Finding sustainable passive income streams is pinnacle of hustling in recent times. The financial crisis of 2008 and general decline in opportunities have forced many people, both young and old to reconsider their options when it comes to financial independence. The day of salaried income being adequate to shelter then from financial rainy days and retirement have come and gone.
In fact, it’s become common place to hear of people having to pilfer their savings and plunder into their retirement plan to manage crises. Even common place social safety nets such as welfare programs and public or private employee provident funds are no longer the safe harbour that guaranteed a comfortable standard of living to retirees. With declining employee coverage, and an increasing rise in conservative political momentum to cut social safety nets, it’s no wonder young people are looking to the rental property market as a means to both supplement their income and save for the promise of future security.
While typically the rental market catered to long-term letting with fixed rates and local government mandated rent control, the rise of AirBnB has seen the industry take a drastic turn for the profitable.
What is AirBnB, and what makes recent homeowners want in on the action?
AirBnB is an online marketplace where owners can list spare accommodation to travellers looking for a short stay that is cheap and convenient. The platform connects homeowners to short term renters, in essence using the premises typically like a hotel. This is a win win for renters because places are typically cheaper than hotels, and they get to live like a local. What’s most important is that the rates for short term leases maybe inexpensive for users, but are very lucrative for home owners who stand to gain significantly more revenue than long-term letting.
The site is popular among locals looking to skip out on hotel non essentials and tourists looking to connect with the local community.
AirBnB: Financial Silver Bullet? Or Overhyped Internet Gimmick?
In one simple word, neither. Unless your property is luxury accommodation with exclusive amenities and facilities that attract high dollar clientele, you won’t be swimming in cash overnight.
But the revenue generated in KK is not modest either. This is not a one size fits all, internet gimmick that promises you massive returns for a meagre investment. This is CONSISTENT cold hard cash. As cash is king, lets demystify what a typical AirBnB in KK can royally return.
Source: AirDNA Market Minder
According to the amazing folks at AirDNA Market Minder, KK is a hot location for AirBnB.
The average occupancy rate is 60% with peaks during the Chinese New Year, Christmas Season at the end of the year and your typical summer months of June, July and August.
A typical KK AirBnB makes an average of $882 USD a month. Thats around RM3600 a month.
Let’s frame this properly, that significantly more than what you would get for long term monthly rent. With that, you could make home loan payments and pocket the difference. In fact, it’s a buyers market with booming property development projects offering fantastic condominiums with dramatically low interest rates, little to no deposits and commitment fees, and buyer favourable loan servicing agreements. There is a growing trend of young couples investing in a first and or second property to convert into an AirBnB’s that essentially after the initial capital investments, pay for themselves and add a small but steady income stream.
What if you don’t own a property but want to get in on the action? Well its not unheard of to have renters sublet portions of their home on AirBnB. In fact, the buzzing Australian city of Melbourne has some owners let to renters with the intent to have renters sublet on AirBnB and make consistent rent payments while pocketing the different. This new business practice has been coined “rental arbitrage”. BEWARE: If you intend to do this then you need the owners permission and it must be explicitly stated in the rental agreement that they approve of subletting.
What Are The Risks And Will I Regret This?
As with any venture into the property market there are inherent risks attached to the business model. Lets evaluate what could possibly go wrong and how AirBnB is working with home owners to mitigate these risks.
What if someone trashes the house?
Simple. AirBnB Host Guarantee is an insurance coverage extended to every listing on AirBnB at no additional cost. It covers up to $1 million USD in claims by hosts and landlords for damaged property.
What if a guest injures themselves in my home and sues me?
Not to worry, with AirBnB Host Protection Insurance, any claims of personal injury made by guests are covered for up to $1 million.
What If a squatter moves in and refuses to leave?
So first of all, always be wary of visitors trying to renegotiate their checkout date after arriving at the property. Try not to book anybody for more than 2 to 3 weeks or even a month, unless they sign an AirBnB Rental Agreement. This protects you and leaves AirBnB in the hook for non compliance by guests.
This is a little weird, I don’t want them here.
So you hastily accepted the reservation but suddenly they’re asking too may questions that simply don’t sit right with you. Something seems off and you get the irrational idea in your head the place might be used for a swingers party or an orgy. But is it too late to say no? No its not. You can cancel a reservation at your discretion. Down let the power get to your head though. There are fines to cancellations especially when closer to the check in date. Think about it, getting replacement accommodation at the drop of a hat is a massive inconvenience. Just rest assured the big red button is there when you need it.
Something broke during their stay. This is so annoying!
Well suck it up butter cup. First of all, always document your home condition prior to allowing guests to access it. You can then establish whether it was damaged or simply a result of poor maintenance. Secondly, its important to fix them asap because dissatisfied guests affect your ratings. You need to inform them to contact you as soon as an incident occurs. You don’t want to deal with a bad rating and finding your toilet overflowed 2 days after they’ve left.
The guests have left with my things!
Say your extra stash of toilet paper or a deck of playing card have gone missing. Ask politely and search your entire house before levelling any accusations. You can actually charge them for these items as well. However if they’ve left with things like jewellery and art work, then its best to get independent insurance for this. Always keep AirBnB updated with any such incidents as they can act on your behalf. To prevent incidents like this, feel free to set up a security deposit via AirBnB to offset any such incidents.
I cant stand it if someone parties in my property.
Always let guests know in advance that this is a family friendly area and parties can result in the police knocking on their door. However if you do find them partying and they are unwilling to stop, then document everything they have done and the mess they have made before cancelling the booking and getting the police involved. No means no.
I don’t want smoking in the house or even on the balcony.
Always include this in your listing and communicate this to your guests before and after accepting the stay. If you do find them smoking, document the evidence of this and the prior communications of your preference and submit to AirBnB before cancelling the booking.
What wont AirBnB Protect me from?
Here’s a list of things AirBnB draws the line at in terms of coverage and you probably need to fork out the expenses yourself.
Intentional acts where liability isn’t the result of an accident
If it wasnt’ an accident, it wont be covered. Eg an assault spiralling out from a fight between you and a guest or even among guests.
Accusations of slander or defamation of character
I know what you’re thinking. How could they have given you a bad review. How could they and others have said such awful things about me on the internet which will cause me to lose money? Shouldn’t I be compensated? The answer is no. This is a personal liability and you are free to pursue this on your own but AirBnB will not protect you or claim any such liability.
Property issues that involve maintenance and living conditions
Do you have asbestos in the house? Is there mould in the walls and ceilings? Are the bed bugs in the mattresses? Is your home generally a mess, a wreck or in need of new stair and windows? Don’t expect AirBnB to cover the bill. Fix it, then list it.
Has a guest car backed into your letter box? Or they rear end your car? Car insurance is the only thing that will help. Sorry.
Is AirBnB even worth it?
Yes it is. With great returns and a promising outlook for rental income in Kota Kinabalu, it its more than worth it. While it may not be the product to build a multimillion dollar empire, its steady cashflow that is great for a passive income stream.
How do I get started?
There are two ways to do this. The easy way and the right way. The easy way is to sign up for yourself on the platform. But the better way is to have Pin Property Management get you sorted for a profitable yet convenient entry into the short term market.
Not only do we manage guest traffic and customer service, but we can also help you design its interiors and stage the property for optimal guest experience.
Call us or email us and we’d be happy to help.