If you haven’t heard about the shared economy then you might have been sleeping under a rock for the past 12 months but with the rise of UBER and Airbnb it is becoming an increasingly hard sector to ignore. Across Europe, Asia and Australia the ride sharing business UBER is having a dramatic impact on disrupting the taxi industry while in the home stay business Airbnb is providing those with a little space in their homes with a little more revenue – the good news is you don’t have to set yourself up solely as a small business or be an entrepreneur to be a participant in the shared economy.
So, a year ago we decided that our two bedroom apartment in the suburb of Redfern (a 20 minute walk from the Sydney CBD) would be put up on Airbnb. We did so after it became apparent that we could earn up to $75,000 per annum before we had to pay any tax on the income (but we still had to declare it as income earnt on our tax returns) and it would have been a more flexible way of managing some spare space. It also meant that we didn’t have to rent the whole place out to a tenant for a fixed term contract period and so the apartment could be used by us when it didn’t have guests.
You can also screen the guests you accept and block dates if you don’t want them to be used (such as Christmas).
Now that we are six months into it I thought it would be a great idea to share some of what we have learnt with you and suggest it is one way of considering making a little more money!
The price is right: always make sure you research who else in your suburb is on Airbnb and take a good look at how they have priced themselves. When we began we put one bedroom of the two bedroom unit up for $150 per night and quickly found that we had over priced ourselves with most rooms going for between $70 and $90. In the end we decided to settle on $70 to get some guest through who would then leave a crucial positive rating for their stay. Ratings are important because it gives you the edge over others. Over time we gradually raised the rate to $75 per room and then discovered that we could probably increase it slightly above that for holidays, long weekends and Christmas. In other words we discovered what the hotel business already knows! Today you can book both rooms for $75 per room or both for $150. If only one room was booked for the entire year that equates to $27,375. Now, if the unit was being rented for $550 per week to a tenant the income would be $28,600. If both rooms were rented for the whole year then the income potential would be $54,750. That is nearly double the rental income and yet still below the taxable threshold. So, make sure you get the price right!
Make sure the room and the house is clean! People hate nothing more than checking into a dodgy back packers and cheap motel only to find that there are bed bugs, the room is not clean and it smells like a cheap smokers pad. Always make sure the room is clean and don’t give your guests the opportunity to leave a negative rating!
Furnish it appropriately: if you say something is in the room then make sure it is – for example a queen sized bed is not a single and a double bed doesn’t really mean bunks! We always ensure there is fresh linen on the beds and we turn the linen over quite often. The cost for doing so is not that high and if you are close to a KMART store you can pick up a good stock of quality linen for less than $50 (an inner duvet cover, cover set, sheets, pillow cases and a towel set). Any linen we discard we then turn around and donate to charity.
Added extras: we always provide a few added extras. Because the apartment has an unlimited internet download package we are able to offer free WIFI as part of the cost. Also, because I travel a lot for work, I collect the little bathroom accessories such as shampoos and soaps to be used in my own Airbnb – in fact sometimes I am a little naughty and if I stay somewhere for only a day or so I’ll ring down to the hotel reception to ask for another lot! We also have a little welcome gift in the form of a box of chocolates and a welcome note. All for less than a few dollars but worth the investment.
Be friendly! We always tell guests to treat the house well and the house will treat you well back and that to use the amenities as they see fit. The fridge always has milk, the cupboard is stocked and there is always the tea and coffee option (yes, the sachets may have also come from a hotel I once stayed at!). If your guests are new to the city and are playing tourist then pop into your local council or tourism board and have a map of the suburb or things to do. All of the small things matter to give a guest a great experience.
To date we have had guests stay with us from right around the world. From the Ukraine to Guatemala, from the USA and Canberra in Australia to Japan and South Korea and I can tell you one of the best things about Airbnb is not so much the money its all about meeting people from different walks of life and cultures.
Check out these links mature aged people need to know about Airbnb when it comes to tax in Australia:
About the author: Matthew Tukaki is the Host of the popular radio show in Australia called Second Career on the Talking Lifestyle Network and is the former Head of the world's oldest and one of the largest recruitment companies, Drake International.
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