Property investors are being hit with increased expenses due to rising interest rates and the loss of interest deductibility this year. Focusing on increasing rental returns will be paramount moving forward, so this is why an increasing number of investors are turning to short- term rental over traditional tenancies.

For the correct properties, short-term rental can prove an excellent solution to increasing rental yield, whilst reducing ongoing maintenance costs which are typically higher with a regular tenancy. Demand for short-term rental accommodation in Auckland has risen dramatically over the last year, and we are now seeing nightly rates surpass pre-Covid levels consistently over the last few months. If you’ve been on the fence about whether short-term rental will work for you, then now is the best time to finally get started.

CHOOSING A PROPERTY

One-bedroom apartments in central suburbs tend to have the highest occupancy rate and will prove to have the highest yields. Two-bedroom apartments with two bathrooms are also an excellent choice for short-term rental, especially if there is a parking space included. Three bedroom apartments and suburban houses are also a great choice, although the value of the property tends to be substantially higher, resulting in a lower yield.

Here are some examples of yields for different types of properties so you can see the difference.

ONE-BEDROOM APARTMENT (AUCKLAND CBD)

Purchase price = $480,000
Rental appraisal = $520 per week (5.6% gross yield)
Short-term rental appraisal = $954 per week (10.3% gross yield)

TWO-BEDROOM APARTMENT WITH TWO BATHROOMS, PLUS CAR PARK (EDEN TERRACE)

Purchase price = $800,000
Rental appraisal = $700 per week (4.6% gross yield)
Short-term rental appraisal = $1,516 per week (9.9% gross yield)

THREE-BEDROOM VILLA WITH TWO BATHROOMS (GREY LYNN)

Purchase price = $1,650,000
Rental appraisal = $850 per week (2.7% gross yield)
Short-term rental appraisal = $2,520 per week (7.9% gross yield)

The main factor determining if a property is to be successful as a short-term rental, besides location, is the presentation, so the furnishings and the property itself need to be of above-average quality. If you’d like a short-term rental appraisal for your property so you can see the difference yourself, then get in touch with me directly on the contact information below.

‘One-bedroom apartments in central suburbs tend to have the highest occupancy rate and will prove to have the highest yields’