Air BnB as an investment

[sidinz]

The reason AirBNBs should have fixed wired fire alarms, emergency escape plans and illuminated emergency exit signs is the same reason genuine commercial operators need them.

It's because when there are a bunch of people sleeping in a building and there is a fire, all the occupants need to hear the alarm at the same time. You can't guarantee someone in a bedroom down the hall will wake up when a smoke alarm in the kitchen goes off, and you can't guarantee that one of the other guests will go and make sure everyone knows there is a fire.

When the alarm is activated, most if not all the occupants will likely be asleep. When awoken they will be in an unfamiliar building.
That's not the same as a domestic rental property. A domestic rental property is most likely familiar to the occupants.

And yes, IMO you should only have to pay commercial rates on your AirBNB for the number of days it was used to host guests. I think that's what the CCC is mulling over at the moment.
I reckon they'll come to the conclusion that it's too hard to implement and copy what QLDC is doing.
Unfortunately I think it will take a couple more AirBNB fires like the one in Christchurch before councils start looking at resource consents and proper fire alarms though.

What an utter load of bollocks. The guests who got injured in the fire in Chch did so because they stayed inside the house in order to fight the fire, not because they had any trouble evacuating. Hotels need such fire systems because they have dozens or even hundreds of people in a building a few storeys high. Having an early warning and mass evacuation system is vital under those conditions. To say that your average suburban home with multiple ground floor escape points need the same is ridiculous. I run an Airbnb. It is 76m2 and sleeps six. Every room in the house has a window that can be climbed out. It has three external doors on three different sides of the building. You can't seriously be suggesting that this situation needs the same systems that a multi-storeyed hotel does?

As for the notion that commercial operators are subsiding Airbnbs, hahahahahahahahahaha! On the contrary, under the proposals, I will be subsiding them! Their rates will go down at my expense.
Unlike a motel/hotel that is occupied by dozens of guests and staff 24/7, all year, all using water, generating rubbish, using the roads and street lighting, my place is only occupied around 60% of the year and only 2-6 people on a half-acre section. My guests' use of council services and infrastructure is far less than a tenant family living there year-round and a fraction of what the local motels would use on a much smaller section. As it is, I pay more than my fair share, based on occupancy. Commercial rates would add insult to injury.

Courham is totally right that it's also a threat to the Kiwi tradition of renting someone's bach for a week. If these people are forced to pay commercial rates, many will simply find it's uneconomical to rent to anyone in the open market and only do it on the quiet to friends and family. Thus the taxes they're currently paying will disappear from the system.

[sparxNZ]

You can't seriously be suggesting that this situation needs the same systems that a multi-storeyed hotel does?

I never said Hotel or Multi Storeyed.
I said genuine commercial operator.
This would be in reference to genuine commercial operators with similar building types like consented Bed and Breakfasts, Lodges and Hostels. Even simple single storey ones (depending on the planning rules in the territory) require fixed wired fire alarms and illuminated exit signs and the associated compliance schedule + building warrant of fitness.
To contend that professional Airbnb operators shouldn't have such requirements placed on them is all fine and well, regulation is a pain in the ass.
To contend that Airbnb operators shouldn't have them but genuine commercial operators with similar building types should have them, now that would be an utter load of bollocks.

As for the notion that commercial operators are subsiding Airbnbs, hahahahahahahahahaha!

I never said commercial operators are subsidizing Airbnbs either. You must have selective reading ability. My wife says my hearing is like that.
I said professional Airbnb hosts are effectively subsidized on rates by all non Airbnb hosts.
To elaborate, councils charge higher rates on commercial accommodation providers. That's just the way it is. If all the tourists in this country were New Zealanders it wouldn't be justified, because almost all New Zealanders are paying rates directly or indirectly anyway. The idea is to allow councils to clip the ticket on foreign tourist's accommodation to cover those people's share of the services provided by that authority. Airbnb, just like Uber did with transportation, sprung up at the speed of broadband and circumvented that process.
If professional Airbnb hosts (I mean the ones who don't live in the property they let) paid commercial rates or a levy to compensate for the absence thereof on the nights they hosted then councils would need to get less of the total rates from all the other home owners. That's what I mean when I say subsidized.

[sidinz]

To contend that Airbnb operators shouldn't have them but genuine commercial operators with similar building types should have them, now that would be an utter load of bollocks.

What commercial operators have a similar building type as a sub100m2 suburban house? I would say none.

I never said commercial operators are subsidizing Airbnbs either. You must have selective reading ability. My wife says my hearing is like that.
I said professional Airbnb hosts are effectively subsidized on rates by all non Airbnb hosts.
To elaborate, councils charge higher rates on commercial accommodation providers. That's just the way it is. If all the tourists in this country were New Zealanders it wouldn't be justified, because almost all New Zealanders are paying rates directly or indirectly anyway. The idea is to allow councils to clip the ticket on foreign tourist's accommodation to cover those people's share of the services provided by that authority. Airbnb, just like Uber did with transportation, sprung up at the speed of broadband and circumvented that process.
If professional Airbnb hosts (I mean the ones who don't live in the property they let) paid commercial rates or a levy to compensate for the absence thereof on the nights they hosted then councils would need to get less of the total rates from all the other home owners. That's what I mean when I say subsidized.

Fair point on my misreading.
I fail to see how my Airbnb is being subsidised by other ratepayers. It sits empty for 60% of the year, but I pay rates year-round. As I see it, I'm subsidising other ratepayers, as my guests only use 40% of the services I'm paying for. The council gets to 'clip the ticket' every month when the rates are debited from my business account. So if the council is getting my guests' pieces of silver through the rates I pay, where is the subsidisation?
A landlord pays for his tenants' use of council services. The Airbnb operator pays for his guests'. No difference except that the tenant uses them for 100% of the year rather than half of it.
And by the way, Airbnbs have a much higher proportional rate of Kiwis/no tourists staying in them than hotels/motels.

[Catch22]

I have an AirBnb in Ohakune. It averages around 90 days a year being let out with a gross income of $23,000 per annum on average. Thats about 9.5% gross yield.

I could have gone down the rental path but I wanted a place that I could enjoy as a weekend and winter getaway for my family and myself as well that was less than a four hour drive from Wellington. Considering I have that too, I am happy with the gross yield.

Only damage has been a cracked glass jug and one pillow missing. I employ a local cleaner who I have known professionally from when they used to live in Wellington in a different career. The quality of the cleaner makes a huge difference as feedback good or bad is invariably around cleanliness.

It is my foray into rental/AirBnB/Bookabach. Not quite conventional I guess. Houses have been cheap in the area but have been going up steadily.

[sparxNZ]

What commercial operators have a similar building type as a sub100m2 suburban house? I would say none.

I've got one, and it needs a building warrant of fitness. I know of two others in my town. Probably not many smaller than 100m2, and mine's about 115-120M2. Number of people accommodated seems to be the most important factor.
Many resource consented B&Bs would fit the description of a residential house. I don't know about other district councils but in Tasman if more than 4 people are hosted as visitor accommodation on one property (not just one dwelling, one property) then a resource consent is required.
Even if you had 5 people in the back yard in tents you'd need a resource consent and the consent conditions would require you to get a BWOF on the house if the campers used the kitchen or anything else in there.
When you get resource consent for visitor accommodation 90% of the time you have to put in a compliant fire alarm, get it tested, get a BWOF, pay about 100% more in rates etc etc. What I'm suggesting is either applying those requirements to professional Airbnb operators or removing those requirements from bona fide commercial operators is fair. Given that New Zealand has a tendency to regulate rather than reform I would imagine the former is more likely to happen.

I fail to see how my Airbnb is being subsidised by other ratepayers. It sits empty for 60% of the year, but I pay rates year-round. As I see it, I'm subsidising other ratepayers, as my guests only use 40% of the services I'm paying for. The council gets to 'clip the ticket' every month when the rates are debited from my business account. So if the council is getting my guests' pieces of silver through the rates I pay, where is the subsidisation?

Right you are if you consider your investment as a residential one, which you're well within your rights to do of course.

Interestingly, I saw an article in the news yesterday about a chap in Dunedin building a house on his property without a building consent that very closely resembles a boat. The council issued a notice to fix and the guy went for an MBIE determination claiming that it is indeed a boat and when it's finished it should be capable of floating, therefore it's a boat not a building and doesn't need to comply with any rules. I've got a feeling the MBIE determination hearing isn't going to go well for him and I'm really looking forward to reading the nuts and bolts of it when it gets released.

Commercial rates for a consented B&B run about double that of an equivalent residential property. At least in Tasman. How on earth would I know that? I have two almost identical houses on the main street in my town which are right next to each other. One is consented as a Hostel and one is a RBTR residential rental. Roughly the same number of people occupy both buildings on average through the year. The rates on the consented one are more than twice the rates on the residential one. The mandatory insurance is about four times the price.
It would be quite reasonable for a professional Airbnb host to say that if you have to pay commercial rates, or some kind of levy in lieu of the same on an Airbnb then you should only have to pay them on the nights it is used.

It is worth noting that most of the commercial operators around here close for 2-3 months of the year too. I'm shutting for 3 months this winter. We still have to pay rates when we're closed, that's just how it is.
Coming up with a way to charge all operators, consented or not, fair rates for only the days they operate would be far too much work for any council to bother.
I'm guessing at this point that councils around the country will wait to see how things go with QLDCs approach, wait a little longer to see if anyone sues QLDC over the whole thing and then probably just copy it.

The result, I would imagine, is that a lot of professional Airbnb operators quit when they have to get a resource consent and the remaining few professional ones along with the quintessential "mum and dad renting out the spare room" operators (who I don't think QLDC is targeting for resource consents) bump their prices up a bit due to the reduction in competition.

At least the whole thing will provide certainty. I'm giving consideration to buying an empty section adjoining another one of my commercial accommodation operations, subdividing and building two townhouses and four Airbnb cottages. The only thing holding me back is when I do the feasibility on it it's super profitable as things stand right now but if I had to jump though the hoops I do with the commercial stuff the ROI would fall so much it wouldn't be worth the extra work.

[donna]

We wrote an article on AirBnB pros and cons It will be attractive to a new breed of landlords.

cheers,

Donna