I want to buy a Sydney apartment for when I want to visit the city and I'll AirBnb it whenever I don't. Bad investment idea?
Edit for simplicity purposes.
Am I Making a Bad Financial Decision to Buy an Apartment for Airbnbing and Using Whenever I Want?
Comments
Stay tuned for part 2 I guess.
Yes.
I expect you'll be better off staying in hotels or other people's Airbnbs. The people I know who are able to make money from short term rentals live close by so they can provide superhost service and cut costs by doing their own cleaning & provisioning.
Does this plan appear sound?
Nuh.
Why you would sell down ETF's (presumably diversified) to buy into an over-inflated market to obtain an Investment Property that with airbnb will be occupied only some of the time.
Yes, you will be competing with others already airbnbing and if you aren't hosting (or nearby) then people will prefer others.
Add to that having to manage the comings (and goings) of unknown randoms, cancellations, cleaning, breakages and complaints from your neighbours, and an Insurance that covers your airbnb venture.
Just no.
You could be triggering a capital gain tax payable event when you sell your ETF.
As mentioned by others, just stay in an Airbnb or hotel when in town. At least you can mix it up with different locations and scenery
You could be triggering a capital gain tax payable event when you sell your ETF.
No could, will trigger a CGT event if sold for a profit.
What if it’s sold for a loss? How could that trigger a capital gain?
What if it’s sold for a loss? How could that trigger a capital gain?
Yep still a CGT event even when sold at a loss.
But instead of a profit, you get a 'loss' you can carry over endlessly to apply against another more CGT profitable event.
The tax laws are built for investors.
Make an investment and lose $10k. Oh no, but YAY you get to carry that $10k loss over on your return forever until you have a profitable CGT event to apply it against.
So then make an investment that made $20k profit, but you held that for more than 12 months!? Excellent! You get a 50% reduction on your CGT profit. So only have to claim $10k profit on the tax return.
But wait, there is more! As you have a $10k CGT loss from 3 years ago! You can apply that loss now, so your taxable gain is $0. So you get to pocket the full $20k and the taxman gets zero.
@JimmyF: Right up to that last point..
The loss applies to the gain first. So it would be $20,000 gain less the carry forward of $10,000 down to $10,000. That then gets discounted to $5,000 which is then added to your taxable income.
I believe most OzBargainers are renters as anyone who has a rental property or Airbnb gets a whole lot of angry people commenting. Really not the best place to ask.
Does this plan appear sound?
The plan sounds ok in theory, but have you done the numbers?
Considering you are 5+ hours away, you're going to be outsourcing all the work to someone else. Airbnb is far from set and forget.
You'll have to manage the booking requests, how is the key exchange going to go?
How will you handle issues as they pop up? Customer is cold and wants extra blankets? Says the fridge isn't working or a light is out?
Who is going to clean the place and 'reset' it for the next person? Replace broken glasses and plates?
So do the numbers, is it going to be worth it? You're going to need people on call to handle this stuff!
Or as most have said, it might be better to put that money into something else and just 'rent' a place those few times a year.
As someone who lives in the city and owns a property in the country 4 hours away, I 100% agree with these.
The times you probably want to go (holidays, long weekends) will be the time you will get good bookings, so will be lost income, so effectively costing you money anyway. And when you stay do you want do the cleaning yourself, or have to pay?
Great points I hadn't considered.
Have you factored in the cost of paying someone to manage it for you while you're in the country and not in the city? Cleaning, inspecting, maintaining, claiming. And if you're going to store possessions in it you'll want a closet or room or something with a strong door on it. It may not be as lucrative as you think, but it's better than having it sit empty for 80% of the time. Plus you can enjoy the convenience of having the cleaner clean up after you, why not. You can lend it to friends visiting for holidays, your parents, I bet it would be pretty handy if you can afford the repayments and to pay for the ongoing costs.
Plus you can enjoy the convenience of having the cleaner clean up after you, why not
At your cost of course…. Using the place on a weekend is generally a double whammy, lost income from a rental, with all the outgoings of a rental.
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12 hours 46 min agowhy not buying HN shares?
Member Since
12 hours 46 min agoMost likely a troll post.
Especially when they say………
We don't have any debt and we own our house.
But want advice on buying city property……
I used to live in the city, now I live in the country 5+ hours from Sydney. I enjoy it and don't want to move back
Move closer to the city?
I live in "the country" (VIC) and I am only 1.5 hours from Melbourne. We wouldn't move closer to the city at all. I am far enough out to enjoy the country life, but also close enough to go to the city.
after I sell ETF investments we'd have about 45%
How much is the apartment? Like what $1m?
I'd expect to use it probably 4 times a year for 5-10 days at a time
40 days a year?
Airbnb it out at other times
Who is doing it and the cost?
Lets say $500k of debt and $500k of equity into an apartment which you will use 40 days a year non deductible say 1/12th (being generous)
I'd say get a spreadsheet out and say you remortgage your PPOR and get $500k out (interest tax deductible) and put $1m into the ASX200 index which yields 2.8% (franking credits on top) but for $28k can you rent the apartment you're buying for 40 days a year?
Bye OP
I've been tossing up converting my 1BR apartment to an airbnb but I don't think it stacks up.
There happens to be one more doing the same thing in my building (around 70 apartments, 3 stories) and once you exclude the various airbnb and cleaning fees they only get $100/night - and it feels like its hardly booked (currently looking at the listing and every day in the next 3 months is available). I get $450/week rent currently so I'd need to booked out 4-5 nights a week to be getting around what I already get with stability, and I doubt there's enough major events (concerts, sports, racing etc) to make enough to offset the lumpiness of it all.
(that said was just informed yesterday that tenant moving out next month and at this point I'm considering just selling it)
Thank you I appreciate the insight.
I works in the industry. The income for Airbnb and normal long term rental to be honest would be quite similar, just take in consideration of all the fees and higher management fee. Also worth to note, if you would need to use your own apartment, it will be most likely a weekend which is the most peak booking time.
Im not sure I understand the question, or problem here.
You've asked for an opinion on a financial decision, but you've given nothing more about the financial metrics, including purchase value, expected yields, expected outgoings, expected private use? To be honest, this is a waste of time post.
If I had to guess, I'd say you're trying to ask the tax implications of this purchase, and how far you can extend a deduction over personal use. To the extent that the property is used for visiting, ie personal use, then no deduction will be available during that period. This does not matter whether it's 'genuinely available for use', as your private use of it will override the deductibility of marketing it to the public.
Sounds like a great idea.. let us know how your claim goes with your insurance when someone trashes it