With the increase in room and apartment rentals through online booking platforms like Airbnb, homeowners now have one more avenue to consider when trying to optimise use of the available space in their home. However, according to local legislation homeowners are still not legally permitted to rent out their homes through such means.
But, despite knowing it’s illegal, more and more Singaporeans are quietly putting their properties on Airbnb. Short-term rentals are technically illegal, and landlords are obliged to rent out their property for a period of at least 6 months.
Sure, the authorities haven’t punished anyone for renting out private property yet (the same can’t be said for HDB flats, though). But why can’t these people just do things the law-abiding way? Here are three reasons Singaporeans prefer renting out their homes on Airbnb despite it being illegal.
Reason 1: They earn more
For many landlords, it all boils down to a matter of dollars and cents. Simply put, you earn a lot more renting your property out to tourists on Airbnb than long-term tenants.
In general, bedrooms in city-fringe areas like Eunos can be rented out on Airbnb for over $100 a night, while those in suburbs as far as Pasir Ris or Yishun can still command $60 to $90 a night, when you factor in the cleaning and service fees.
Conversely, thanks to the lacklustre rental market, condo common rooms in far-flung suburbs like Pasir Ris usually cost significantly less than $1,000, often as low as $700 or $800 a month.
It doesn’t take a rocket scientist to figure out that you can make a lot more on Airbnb if you set the right price. Renting out your property for less than two weeks would earn you more than an entire month with a tenant on a long-term lease.
You might argue that there’s no guarantee an Airbnb host will be able to find enough customers, while somebody who’s renting out his property legally is guaranteed a tenant for at least 6 months.
While how easy it is to fill up your property depends on many factors, if you have a property close to an MRT station in a decent location, there’s a good chance you’ll have sufficient occupancy to earn more than a long-term landlord.
In fact, a few anonymous (for good reason) hosts with properties in city-fringe areas have noted that it’s possible to achieve almost 100% occupancy in good months. That means that in those months, they’re earning 2-3 times what they would get renting out the property on a long-term basis.
A recent news report revealed that the average Airbnb host in Singapore earns $5,000 a year, and rents out his property for an average of 45 nights a year. That’s a great rate considering the property is occupied for the equivalent of just a month and a half each year.
Reason 2: Flexibility for those who can’t/don’t want to rent out their rooms long-term
While there are some Airbnb hosts who rent out their places full-time, not everybody wants to have to deal with the fact that there’s a long-term tenant taking up space in the house at all times.
What if you have friends from out of town who’re looking for a place to stay, or you want to celebrate your xxth birthday bash in your home without worrying about disturbing your tenants? Short-term rentals give you the flexibility to block out dates on which you don’t accept guests.
There are also people who don’t have space in their homes for a tenant, but who wish to rent out their property when they’re away on holiday. For these folks, the only way they can make money out of their homes is through short-term rentals.
Reason 3: Tourists can be less troublesome to deal with than long-term tenants
Renting out your home to somebody longterm can bring its own set of problems if you’re unlucky enough to pick the wrong tenant.
Tenants not paying their rent or paying late are a huge headache, and while you can eventually evict them if they keep it up, you’ll be cursing them for the unnecessary drama.
There are no such problems with Airbnb as customers pay the site directly using credit cards when the booking is accepted, and the money is then released to you.
Then there are other issues you might not be comfortable with, such as tenants inviting guests over or cleanliness and hygiene problems.
Of course, these issues can arise with Airbnb guests as well, but their transient nature makes it a lot more bearable. In addition, the fact that they’re mostly tourists means they’ll be spending most of their time sightseeing and not hanging around the house.
For many landlords, that’s preferable to, say, an international student who spends all his time gaming in his room with the air con on at full blast.
If you liked this story, check out our other reports on rental concerns:
- 5 things to note when renting out your private apartment.
- Why is it illegal to rent out your apartment on Airbnb?
- One way to get your apartment rented out ASAP.
Article by Joanne Poh.
The post 3 Reasons Singaporeans Choose to Rent Out Their Homes on Airbnb Rather Than Doing it the Legal Way appeared first on the MoneySmart blog at http://blog.moneysmart.sg/property/3-reasons-singaporeans-choose-rent-homes-airbnb-rather-legal-way/.