43) are claimable on the property’s structure and permanently fixed assets, and plant and equipment depreciation (Division 40) is claimable on the easily removable or mechanical assets. Because holiday rentals are normally furnished by the owner, depreciation deductions are available for qualifying furnishings, which can boost yearly depreciation claims. There are partial year deductions available in scenarios where properties aren’t available for year-round deductions. For instance, when owners occupy their property for part of the year or if the property hasn’t been owned for a full tax year. This allows owners of investment properties to claim deductions for the times of the year the property is income-producing as a percentage. For example, if a property is occupied by a tenant 75 per cent of the year and owner-occupied for the remaining 25 per cent, then 75 per cent of the total yearly depreciation claim is claimable. How to maximise deductions The most effective way to maximise deductions is to order a tax depreciation schedule. A BMT Tax Depreciation Schedule is a detailed forty-year report illustrating all depreciable items in both categories. Whether a holiday rental is rented out 100 per cent of the time or 20 per cent of the year, investors should contact a specialist quantity surveyor to discuss the available depreciation deductions. BMT Tax Depreciation conduct site inspections nationwide to ensure schedules are maximised and fully compliant with current Australian Taxation Office rulings and regulations. To learn more about the deductions within your holiday rental Request a Quote or call the experts on 1300 728 726.

The post Investing in Airbnb property appeared first on .

Tips for buying a holiday rental property

BMT team — Thu, 10 Jan 2019 22:44:12 +0000

Whether it’s a lazy lakeside house or a dreamy beachfront cottage, the appeal of a holiday home can’t be denied. Holiday homes offer the flexibility of a convenient weekend getaway with the bonus of rental income if you plan on short-term holiday letting. If the warmer weather has you considering buying a holiday rental property, there are a few important things to consider before signing on the dotted line. Location While it may be easy to fall for a secluded property with no neighbours or town for miles, this isn’t a wise choice if you plan on renting it out. Proximity to the beach or main attraction of the area and the local grocery store are must-haves for convenience driven travellers. Look at potential properties from a traveller’s perspective. If you are spending your summer vacation at a small, coastal town where the main drawcard is the beach, a property located twenty minutes inland won’t appeal to most travellers. Before buying a holiday home, ensure you do your due diligence and opt for an area that has consistent rental demand throughout the year. This way, you can best avoid long periods of vacancy. Listing Consider where you will list your holiday home when you wish to rent it out. You can choose to go through a real estate agency or list your property on a homestay website such as Airbnb. If you plan on using Airbnb to advertise your holiday home, make sure you read up on the local rules governing the conditions of short-term holiday letting. In New South Wales, recent legislation means that residences in Greater Sydney can be used for short-term holiday letting up to 180 days per year if the host is not present. In all other areas of New South Wales, properties can be used for letting 365 days per year. However, local councils have the power to decrease this to no less than 180 days per year. Depreciation Owners can claim depreciation deductions on their holiday homes for the period that they are available for rent. You can’t claim depreciation for the times you are living at the property. Don’t assume that because you are personally using the property at times throughout the year, you can’t claim depreciation. This is a costly mistake to make as depreciation can save owners thousands each year, making a holiday home significantly more affordable to own. It’s crucial that holiday rental owners engage specialist Quantity Surveyors to prepare a tax depreciation schedule in order to claim depreciation. BMT Tax Depreciation can tailor your schedule to your individual circumstances to capture all deductions for the time your property is available for rent. Before buying a holiday rental property, contact the expert team at BMT on 1300 728 726 so you can make a more informed decision about the most suitable property for you.

The post Tips for buying a holiday rental property appeared first on .

» holiday rental property

Investing in Airbnb property

Tips for buying a holiday rental property