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3 misconceptions about hosting I learned this summer


Thanks for your reply. It still seems like a situation of anecdotes, not data. But more research is being done on Airbnb all the time and once they go public we will know much more about the sustainability of the business model.

For me, Airbnb is like the pot of gold at the end of the rainbow.


Didn’t they say don’t smile til Christmas ironically? I think it just means have firm boundaries, not be miserable.


If that’s the case @Daniel_Lin then people will vote with their feet and stop hosting.

I certainly wouldn’t do STR with those sort of margins.


Yes @helsi. Hosts will leave and new ones will enter, and evebtuslly reach a state where there’s just enough margin to incentivise hosting. But right now, the Melbourne market is certainly over saturated . Even some of the top hosts have only had 70-80% occupancy. Entire 2BR apartments are being let out for less than a $100 during winter, and electricity for heating literally costs a 2nd mortgage. Here is what my brilliant management company did for a 30 day booking over July.

30 day booking - $3000
Utilities $300
Internet $59
Consumables $100
Which leaves me with $2540, barely covers the mortgage and council fees. (I didn’t count management fees which put me in losses).

A long term fully furnished let will have netted me about the same, without the hassle. And I was lucky, most people don’t get 100% occupancy during winter. Its just difficult to see how STR can survive in Melbourne as a full time business. It seems more and more logical to just rent out a spare room, which can sell at $59/night, almost half the price of the whole apartment. In this sense, Air is actually fulfilling it’s core purpose as just a platform for mums and dads to net a small side income renting out an extra bedroom. Things woll get better in summer but I’m 20 days booked in Dec and the extra still doesn’t fully cover the winter losses during Aug and Sept. Fingers crossed for Jan - Feb.


You are assuming though @Daniel_Lin people have your sorts of costs. Many will have no or a very low mortgage so their profit margin will be much, much higher than yours.

With your sort of figures why not go for a LTR and get your council tax and utilities covered and this will leave you with more money and more time to help you sort out your unemployment situation.

Best of luck.


I’m still laughing at Gutend’s Welcome Letter, with detail about Airbnb reviewing. Perhaps he’ll post it here again!?

I love your style, and your insights.


This is the key difference. My home is paid for and without Airbnb my guest room would be empty and bringing in no money. Even if my home wasn’t paid for I’d still be building equity.


@helsi, unlikely. My place has more than 20% equity and a low interest rate. The only way people can have a lower mortgage is if they take out an interest-only loan, or are rich enough to pay 50% equity, which is unlikely. If that is indeed the case then it is in my best interests to quickly exit the market. No way can I compete with investors who are just happy to cover the interest. I had to let it out on airbnb as I was intending on moving in nect year, finding a tenant willing to take on a less than one year lease with no hope of renewing is just impossible.


@Daniel_Lin sorry I don’t think you understand. I am talking about people who have had their property for a while and therefore have little in the way of a mortgage.

They will have seen the way the Airbnb market is going and either offered STR on a property they didn’t fully occupy or released a property from LTR.

I am not taking about investors new to the market. They I presume would do their homework and run the figures before deciding to buy a property purely for STR or LTR.


The number of listings in Melbourne doubled every year for the last 2-3 years. I highly doubt they are all people who have paid down their equity.


Here’s a modified version of his letter that I now use.

Your AirBnB review is very important to us and we hope that your stay will be 5 Stars!

Airbnb’s rating system is different than the classic hotel star rating system. Airbnb can close down any listing that drops below an average of 4.3 stars without notice. The rating system is rather confusing. To give you a better understanding, we designed the following (cheeky) guide to the rating system:

***** Perfection does not exist, but we were happy here.

**** Several issues need to be improved. (Please send us a message.)

*** Major problems that should be fixed immediately. (Please send us a message.)

** Close it down at once.

  •      Put these hosts into jail.

We always strive to give our guests a 5 star experience. Please let us know of any problems you may have during your stay and we will do everything within our power to solve it. Please use the Airbnb Messaging system to contact us.


I have the same type of listing as you, @K9KarmaCasa. I’m also just maximizing profits on what I already have but I’m not retired and use the extra towards the mortgage.

I was buying investment properties earlier this year and considered buying one just for STR but after doing the analysis, it felt like too much work and too much risk so ended buying for LTR instead.


Where are you located in Melbourne, Daniel? We have two airbnb’s in Melbourne and easily make 2-2.5x more than we would make for a normal rental so totally worth it!


That’s what I was saying about St Andrews at 20 odd GDP a night! Same margins as Daniel is talking about. It’s not sustainable.


For business purposes it doesn’t matter whether you own your equity or not. It’s still a standard return on investment calculation.


Did you say your listing is in a working class district? I think this is a good move in itself because the returns can be much higher. My next prooerty investment will be in a lower SES area, which will hopefully be up and coming so there’s the potential for income and increase in equity.


Absolutely. So in the UK, with low interest rates currently, a repayment mortgage over 25 years costs about £2000 a month for 500k, before other bills and costs are accounted for. We need to make sure we’re not operating at a loss. A buy to let mortgage would enforce a stress test of interest rates going up to 8%. In my area there’s no way you would get an adequate return on investment. We need to do the math as they say.


Median home value is around $120,000. The median home price is around $155,000. That’s about 35% lower than the US average. My home’s tax value is right there in the middle, around $140,000. I’d consider my area working class. There are a number of retired people on my street, some bought these houses new or near new and have been here 40+ years.

There is a completely different mindset in renting a room in your home and buying a home with an idea to Airbnb it. In the latter case there is a ROI that has to be considered. There’s a street near me that has three cul-de-sacs overlooking a ridge. The backyards of those homes have great views and lots of privacy. I’ve long thought about buying one if the right one ever came on the market. Those houses are valued at double what mine is. If I bought with the idea that I could make enough on Airbnb to pay the mortgage…well, I couldn’t. So the “investment” would be entirely the home equity portion. At age 60 I don’t want to tie up my funds in an illiquid investment like real estate.


Your situation is excellent and very sensible. The Airbnb returns on a property worth $140k would be very good indeed. You would struggle to buy a small flat for that here. So, that’s the way I need to go …


Thanks @Karma that is the point I have been trying to make to @Jess1, but you have put it across much better.

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