When some agents think about short-term rental accommodation, they see all the extra work associated with high-volume guest turnover – advertising, bookings, inspections, arranging services like cleaners, gardeners, handymen, and being more on-call.
Other agents see opportunity…
The number of short-term rentals in the market has been on the rise recently, following a post-pandemic dip.
In December 2023, there were around 280,000 unique short-term rentals listed in Australia, of which 69 per cent were “active” rentals (available or booked at least one night a month) and 88 per cent were “entire home” listings.
Active un-hosted short-term rentals comprise around 1.5 per cent of Australia’s 11.1 million dwellings at any given time.
NOTE: While they have been on the rise, it is important to note that in some states, governments are starting to disincentivise short-stay properties, to try and swing back some stock to fixed rentals (due to the ongoing housing shortage).
The financial returns are a key driver for property investors to tap into the short-term market.
According to research from Grounded Community Land Trust Advocacy, short-term landlords in 13 local councils are earning up to $131,000 in rent a year.
Meanwhile, the same research found that earnings were 80.9 per cent above long-term rentals.
With higher returns for the landlord, there can be higher returns for the managing agent via percentage-based management fees.
Although financial returns are one of many upsides, there are also downsides.
The obvious downside is the extra work in managing guest turnover – and yes, there is potentially quite a lot of work involved in managing a short-term property if it is being used by holidaymakers who are only staying a night or two then moving on.
If agents have, or are considering to add, short-term rental properties to their portfolio, another consideration is the insurance required to protect these types of properties.
It may be a revelation to some that there are landlord insurance products specifically designed to cater to short-term rentals.
EBM RentCover created one of the first – RentCover ShortTerm – and it remains one of the few which covers landlords operating right across the short-term market, including those using Airbnb.
The cover is designed for investment properties rented out for less than six months at a time, with the option to cover both contents and building.
Too often, owners are unaware that their normal home and contents insurance, landlord insurance or other insurance options simply may not cover them for damage or liability caused by a paying guest.
And what works for longer-term tenancies doesn’t necessarily work for the short-term market – the risks are different.
While there are some aspects of landlord insurance that apply to both fixed-term and short-term rentals – such as owner liability or accidental or malicious damage to the building, fittings and fixtures – the different lease arrangements pose unique risks.
For example, loss of rent is a key consideration for landlords with fixed-term leases, with tenants breaking leases and defaulting on rent.
For short-term there is no lease agreement in place which means a different type of loss of rent cover is required.
For short-term, the loss of rent coverage should consider circumstances such as the loss of rent due to a confirmed booking being unable to occupy the property due to guest damage or damage from insured events like fire and storm.
Short-term contents cover is also an important consideration.
Most long-term rentals are leased unfurnished, therefore typical landlord insurance policies don’t automatically offer cover for contents.
Meanwhile, most short-term properties are provided fully-furnished and fully-equipped, which a short-term landlord insurance policy takes into consideration.
To summarise, a specialist short-term landlord policy, like RentCover ShortTerm, provides the cover needed to protect against the unique risks short-term owners face.
Which means any landlord in the short-term market should seriously consider taking out tailored insurance if they don’t want to risk being caught out by having the wrong or inadequate cover.
By extension, it means that any agent managing short-term properties, or looking at offering the service, should consider whether their landlords are protected by specialist short-term insurance – and, if they aren’t, whether it is worth the risk of adding them to their rent roll.
