Airbnb has grown in less than a decade to a $30 USD billion plus company from the simple idea of three flat mates wondering if anyone would pay $80 to sleep on an air mattress on their lounge room floor, as they were desperate for money.
With over 3 million homes listed on the site, it now has more rooms than the Hilton without even owning any property. Although, most people are making some part-time income generally from a few thousand up to $15,000 p.a., there are numerous people making six-figure incomes and a few making seven figure incomes.
Some newly created property funds plan to attract investors who perhaps don’t want to put their property on Airbnb and do all the time-consuming check ins, organise cleaning and look after guests.
However, they would rather go for a hands-off approach and simply invest into a fund that will acquire quality investment properties in preferred locations that have high Airbnb returns.
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”.
One spokesperson we spoke to in regards to a new fund they are planning to launch soon for the Airbnb market said, “not only have we identified suitable luxury properties, but we also intend on making the properties available to investors to holiday in about 8 days a year at no charge if investing over $100,000 into the fund”.
She said considering the quality of these properties, select investors will be able to profit from the high cash flow that is generated from Airbnb and the capital growth of the properties. However, because they’ll be affectively part owners in a portfolio of luxury homes, they will also be able to utilise them eight days a year at no charge plus extra additional days at a discount rate.
“This just makes it more attractive to investors to be able to actually utilise their investment for holidays as well. It’s almost like a timeshare, but far more lucrative because you own a part of a solid asset that’s generating significant potential cash returns”. She also said one other property fund we are setting up is to target the resort industry as well. Due to the demand from Chinese tourists, more and more high-quality resorts will need to be built to meet the ever-increasing demand of the Chinese tourists coming to Australia, New Zealand, the South Pacific and Asia.
“We may even combine some funds for investors that want to be diversified into an Airbnb fund and one that also taps into resort development”, she said.
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