Airbnb vs. Renting in Australia: Which Strategy Should You Choose?

Sites like Airbnb, Stayz, and other alternatives in Australia have changed how we travel and offer a great way to earn extra money for holiday homeowners and people with spare rooms. So, if you own an investment property in Australia, should you turn it into an Airbnb or consider renting it to long-term tenants?

Airbnb vs. renting: which approach can yield the best income in Australia? This blog will compare both options to help you identify your business’s best rental property investment strategy.

You may also want to check out our article to find out whether Airbnb is profitable in Australia and how much you can earn as a host.

Airbnb vs. Renting in Australia: Advantages and Disadvantages

Long-term rentals have been a traditional form of housing when landlords make their properties available to be rented out for at least six months or longer. Most long-term properties can generate between 2 and 5% in rental yield.

Property owners must follow the lease agreement and may not change their pricing on the spot. The rental agreement ensures a consistent, reliable cash flow, and the monthly income remains unchanged regardless of the ever-changing economic circumstances. Still, if you rent your home in a traditional manner, the rental income may not be as lucrative compared to Airbnb rentals.

Airbnb has reinvented how people invest in real estate, and it’s very popular among international and domestic travelers who prefer this platform due to its affordability, local experiences, and flexibility. Since Australia has a strong tourism industry, Airbnb offers property owners a unique opportunity to earn higher profits than traditional long-term rentals.

This potential for higher income is the main reason why most people consider renting their homes and apartments short-term, although starting an Airbnb requires higher upfront costs. You must decorate and furnish your STR property and stock it with essential amenities before accepting guests.

Owning an Airbnb involves many responsibilities and often feels like a second job. The good news is that you can use vacation rental software like Hospitable to automate repetitive daily tasks and save time.

With Airbnb, you can be more flexible with your pricing. You can adjust the nightly rates practically every day, considering factors like market demand, seasonality, day of the week, special events, etc. You can set higher nightly rates during a peak season and generate more revenue, which isn’t possible on a long-term lease. You can also offer discounts to maintain a high occupancy rate during a slow season.

Another often overlooked advantage of Airbnb is that you can still maintain access to your beach house or holiday apartment and use it when you want. You can choose when your property is available and block out dates when you want to stay there with your family and friends or do repairs and renovations.

Airbnb vs. Renting in Australia: Factors to Take Into Account

When it comes to renting out your property in Australia, both Airbnb rentals and long-term rentals have their advantages and disadvantages. So before you decide, you should weigh the pros and cons of both approaches and consider different aspects that may directly impact your income.

First of all, it’s essential to understand that not all properties will be viable as short-term accommodation. You will only be able to enjoy high occupancy rates if your Airbnb rental boasts a great location, for example, a major city or a popular vacation destination. Alternatively, travelers may have a reason to book your listing if it offers something unique. For example, treehouses, yurts, and farm stays often attract guests due to their novelty and the unique experiences they offer.

But even with a beachfront property in a picturesque location, you’ll only be able to generate more revenue if you go the extra mile to make your guests happy and earn positive reviews. You should ensure fast and clear communication with your guests via messages to provide them with the necessary information at the right time and make them feel cared for.

Writing messages to all your guests manually is very challenging and time-consuming. Still, if you opt for vacation rental software like Hospitable, you can automate communication with your guests at all customer journey stages.

You should also consider short-term rental regulations In Australia, which you must follow to ensure compliance and avoid potential legal issues. Remember that STR rules and regulations vary depending on the state or territory of your rental property.

Moreover, the current housing crisis in Australia has renewed the debate about how to regulate STR platforms such as Airbnb. Many state governments in Australia have announced changes to rules that govern using properties for short-term stays.

On 21 February 2024, the WA government introduced a short-stay rental reform Bill into the State Parliament. Its goal is to provide more robust regulation of short-term rental accommodation (STRA) in Western Australia, implement a short-stay rental accommodation register for both hosted and unhosted properties, and introduce a $10,000 incentive payment to property owners to switch from the short-stay to the long-term rental market.

The Australian and New Zealand Short-Term Rental Association (ASTRA), representing small-scale non-professional property investors, welcomed this new reform. The association acknowledges the government’s efforts to balance protecting the visitor economy and incentivizing owners of short-term rental properties to enter the long-term rental market.

Short-term rentals are typically blamed for increasing rents and exacerbating housing supply shortages. Many local councils are urging owners to return their holiday homes and Airbnb properties to the long-term rental markets for residents, hoping this can help ease undersupply.

But in fact, dwellings used for short-term rentals in Australia are a tiny percentage of the overall housing market, so regulating short-term rental accommodation in isolation won’t solve the entire problem. A combination of factors causes the housing crisis, including an inadequate supply of social and affordable housing.

Airbnb vs. Renting in Australia: Which Rental Strategy Is Best Suited for Your Property?

When choosing between Airbnb vs. renting in Australia, both strategies have pros and cons. Airbnb can generate higher rental income, but it’s not suitable for everyone or every property. If you own a house in a popular tourist destination, turning it into Airbnb can be more profitable than becoming a traditional landlord.

But if the area you live in has lower demand from business travelers and holidaymakers, there’s the risk that your STR property might sit empty for a large part of the year. Then, the stability of the conventional long-term rental would be more suited to you.

You may also want to check out our blog article to learn about how to Airbnb your home in Australia and what you should do to get started on this global OTA platform.