How to Setup a Holiday Home in Australia – All you need to know

Have you ever wondered how many holiday home rental properties are there in Australia? Well according to stayz.com there are over 40,000 registered holiday home rentals now with them. Thats a lot of short-term holiday house rentals in Australia. Now people wouldn’t do this if it wasn’t beneficial financially for them to do it. So what are their secrets? How do you Make Money from a Holiday Rental?

Australian Property Market Rocket Ship

Australians love affair with Houses has seen the Holiday Rental market just explode over the last five years. This is great as it gives holiday makers the option of staying at a hose or apartment rather than a hotel, motel or caravan park. Having a holiday rental can be a lot of work but the rewards can also be greater than a standard investment rental. So why would you choose to get a holiday rental Property? Rather than the standard Investment Property long-term rental?

• Well you can use it yourself if it is not being rented out – That is the biggest draw card, a cheap holiday as you are staying at your own Holiday Rental for free
• If you live near by you can regularly check up on and do maintenance when ever you need to yourself. Save money doing things yourself, and the ATO will help you pay for this. (Its called Negative Gearing if making a loss)
• You can negatively gear the holiday house property the same as normal investment properties. This is because your losses can be offset against your regular income. Australian Tax Office high-five again
• It’s an Investment that should always increase in value every year as long as the location is good. So tenants help pay it off, ATO helps pay it off, and Capital Gains Helps pay it off. WINNING

Buying A Vacation Home

So where should you buy a Vacation Holiday Home? This is a tricky question people like to take holidays in different areas for different reasons. Some basic tips I can give you is Location, Location, Location. Do some research and see if there is demand for accommodation in the area you are looking at. Check out the top 5 or so holiday rentals and see if they are all fully booked out around the same time. This will show a demand for Holiday Houses.

When we started looking to buy a Holiday Home there were only 8 holiday rental houses in the area. Fast forward 6 years and now there are over 45. Investing in Vacation Rentals can be a wise investment if you follow these tips.

• Try and get something near the Beach, Lake, City, or Country Hills, you will pay a little more but you will have better success
• Close to Public transport
• Close to Shops and Restaurants
• Something with a Great View
• A low maintenance place – Tiles or Floorboards throughout save carpet cleaning bills. Low Maintenance garden with automatic sprinklers saves on Gardening costs.
• The place where other Holiday Lettings are operating. Proven Tourist Locations.
• Holiday Villa, Holiday Apartment, Vacation Home, Holiday Cottages. So many options for you to choose from.

If you stick with the above dot points you will have success with your holiday home and make money as a side effect. You probably won’t be able to get the perfect location but do try.

Setting Up Your Short Stay Holiday House

Initial set-ups are a little higher with a holiday rental as you will have to factor in these items. If you set aside $10,000 as a base amount that should be enough to set up your holiday house. Visit some second-hand stores to buy in bulk some everyday items. or even some Ex Rental gear at half the price of new. Don’t forget to keep your receipts for the Tax man.

• Fully furnished inside and out. Beds, Tables, Chairs, Lounges, Pictures
• Kitchen utensils, plates knives forks, cups etc.
• Bedding – Linen, pillows, mattresses protectors, towels etc. Many holiday owners just supply Pillows and a doona or quilt. This cuts down on laundry costs so just get the guest to bring their own linen.
• Electrical items, TV, Microwave, Fridge, Washing Machine, Iron, Hair Dryer etc
• Basic Food items, Tea, Coffee, Milo, Milk
• Cleaning Products for the Cleaner or save money and do it yourself.
• Vacation rental Insurance – Don’t forget, this is a must. Make sure your insurance company is fully aware this is a short stay holiday rental.
• If you have some spare cash go Solar Panels on the roof. What a great way to make money when you have no tenants. No electricity use and feedback into the grid and cash in the bank. Sure the feed-in tariffs are not as good as a few years ago but something to think about. Go no smaller than a 2kw system to make it worthwhile.
• LED lighting to save on power bills and reduce constantly changing out blown bulbs. The new Philips hew bulbs can last 25000 hours run time.

Advertising your Holiday Home with Stayz and Google

There are a few ways to advertise your holiday house nowadays, but the best way is through an online directory like Stayz or Airbnb. WE started with stays but now it has been brought out by HomeAway and then VRBO.

It is simple to set up. VRBO will ask for some details like proving that you own the property and bank details. Once this is approved you can add photos and a description.

They really have cornered the market and brought out the competition, but overall they are fine. There are some things I don’t completely like about VRBO.  For example, if I get a booking and it’s paid in full well in advance to VRBO via credit card, VRBO will only pass on the deposit not the whole amount of the booking until the start of the guest arrival date.

You can also create your own holiday house website and advertise it like www.mannumsrest.com This enables you to add more content and format the property on the website the way you like. If you need help setting up a web page check out these great Beginner Website Instructions. Only through advertising will you really begin to make money, with your holiday house. Spend a little to make a lot.

Google Adwords

You can also advertise on Google through their AdWords program. This gets your property to the front page for certain keywords that people may search for. But be aware there is a cost for this and must be set up correctly to limit your exposure financially. We have our AdWords account set up for keywords such as “Holiday Rental (your area)” and cap it at $3 a day. This way we will be only charged $3 maximum a day for searches for this keyword. Once that value is reached our advertisement will stop showing until the next day.

You will only get charged if someone clicks your advertisement

Word of mouth and letter drops in your area are another cheap way to advertise your holiday rental. Or do some social media and YouTube promotions. Having rent coming in continually is important to stay afloat, in the Vacation rental business.

Managing your Holiday House Rental

Every business needs a manager and so does Holiday Rentals. Either do it yourself or Get a property manager in to do it. There is a lot more work to do it your self but I find it very rewarding and helps me find the smaller issues that a property manager may miss. This doesn’t mean you have to be present at each check-in / check-out. But it does mean that you will need to keep your booking calendar updated and have a mobile on you at all times to take guest bookings or deal with current guests’ issues.

A lot of property owners have different details on how to get keys to the guest. This may involve either

• Picking a key up from a local business
• Getting a key from a neighbor
• Picking a key up from the property owner if they live nearby
• Have a key safe on site with the combination emailed to the guests in advance.
• Dealing with the rubbish. Who will take out and bring in the rubbish bins? I find it easy just to get in good with one of the neighbors and pay to say one of their kids to do it every week.

You won’t be able to convert 100% of your inquiries into a booking. This is just the human nature of people checking on a few properties around the area and then picking the property with the best features and price. On average, we convert about 70% of Enquirers into bookings.

Make Money with Holiday Vacation Rentals

So how much do you charge a night? Well, this is dependent on the quality of the property, the location, how many you sleep, and your competition.

If you have never stayed at a holiday home rental, now is a great time to check out the competition and see how they do things. Book a 2-night stay somewhere and check out their procedure. You could even pick up the phone or email some Holiday Property owners and ask them some questions. They will be glad to help.

We priced ourselves above the cheapest somewhere in the middle. Due to having more rooms and beds, than the cheaper competition. Be aware that say you sleep 7 people there may only be 4 beds. Make sure that the bedding is clearly identified.  Often you will get a few families staying together so the price is halved for them so don’t be afraid to have a higher price if you sleep more than the competition.

Pass the cleaning fee on to the guest. If they stay 1 night or 10 nights the cleaner still needs to clean the property at usually a flat fee so pass this cost on.

Holiday Homes Bond

Taking a Holiday Home Rental bond is very normal in the holiday rental business.

So how much bond should you charge? Well, this depends on a few factors like the quality of your house and the equipment inside and or the gap on your insurance.

I have seen bonds as high as $2000 but this was an expensive property with 3x 65 inch LCD TVs, but the bond is usually going to be around $200 to $500. The bond is paid at the same time that the balance is taken. Make sure to return the bond promptly at the end out your guests stay if all is good. I aim to get the bond back within 1 week. The electronic funds transfer is preferred for all payments so make sure to get their Bank BSB and Account numbers to return the bond.

You will get the odd breakage in cups and plates but we don’t take the bond away from this as it doesn’t cost much to replace.

Make sure your Holiday Rental Bond is stated on your website and in your correspondence as you don’t want to shock the new enquirer with a $2000 bond.

All about Tax Time and Holiday Home Rentals

The Australian government is cracking down on Holiday Rental Houses that claim Negative Gearing on the Interest and Expenses. Make sure you keep all your receipts and have your property available for rent at all times unless you are using it. Be aware that the time you are using it you will be unable to claim for expenses for that portion of your stay.

For example, if you stay at your holiday rental for 3 weeks a year total you will only be able to claim a deduction for expenses for 49 weeks. Your tax agent will work out a ratio for the time you are using it and deduct it from the rest of the year.

For example, If you rent out for 49 weeks and Have Income of $20,000 and Expenses of $30,000

Your Holiday Rental received revenue                                    $20,000

Holiday Rental deductions             (49/52 x $30,000) =     $28,269

Real Holiday Rental loss                                                          $8,269

So as you can see your loss is $8,269 rather than the $10,000 if you had rented out for the full year and not stayed there yourself.

If seeing an agent take a screenshot of your website and or holiday house on-line calendar to prove your commitment to actively trying to rent out.

Receipts to keep for the Tax agent:

• Rates, Water, Electricity
• Insurance
• Commission to websites like Stayz and Google (AdWords)
• Bank Interest
• All Income minus the bond
• Cleaning products
• Any repairs or improvements in painting etc.

For more in-depth info on ATO tax implications see here go over it and make sure you are sticking to the rules.

Holiday homes investment opportunities

Like any investment, you should be in it for the long term. You will have good months and bad months. Make sure to take out the appropriate insurance to protect your investment.

But the advantage is that you can have fun with your investment.

Buy low sell high that’s the name of the game. Look around and wait for the correct investment holiday home.

Issues with Tenants and Your Holiday Home

Generally, we have always had good tenants. The bond seems to screen out the riff-raff. But Holiday Homes is just that. A place to unwind and enjoy yourself. So some of the issues we have had in the past are.

• Noisy Tenant’s Parties etc after midnight – Just ask your neighbors to call the police if they get too loud.
• Excess Rubbish – Have a clause in the Terms and Conditions that state that excess rubbish is the responsibility of the guest otherwise a Rubbish removal fee will be taken out of the bond.
• Taking Holiday House Property with them – Eg towels, games, DVDs
• Not Cleaning BBQ or Excess dirt in the house.
• Leaving Heaters / air-conditioners or lights on after checking out. Can be fixed with timers.
• Losing Keys
• Pets inside the Holiday House

You will need a Plan B for many other issues that may come up. Keep a local plumber and Electrician on File in case of Emergencies.

Good luck with setting up and running a Holiday Home Rental. Vacation Rentals by Owners are a lot of work, but very rewarding at times. Once you can get your holiday rental positively geared, it’s now putting money back into your pocket, it makes your time away so much sweeter. Let me know in the comments below where your holiday house is and what you do to make it special.

Mathew S

I am a qualified Industrial Electrician for the past 20 years and I love to share my knowledge on home repair and maintenance jobs.

I love fast toys like Motorcycles, Cars, Jetskis, Boats, and Computers so writing about them is easy. Working on them is fun.
To keeps costs down I do all my own mods, repairs, and servicing. These skills I want to share with everyone. DIY is a skill everyone can learn.