With the success of Airbnb, it is expected these funds will attract a large amount of capital enabling investors to not only tap into the capital growth potential of holiday homes, but also the higher yield they generate from Airbnb income. Many property investors in Australia are used to rental returns as low as 3-4% pa.
However, many properties successfully managed on Airbnb are grossing between 8 and 12% pa generating much larger cash flow returns. Some properties in ideal locations are currently generating over 10% capital growth. When combined with the rental yields, this makes it a very attractive investment compared to the low yield that’s available around the world currently.
One property sourcing company we spoke to said they have been approached by a property fund being set up to tap into the Airbnb market. The property fund requested them to identify the best areas to purchase property. He said, “the best areas are places such as Gold Coast and Noosa in Australia and Queenstown in New Zealand. Obviously, areas that people want to holiday in are ideal for Airbnb. Bondi in Sydney is another area that maybe targeted along with overseas market such as Los Angeles, which also performs very well on Airbnb. Luxury mansions in LA can be acquired for around $2 million upwards. Some properties on the Gold Coast and luxury waterside mansions can be acquired for less than $1.5 million and generate returns between 8 and 12% gross”.
Another industry observer said, “it was only a matter of time before property funds were set up to target this lucrative industry created by Airbnb. It only makes sense due to the low yields most investments and bonds are offering. Many sophisticated investors and funds will be looking to tap into the property market, which is generally a long-term buy and hold. However, thanks to Airbnb, it now enables the cash flow returns that investors also want”.