AirBNB Loans and Lending
For a Queenslander (me) it was chilly.
Not Hobart or Melbourne cold, but cold enough for me to have a beanie on.
The line where I stood was long, well before open time, and a cool wind was making the wait even more noticeable.
Finally, there was movement and even with hundreds of people checking-in as good citizens do, I was quickly inside.
Showing my ticket and taking a free cowboy hat and not so free photo, I was ushered to my seat.
With a crack of a whip, the smell of a horse the fancy lighting turned the sandy arena into a river and green pastures. My evening at Australian Outback Spectacular was underway.
Looking around I quickly noted that there was NOT ONE spare seat in the stadium that holds 1000 people.
Last weekend I was a tourist in my own state. And I was not alone.
It seems that the new cool thing to do is go out and spend up big on the weekend, in your local area.
Yes, the Gold Coast has always been busy, and Dreamworld, Movie World etc draw a crowd, however I was not expecting things to be in such demand, still.
Soon after initial lockdowns lifted, I totally understood that we all wanted to get out and have some fun, but 10 months later, things are pumping.
The flow on for all this activity is the velocity of money increases. This is the speed at which money travels though the economy. More money is being spent more often.
We are also beginning to hear about inflation. We have talked about that on Xenium.Live with PJ a couple of times last year, and that it is one of the indicators to look out for.
While all this info is anecdotal, the point I want to make today is about accommodation, specifically AirBNB.
In the past month I have been asked twice about using AirBNB income for investment property purchases.
The stories above support the idea that AirBNB is pumping. And if you own a property used for AirBNB, then you are probably laughing all the way to the bank.
Until you get there and want to use that money as income and serviceability
While AirBNB is cranking and people are out spending, the big banks have not moved with the times.
Who’d have thought!
If you are buying a property that is used as an AirBNB then the only income the bank will use is yours, and the normal open market rental figures from the property.
This means that you will need a real estate agent to give you an appraisal for rent, this is not hard. The bank will then put that figure into their calculations and use it or discount it however their calculations work.
The biggest issue with buying an AirBNB property (apart from neighbour complaints) is that they are usually priced higher due to the larger income they generate.
This is where your problems may come with the bank
The lower rental amount banks use will not support any comparable yield on a higher price. Meaning that you will be left with a property that potentially values lower than what you are looking to pay.
Sometimes substantially lower.
No matter how you look at this, it means you must dig further into your pockets for more upfront cash.
If this digging goes really deep, you may find that the cash on cash return drops right off or at the worst, the bank might decide it is too far outside of their parameters.
Remember, banks serve one purpose, themselves
In short, be very careful about buying AirBNB property. Make sure you have an awesome broker and funding lined up that you understand.
I alluded to other problems with AirBNB and there are quite a few. I am not against it, but you do need to know all the complications, including, how the ATO views it, the council regulations, insurance etc etc.
The holiday at home market has made AirBNB even more popular, with plenty of us willing to use it to find our local get-away.
As property investors the cashflow of AirBNB looks appealing, and yet perhaps unsurprisingly, it is not straight-line simple.
Not impossible, just not simple
One thing is for certain, people are out spending, and the markets are booming. Having a piece of the action at this time can be very profitable, spectacular even.
Just don’t be a cowboy about it..
If you want to secure your financial future using property, then contact us here or call now on 1300 66 77 89.
Since 2004, Scotty North has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scotty has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model.
Scotty North is a Qualified Property Investment Advisor (QPIA), with accreditation’s in financial planning, mortgage broking and real estate.
By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scotty designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.
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