The business of holiday rentals

Would you rent your family home or bach to strangers? Juliet Rowan looks at the pros and cons of holiday rentals and speaks to owners of properties listed on sites such as Airbnb, Bookabach and HolidayHouses.co.nz.

Kamni Raju-Russell lives in Maungatapu in a five-bedroom house with her husband and three daughters.

They have a pool and water views, buying the house 2½ years ago after moving to Tauranga.

The girls are aged 3, 5 and 7, and sleep in upstairs bedrooms close to their parents, leaving two bedrooms downstairs vacant for now.

Raju-Russell initially rented the rooms to boarders but after differences in opinion on issues such as cleaning, she decided to try short-term, bed-and-breakfast type stays.

Six months ago, she listed the spare bedrooms on Airbnb and Homestay.com and says she has not looked back.

Raju-Russell says not only has the move paid off in terms of income, but also in enriching her family’s life.

“It just brings the world to our home instead of us going to the world.”

The 43-year-old says she and husband, Mike Russell, travelled a lot before having a third child made it too expensive, and they are enjoying hosting guests from around the world.

“That constant stimulation, meeting people, this is the way to go,” she says.

Guests have their own bathroom and private access downstairs, but share the upstairs kitchen and dining area with the family.

“We eat early and it’s just a matter of being organised and courteous,” says Raju-Russell.

“[Also] our bedroom/bathroom area is totally separate so the girls can retire at night leaving the guests to mix and mingle however they like.”

Raju-Russell charges $100 a night per room in peak season and allows children and pets, the family having two dogs and a rabbit of its own.

She says she is selective about guests and at the moment, a surgeon, her partner and the couple’s dog are staying for two weeks while between houses.

Raju-Russell runs the homestay in addition to two other businesses, one as a lingerie stylist and the other doing online training programmes for companies.

She says having paying guests in her home involves a little extra housework and arranging bookings, but she laughs off any suggestion that it is too much of a juggle.

“They say if you want something done, you give it to a busy person.”

Shelley Hobson-Powell has also found renting out a downstairs bedroom in her family’s Mount Maunganui home to be a winner.

The mother of two listed the bedroom with super-king bed and bathroom on Airbnb in August, and charges $50 a night on week days and $60 on weekends.

“Since then we’ve had five nights that we’ve had nobody in there.”

Hobson-Powell, who has a background in motel management, says by pricing the room reasonably, it guarantees close-to-full occupancy.

“The only hassle is we’ve got to do lots of washing.”

She says the income has helped pay the mortgage and eased the pressure as she has been unable to find work since the family moved to Tauranga for her husband’s job in July.

Guests have ranged from retired couples to backpackers, politicians, police and Defence Force officials, and businesspeople who have missed planes and needed last-minute accommodation.

Hobson-Powell says there is growing awareness of sites such as Airbnb and her family also enjoys the company of overseas guests, with her 5-year-old daughter, Isabella, practising German and Spanish with people who have stayed.

The market for holiday rentals in the Bay is also strong, with listings on sites such as Bookabach and HolidayHouses.co.nz up from last year.

Bookabach had 582 listings in Tauranga District this week, and Holiday Houses had 120 houses listed in the city last month, compared to 95 in the same month last year.

The average nightly asking rate on Holiday Houses in Tauranga is $249.

Mount Maunganui is the third most popular location on Holiday Houses in terms of the number of properties listed, preceded only by South Island hot spots Queenstown and Wanaka.

While the potential for extra income is high with holiday rentals during the peak summer season, one person whose family bach is rented says it is not all roses.

“My mum always rents it out during the best months to make cash off it so we only ever really use it at the very, very end of summer … We only ever get there when it is cold.”

The work involved in running a holiday rental can also be overwhelming for some people or not possible for others who live out of town.

Demand for outsourcing the job is growing in the Bay, prompting Kristin Clarke of Mount Maunganui to launch a specialist holiday property management service called Time in a Place in March.

A former real estate agent, Clarke helps clients with everything from preparing properties for holiday letting, to customising online listings, pricing, managing bookings, vetting of guests and organising professional cleaning when they leave.

She manages 17 properties at the Mount, Papamoa and Omokoroa, some for out-of-town owners of holiday homes or investment properties, and others for locals.

The properties she manages are listed on the Time in a Place website www.timeinaplace.nz  as well as other sites such as Airbnb and Bookabach.

Clarke organises photography and provides advice on specifics such as furniture placement for listings, and says guests want comfortable beds and often look for holiday homes that offer Wi-Fi, Sky TV and a spa pool.

“A lot of people also search for places that allow pets.”

Clarke, 42, says a small but important aspect of making a place comfortable for guests is ensuring it is stocked with basic consumables such as salt, pepper, paper towels and cooking oil.

“You don’t want to be buying a big container of oil when you’ve come away for two nights.”

Her staff take care of restocking such items for her clients and she says demand for services such as Time in a Place reflects the increasing number of overseas tourists discovering the Bay.

“It just ties in with the growth of the tourism industry and New Zealand being a favourable place to come with what’s going on in the rest of the world.”

Trade Me, which operates Holiday Houses, advises people looking to list property to do their research.

“Make sure you’re schooled up on the financial implications of renting it to the public,” says Trade Me Property head Nigel Jeffries. “It can be rewarding, but it’s important to view it as an investment that needs constant care and maintenance.”

Jeffries says people can help their chances of getting repeat bookings and recommendations by providing a well-presented, tidy and pleasant stay for their guests.

“This includes having the property regularly maintained. No one wants to open the door to a musty and dusty stay, or stumble upon unpleasant evidence of past guests.”

Trade Me also advises finding out the pricing of other properties in the area and seeing what they provide to guests as added incentives.

“[Look at] what you could do to help your bach stand out from the crowd,” Jeffries advises.

NZ Herald

Tax warning for holiday rentals

New Zealand’s tourism boom means it can be lucrative to rent out property but owners need to do their homework or could get stung.

A lot of apartments and houses in areas such as Queenstown, for example, could easily be rented out on a short-term basis in excess of $1000 a night, Deloitte tax partner Phil Stevenson said.

“At this rate, it only takes 60 nights of occupancy to exceed the GST registration threshold, requiring the property owner to register for GST.”

There were several implications from being GST-registered, Stevenson said.

The biggest and most obvious was GST often needed to be returned on the sale price of the property.

For residential property, that meant the vendor was likely to bear the GST cost because the property would most likely be sold on a GST-inclusive basis.

While it was possible to get a credit on the original purchase of the property, becoming GST-registered essentially gifted 15 per cent of any capital gain to Inland Revenue.

If a person decided to go back to using the property for private purposes and deregister for GST, they were deemed to have sold the property at market value and they would need to fund a GST cost without realising any cash from the sale of the property, he said.

In recent years, Inland Revenue had been focusing on taxing New Zealand’s black economy which was made up in part by taxpayers providing short-term accommodation.

However, unlike a plumber’s cash job or handshake agreements between friends, using an online platform to arrange short-term accommodation generated readily accessible electronic records.

“Warning: Inland Revenue and local government bodies are paying attention.”

Inland Revenue had wide information gathering powers and the ability to request information from online platforms.

Inland Revenue could use the information to quickly identify who was providing short-term accommodation and request evidence income had been declared in a tax return and taxes paid, Stevenson said.

Similarly, with the recent requirement for IRD numbers to be associated with property transactions, it was now much easier for Inland Revenue to identify when GST should be paid on the sale of a property.

Local governments were also focused on short-term accommodation being provided.

Under local council regulations, a property used for short-term accommodation was generally considered to be a commercial property which might affect rates charges and result in other administrative requirements such as consents to operate, he said.

Taxpayers should also consider other contracts held if they were providing short-term accommodation to ensure items such as insurance over the property remained valid.

Staying just one night privately in a property being used for short-term accommodation could have a significant impact on the expenditure that could be claimed as a tax deduction because deductions for expenditure on days the property was empty could be disallowed, Stevenson said.

For debt-funded investment properties, that could have a significant impact on an after-tax return.

“Some of our clients get quite surprised when we tell them they might be better off staying in a hotel or renting the apartment next to theirs rather than staying in their own vacant property.”

Stevenson also got puzzled looks when he tried to explain to property owners who had used a trust or a company ownership structures to protect their investment, if they became GST registered they would need to pay GST to Inland Revenue for the privilege of staying in their own holiday home.

The message for anyone wanting to rent their property on a short-term basis was to do their homework and make sure they did so with their eyes wide open.

“If you are crunching the numbers on a property investment, crossing the $60,000 GST turnover threshold and private use of the property may have a large impact on your bottom line.”

NZ herald

Holiday homes for all budgets

You don’t need to be a multi-millionaire to buy a bach. If you’re willing to think creatively there are ways to buy an affordable slice of paradise.

Type the word “bach” into realestate.co.nz and prices start at $35,000.

On realestate.co.nz the top five searches with the word “bach” were for Thames-Coromandel, the Far North, Whangarei, Marlborough and Rodney.

Of course the term “bach” is a North Island term, and in the South Island the word “crib” is used instead. So realestate.co.nz also provided its top five searches containing the word “holiday”. They were Marlborough, Rodney, Taupo, Rotorua, and Tauranga.

“Popular” can be a double-edged sword. It can also mean prices have already risen and you’ve missed the boat on capital gain.

But factors such as rentability and capital gain potential should probably rank behind where you want to holiday anddistance from home.

Holiday homes aren’t much of an investment thanks to holding costs and the difficulty of renting year-round. There are plenty of other valuable reasons to buy a bach, such as creating family memories.

If capital values play a part in your decision, QV eValuer service allows you to drill down to a particular area such as Mangawhai Heads and find out the median price and how much annual growth there has been.

There is also a search on the QV site that allows you to compare district growth. Unfortunately it’s not easy to do detailed suburb price histories or find data for your own comparative analysis.

There is also a mine of information at homes.co.nz that gives you an estimate for individual houses as well as free sales histories.

If you wanted to buy in Hahei, for example, you could see that 110 Pa Rd, sold in October 2016 for $420,000, but the neighbouring properties are estimated at $725,000 and $880,000.

Buyers who are short on dollars can benefit from thinking outside the square.

Buying leasehold is one option, and it’s possible to buy a waterfront classic Kiwi bach at Lake Rotoma for $98,000.

Or you could buy a caravan or cabin on a campsite, which is also a cheap option.

It’s also an option to buy yourself a piece of land and drop a dunny in and plonk a caravan or shed on the site and have big family camping holidays.

Watch out for covenants or council planning rules that could hamper your dreams.

Timeshares are also an option. New timeshares are sometimes overpriced. There is, however, a thriving secondhand market where you will usually pay considerably less.

Check out the Auckland District Law Society’s advice about timeshares here.

Of course not everyone wants to buy a bargain basement bach. If you have the money for a slice of paradise, you can pay up to $28 million for 306 Cowes Bay Rd, Waiheke Island.

NZherald

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Auckland, on New Zealand’s North Island, is one of the world’s most beautiful holiday destinations as it is known for its idyllic holiday islands, beautiful beaches, outstanding scenery, superb shopping and vibrant nightlife.

Queenstown, on New Zealand’s South Island, is close to many tourist attractions, including Lake Wakatipu, Kiwi Birdlife Park, Fiordland National Park and so much more. Queenstown holiday rentals are perfect for exploring city and country life. The adventurous may also want to trya popular New Zealand holiday experience, bungee jumping from Kawarau Bridge

Wellington, the capital city of New Zealand, has a good collection of heritage buildings, museums and galleries which are worth visiting. Some of the most notable highlights of Wellington include the Georgian Colonial Cottage, Te Papa, Old Saint Paul’s Church, Futuna Chapel and Museum of Wellington City and Sea

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