As an experienced airBNB host, I decided to (finally!) build my ecokit home and place it on the short term rental market. So where do we put our ecokit home? This was the toughest question.
How do you know if your selected suburb or region is going to generate a good return on investment?
The first step for me was to look into land prices for the areas I was interested in building my home. In Victoria, this included Mornington Peninsula, Yarra Valley and Dandenong Ranges. All of these areas have high tourist traffic on both a local and international scale.
The next step – Due Diligence
If you don’t know already, airDNA is a fantastic resource to research statistics for the short term rental market. For $141 I purchased the Melbourne report which encompassed all of my desired regions. I then looked at every single suburb in these regions on the airDNA report and created a spreadsheet that covered the following details:
- Market Grade: What did they rate each suburb? I.e. A, B, C
- Occupancy Rate: How often is a listing booked in that area?
- How many listings are in the area? I.e. How much competition am I up against?
Next, for every suburb, I created a separate spreadsheet which details annual monthly income for every month throughout 2019. The spreadsheet covered revenue, number of days booked and number of listings for studio, 1 bedroom, 2 bedroom and 3 bedroom accommodation. This helped me to narrow down my suburb based on revenue and where I found gaps in the market. What I found in my research amazed me!
There is a huge lack of studio accommodation available. Studio accommodation is achieving more revenue than a 3 bedroom house in some cases in almost every suburb listing I created. Yet the cost of building a studio would be at least half the price of a 3 bedroom house.
Why is ecokit home perfect for my project?
The thing I love most about ecokit homes is the flexibility in their structure. All of the internal walls are non-load bearing, which enables me to reposition the walls and maximise earning potential.
My intention is to build a Tranquility model and divide it into 2 x studios with their own separate entrance. I could build one house, split it up and create studios from the one structure, therefore greatly enhancing my ability to generate a return on investment.
For example, if my revenue for a studio in suburb X is $2200 a month, I can then build 2 studios with the Tranquility structure and generate $4400 a month. However, in suburb X, if I kept Tranquility as a 2 bedroom house, I could only expect a return of $2700 per month.
Location, location, location
Choosing a block of land for airBNB investment can be difficult. You need to factor in with your location the cost of land, BAL rating (fire danger), excavation if land is on a slope. So while one block of land may look cheap, if the fire rating is high and it’s on a slope, you’re looking at adding at least $50 – $100K to the cost of the build.
Alternatively, you can buy a flat block of land for a higher price in a low BAL area and save yourself the hassle of prepping the site for the build. Then you also need to determine what the potential revenue will be for the area, holding costs during the building process and of course, cost of build.
The great thing about ecokit homes is that the build is fast, reducing your holding costs in the process and enabling you to start generating income on the short term rental market a lot faster.
We are so excited (me especially) to be in the process of providing you with the opportunity to experience an ecokit home first hand. Rest assured, I am working hard to find the perfect block of land to start building so you can see how amazing our homes are for yourself.
Watch this space.