Investing in property is a great way for Australians to earn additional income. And it’s not all about capital gains.
Technology has empowered smart real estate investors with a playground of opportunity, much of which is being left unmet at this point. Platforms like AirBnb, Stayz, and other short-term holiday rental sites have revolutionised the way both consumers and property owners think about property.
But with greater opportunity comes unexpected financial implications. If you are leveraging short-term rentals as a way to increase your monthly rental income it’s kind of like running a business. Not only from an operational perspective but also from a tax perspective. There are several things you need to consider.
Here are 10 tips for using your property investment to save money on taxes, whether you work from home or are active in the short-term rental market.
Important note: This article is not intended to be tax or financial advice. You should consult a professional before making any decisions.
Listing your property on the short-term rental market while you’re not using it allows you to claim tax deductions for related expenses such as amenities, property management services, and cleaning.
Interest on loans is a deductible business expense for rental properties.
There are a considerable number of Australian and foreign renters providing consistent short-term guests to owners. This flow of clients guarantees revenue to property investors. You can then use this income to make property improvements or renovations. All property renovations and related expenses are tax-deductible.
Managing a property portfolio requires both workers and contractors. The payment of wages and salaries to these workers are tax-deductible expenses.
Property owners can recover improvement costs as tax deductions over several years. These expenses help you invest more money into the property and make the most of other tax benefits.
You can recover costs from maintaining your property. General repairs, as well as management expenses, are all tax deductible.
This covers theft insurance, workers compensation, and general liabilities.
It’s important for property owners to work with professionals and keep all receipts. You may hire professionals for contract executions or use an accountant for tax services. In the end, these are all business expenses that are tax deductible.
You can claim a percentage of your mortgage or rent if you have a home office.
Utilities such as water and electricity expenses are also tax deductible. Just make sure you keep your records!
Owning property comes with a number of tax benefits if you know what to look for. Whether you live and work from home, or you rent your property out to guests, you can claim all sorts of things to reduce your yearly tax.
The tax benefits of owning property aren’t a new thing, but the growth of short-term rentals has amplified the opportunities for investors to take it up a level. Operate your property as a business and you will reap the rewards!
“The Australian real estate market is hot, despite some recent plateaus. In the past 30 years, housing prices have more than doubled. In some major cities, housing prices are now seven times higher than just a few decades ago.
Given these market conditions, many people are attracted to real estate because it is a proven way to build wealth.
However, it’s not as “set and forget” as many people hope. Yes, a rental property can generate a steady stream of income that will help pay back your loan and increase the overall value of your investment. But they require maintenance and management too.
With the rapid increase in buying price for property in Australia, many investors are looking for opportunities to make additional money from their current investments.
Some real estate investors focus on renovating homes for a quick profit. Others want to own rental properties that generate passive income each month.
Whatever your approach, if you own a property that you don’t intend to live in, you need to decide on a strategy to generate revenue.
With recent trends showing growth in short-term rentals and vacation letting, it sparks a regular debate in property investment circles about short vs long-term approaches. There are benefits and costs of each.
The most common way to rent out a property is with a long-term rental agreement of anywhere from a few months to a year. This is the traditional way of doing things, with sites like Domain and RealEstate.com.au available for investors to list their properties and find tenants.
The advantage of this type of agreement is the owner doesn’t have to deal with changing tenants all the time. Once the price and length of the agreement are signed off, the money keeps rolling in and the investor only has to deal with maintenance or management costs. This is attractive for some investors who are looking for stability with their rental income.
The downside of long-term rental agreements is their lack of flexibility. Let’s say the market rental value increases in your area but you are locked into a 12-month contract with tenants… this restricts your earning capacity.
In addition to limitations with your earnings, you are also in a position where you can’t make decisions if and when you need to. Say, for example, you hit a rough patch and need to move into your house to save money. You can’t just kick your tenants out!
Long-term agreements are a staple in the property market because they have been around forever, but society is changing the way they think.
The interest in short-term rentals has grown significantly in recent years, sparked by Airbnb, Stayz and other vacation rental websites. What started out as a new way to have a holiday has become a creative way to rent out your investment property. In fact, many owners are adopting a short-term rental strategy in an attempt to increase their rental income.
A short-term rental strategy focuses on charging more per night for the property. Although it takes time to manage multiple tenants, most owners can increase their rental income substantially by adopting this strategy. This is especially true at certain times of the year if you own a property in an area that is popular during seasonal months. For example, if the property is near a vacation area, the summer months can provide a huge income boost.
Of course, there are challenges that come with a short-term rental strategy. It’s a bit like running a business because you are always looking to re-book tenants and fill vacancies. Not to mention there is more maintenance required, such as replacing amenities, cleaning fees, and creating a 5-star experience for your guests.
If you do go down the path of a short-term rental strategy the income can be very attractive. In some instances, owners have doubled their income in a short period of time. But unless you have time to focus on it every week, you may be better off hiring a short-term property management service like MaisonNets to handle bookings, amenities, and other bits and pieces.
If you can get the administrative side of things organised and locked down, the opportunities for reinvesting your additional income earned from short-term stays is exciting.
Finding tenants to fill your property vacancies on a short-term basis is now easier than ever. As a result, many real estate investors in Australia are starting to adopt a short-term strategy. Anyone who wants to increase their rental income should consider adopting this approach.
Want help managing your short-term property portfolio? Get in touch here.“
“The sharing economy has changed the way we live. From Uber to Airbnb, and beyond, societal trends are making the world a more accessible place, bringing cultures together, and giving greater choice to consumers.
The rental property market has been turned upside down and put back together in recent years. We have a new generation of individuals with different customs, traditions, and a new outlook on life compared with their parents and grandparents.
Here are 5 emerging rental property trends to be aware of:
There is no questioning the fact that Australia’s capital cities have a high cost of living.
This cost, along with the loosening of rental laws and societal changes, means that more people are looking for ways to supplement their loan or mortgage payments. One way of doing so is to rent out a room in your home on short-term rental websites.
To think that people would open the doors of their home to a complete stranger and live alongside them was unfathomable even 10 years ago. But today, this scenario is extremely common thanks to sites like Airbnb. There are always going to be quirks about living in the same house as a stranger on a short-term basis, but innovations such as smart locks, identity verification, and certified renter reviews have minimised these effects.
Another reason why these rental arrangements continue to be en vogue is that more and more people have a mobile lifestyle. They are working from their laptop in a cafe, travelling the world, or just getting away for a week or two to soak up a new city. The flexibility of short-term rentals is perfect for this kind of lifestyle.
It’s a simple fact of life: today’s luxuries will be tomorrow’s expectations. Australians in the current generation will almost always expect 5-star treatment, and this includes the places they rent.
Unlike past generations, Generation X Australians don’t want a place to simply lay their head. They want personalised service and an all-inclusive experience.
When Airbnb first started it was simple, and the expectations of guests were simple. But as we have more and more superhosts that are going above and beyond for guests, the expectations rise.
Major Australian cities, such as Sydney, are starting to mature. The property market is spreading out and renters are going with it. This is driven by a growth in property prices in recent years for homes close to the city, combined with better transportation infrastructure, internet connectivity, and remote working opportunities.
The rising prices of rentals in the larger Australian cities are not conducive to individuals just starting out in their professional lives. This is why more and more people from all different walks of life are gravitating to the surrounding suburbs and beyond.
Because of the continual rise in short-term rentals, property investors are starting to run their properties like a business. This includes marketing their property to potential renters to reduce vacancy rates, using concierge services to wine and dine guests on arrival, and ensuring amenities offer guests a 5-star experience every time.
It’s not as simple as posting your rental up on a vacation website and watching the money roll in. The short-term rental space is too competitive for that and you need to approach it like a business. Cash flow, expenses, marketing, hiring, and all the jazz that comes with it.
Want help managing your short-term property portfolio? Get in touch here.“
