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Deciding to rent your holiday home

I want to rent my holiday home. How do I decide to go ahead?

Thousands of holiday homeowners rent their properties to travellers successfully. If you’re interested in renting your home, we’re here to guide you through the process.

My holiday home is expensive to maintain. How can I rent it and make it pay for itself?

One of the most common reasons people choose to rent their holiday home or investment property is to cover the expenses of maintaining the home. Some owners might have bought their home as an investment and want to wait until the market improves before they sell, but don’t want the added expenses until then. Others have purchased a house or apartment they wish to retire in one day, and are covering their mortgage and maintenance payments in the meantime. Whatever the circumstances, there’s one clever idea that can unite owners – if you can get someone else to pay for your home in the meantime, why not?

Can I use my holiday home to make an income?

Yes, you can make money from your holiday home, but you need to be aware that it requires time to get the most out of renting. One of the perks of renting toff-speakers rather than long-term residents is that you can control your home’s pricing and availability. For example, in peak season, you can earn a significant amount more than off-peak. Plus, you’re still able to use the home yourself. Peak periods are dependent on the location. Properties in locations that count as summer and winter destinations have a more extended peak period. These traditional locations more than make up for their shorter peak season by continually being in great demand with travellers.

I already rent out my holiday home with a property manager. What’s the difference between doing this and renting myself?

People lead busy lives, so many owners hand the responsibilities that come with renting their holiday home to a property manager. There are pros and cons to renting by each method. Many owners share a commitment with a property manager to get what they feel is the best of both worlds. Some owners do all the marketing online or take bookings over the phone from their primary home, whilst letting the property manager take care of things on the ground. The most import thing is finding a method that will work for you.

There are many advantages to using a property manager or property management service. A good PM will market your rental property to guests, take bookings, and deal with the related administration (such as deposits and rental agreements), manage arrivals and departures, and clean and maintain. However, self-managing your property is easier than you think. The trick is to educate yourself, and that’s where the Owner Resource Centre can help. To many, a holiday home is a significant financial investment.

Renting by an owner allows owners to screen potential travellers and decide who would be a suitable guest in their home. Others realise that their higher standards mean that guests make repeat bookings and word of mouth recommendations. Other advantages include being able to charge your guests additional cleaning and service fees, rather than having to pay them (at the property manager’s profit) yourself. On top of this, saving, the 15 – 50% commission a property manager charges per booking makes the process well worth it.

I don’t live anywhere near my property. What if my guests have questions?

The majority of holiday homeowners don’t live near the property they rent out. The trick is to find an excellent service to look after any maintenance issues and finding a reliable and trustworthy housekeeper. This person will be essential to running your holiday home business from a distance. As well as providing a regular cleaning service between check-ins, they will also be your person on the ground. Being there to help travellers with day to day problems that you can’t fix via phone or email, checking people in, and being your eyes and ears on the ground can also be included in their duties.

I’m worried about what people might get up to in my home.

Renting out your home is a very personal decision. Many owners have a strong emotional attachment to their holiday homes and worry about having strangers stay. First of all, this fear is rarely realised. It’s important to remember that you’ll mostly be renting to like-minded people. Holiday rentals are a sophisticated form of travel and cater for a different guest than impersonal hotels. Most travellers choose a holiday rental over a hotel because it’s a home, and respect the place accordingly.

If you rent from the owner, taking bookings is your responsibility. Every homeowner should take the time to call potential renters and screen them accordingly. If you don’t feel comfortable renting to a group of students looking for a wild weekend or feeling someone isn’t entirely honest with you, go with your gut feeling. You’re the one who gets to decide.

Like any tenants, your guests will be obliged to operate within the boundaries you set. Like any other landlord, you get to draw up the rental agreement and take a security deposit to protect yourself. Whilst you might not want to leave any priceless family heirlooms out on display, it’s highly unlikely that anyone who handed you a large amount of their cash is going to do anything to upset you.

Will I still be able to use the property for my holidays?

Yes. You take the bookings, you decide the weeks of occupancy. The fact that you’re now making money from your holiday home means you’ve got already got an excuse to go and pay more visits.

Are there other benefits?

Many owners see running their second property as a business and the perfect excuse to create the home they’ve always dreamed of. You can justify redecorating, adding up market amenities like a pool or spa, or equipping your home with the latest home entertainment system. Suddenly these luxuries are no longer frivolities but sound business investments that can give you the competitive edge and increase your rental rates.

It’s not uncommon for owners to admit that their second home is far superior to their primary home. Whilst their regular home is affected by the hustle and bustle of everyday life, a holiday property stands apart from the daily grind. What could be better than having a luxury holiday property that you’ve created for the high end of the market, all to yourself? And as well as that, many owners repeatedly say they find renting their holiday home a very satisfying experience. To many, their holiday property is a labour of love. If you have a holiday rental with the “wow factor”, then you’ll love reading the glowing online reviews, receiving personal thank you notes and repeat bookings.

How to Manage a Holiday Rental Property

How to Manage a Holiday Rental Property in Australia – Having a holiday rental property can be very lucrative, but you need to be aware of the pitfalls and manage your property professionally, like a small business.

Property Owner or Property Manager?

This guide is particularly focussed on owners of holiday rental properties who self-manage or contract with someone to act as on-site manager for them. We have a separate guide if you are a professional manager of other people’s holiday rental properties.

In this legal guide, we cover the pros and cons of holiday rentals, whether you should self-manage your property, how to advertise your property and why you absolutely need to use a Holiday Rental Agreement with your guests.

Self-Managing

Should I rent my property as a holiday rental?

If you own an investment property and want to rent it out, you have two choices:

  1. Rent it out as a long-term residential property, or
  2. Rent it out as a short-term holiday rental property

In general, “short-term” means the longest you can rent out your property is for around six weeks. The legislation varies by State and Territory, so do check your local restrictions. Each rental option has its pros and cons.

In the case of a long-term residential property, once you’ve found a tenant and agreed the monthly rent, you have certainty of income (unless they stop paying rent and need to be evicted). But you also have strict residential tenancy legislation, covering the tenant’s rights and your obligations as an owner, that must be adhered to. These include:

  • How much rent and security bond you can charge
  • Where and when you must lodge the security bond
  • When you may apply the security bond to any damage caused.
  • What maintenance and repairs must be carried out, and
  • How much you can charge for water, electricity, gas, etc.

In the case of a short-term holiday rental, you have a lot less security of income. However, you avoid the onerous residential tenancy legislation. As long as you meet the Australian Consumer Protection regulations, you will find you are much less restricted in how you manage your holiday rental property.

Do I need a licence to rent my property as a holiday rental?

No, you do not need a licence to rent your house/apartment as a holiday rental property. Licences are only required by letting agents, but not by individual property owners.

If your property is in NSW and you are engaging an agent or a broker to manage your property, they must have a licence. In Victoria, agents who only manage short-term holiday rental properties (less than 90 days) don’t need to have a licence. The other States and Territories are less strict, and some have no requirements.

You should make your own enquiries locally to ensure you are compliant.

How should I advertise my holiday rental property?

Thanks to the Internet, there are quite a few practical and inexpensive advertising options now available. Search for holiday rental websites that cover your area and compare advertising rates, the number of listings and how the website ‘ranks’ for online searches. Some websites charge a ‘one-time’ or annual fee to advertise, others charge nightly fees for successful bookings.

While you’re checking holiday rental websites, don’t forget to check your nightly and weekly rates with other similar properties in your area. Make sure you’re competitive.

Whichever holiday rental website you decide to use, your property advertisement needs to be very clear and accurate. You have to be careful that your advertising matches your property specifications and inclusions so that you don’t breach Fair Trading legislation. Make sure to list any restrictions, such as children, smoking or pets.

The clearer you are, the fewer issues you will have with misunderstandings or inquiries that require back and forth communication and waste time. You want to ensure you are upfront and open to be able to secure your bookings as quickly and efficiently as possible.

What do I need to be aware of when advertising my property?

The Fair Trading Act and Consumer Protection legislation state that it is illegal for you to make any false or misleading statements to any consumers about your accommodation.

Misrepresenting accommodation in advertising or brochures may be deliberate or accidental, but, either way, it is illegal. You must be clear about representing the quality and standard of your property. Ensure your property photos are complete and updated regularly and that the description of your property, distances to attractions, transport and shopping, etc. are all accurate.

Also, make it clear the number and types of beds and bedrooms you are advertising – if there is a sofa bed in a sunroom, for example, this must be made clear as it is not an actual bedroom.

Property Managers

Should I self-manage my holiday rental property or use a manager?

Once you’ve decided to rent out your property as a holiday rental, your next decision is whether you’ll self-manage the property or hire someone to do it for you.

If you do not live near your holiday rental property, you’ll probably need to hire a manager. You can either choose a professional real estate/property management company or find an independent property manager. When choosing a property management company or property manager, be sure to do your research. Ensure they have a good reputation and competitive fees.

Some property management companies charge large fees for limited duties – and this will quickly eat into any profits your holiday rental property makes. Most management companies have a base charge of 18-20% of rental revenue, with additional fees for linen, callouts, advertising, etc. These can quickly add up and turn your holiday rental property into a break-even or loss-making proposition.

How can I keep my property manager fees to a minimum?

A cheaper alternative to a property management company is an independent property manager, someone you know or a resident found through an advert. If you don’t know them personally, ensure you check references and their experience. You might be lucky and have a hotel management school or tourism course taught locally. Approach them for a recommendation or offer to provide one of their students with some job experience.

To save further management fees (and for your comfort) you can also manage the property bookings yourself. This will involve advertising online, providing quotes and collecting rents and security deposits. In our experience, you’ll save substantial management fees by hiring an independent property manager and then managing some of the duties yourself.

But make sure you have an explicit agreement with your property manager. Agreeing a list of their duties and responsibilities in a professional contract is a very good idea. This will help avoid misunderstandings and ensure you have a great relationship with your manager.

Holiday Rental Agreements

What is a Holiday Rental Agreement?

A Holiday Rental Agreement is an agreement with your guests that sets out your Terms and clarifies the rules for renting and looking after your holiday rental property. Your guests should sign the agreement and then return it by mail or a scanned copy attached to an email.

For overseas guests, request a photocopy of their passport or other identification document. This is protection for you that they are who they say they are, it is confirmation of their signature on your contract, and it may act as a deterrent against any breach of contract or damage to your property.

Should I have a Holiday Rental Agreement with my guests?

Yes, absolutely – this is probably the single most important item in this guide. You need to have a clear and comprehensive agreement with your guests, which includes a clear statement about the start and end dates and the price you are charging.

A Holiday Rental Agreement will protect you and your property. It ensures you and your renter are clear on all the rental terms, gives them comfort and makes you look more professional. You also have recourse with a Rental Agreement that you may not otherwise have – against damage, destruction, noise or other unfortunate issues that may arise.

Once you have accepted a guest booking, you have to honour it, subject to any conditions you have outlined to them. You can only change the terms of the booking at a later date if there is a mutual agreement between you and your guest.

What terms should my Holiday Rental Agreement include?

Your Holiday Rental Agreement needs to specify the number of items, including:

  • Booking dates
  • Check-in and check-out times
  • Nightly or weekly rate
  • Reservation deposit
  • Security deposit and terms
  • Cancellation policy
  • Payment method and terms
  • Additional fees for cleaning, utilities, etc.
  • Charges for lost keys, swipe cards, remote controls, etc.
  • ‘House Rules’ covering smoking, pets, noise, etc.

You need to decide the amount and timing of your reservation deposits and whether these amounts will be non-refundable. The timing of final payments also needs to be specified in the Agreement. If you are charging a security deposit, ensure this is clear in your quote to renters. The terms of refund (including timing and basis for return) must also be clearly stated.

If you decide to charge a cancellation fee, this must also be communicated prior to accepting any booking. Both the amount and terms surrounding the fee must be fair and reasonable, or it may be considered an ‘unfair contract term’ and disputed.

In addition, did you realise that, depending on the wording of your agreement, you could be subject to the Residential Tenancy Act of your State or Territory? This is bad news. Have you heard of all those eviction restrictions landlords have? Those are in the Residential legislation. You don’t want to be covered by those.

In Victoria, for example, just by using the term ‘tenant’ in your holiday rental agreement, you may be subject to the Residential Tenancy Act and end up with additional legal requirements that you did not foresee. So get a professionally written Holiday Rental Agreement in Australia and use it with every guest.

Does my Holiday Rental Agreement need to be signed?

Legally, you have a ‘contract’ with your guests if you have agreed dates, the rental price and paid a deposit – even if everything has been done via email and electronically. However, what you don’t have is agreed Terms of the holiday rental. If anything unfortunate happens, you are very exposed if you can’t point to an agreed Term that the guest has breached.

For example, if they say two people are staying, they bring another 4 of their friends to visit, you can point to your agreement term. Or if the property is non-smoking and smoke, and you need to have the property professionally cleaned, etc. I think you can see how things might go wrong – and in some cases badly wrong.

You need to have a signed Holiday Rental Agreement with your guests, and you must give them the agreement prior to payment to ensure they can review and agree to it. If you don’t, they could argue that they did not see or agree to the Terms when they paid and can’t be bound by them. So send your guests your agreement when you ask for a deposit and get them to sign and return it to you.

Should I tell guests my holiday rental Terms and Conditions?

Yes, you need to make all your Terms and Conditions clear in your online advertisements. In particular, cancellation fees and security deposits, along with the conditions associated with them, need to be disclosed and explained. You also need to list any additional costs that are not included in the nightly/weekly rental fee, such as departure cleaning fees, wi-fi, utilities, etc.

A transparent approach to all your Terms and Conditions will help avoid any possible disputes. And remember, a failure to disclose any of these conditions could be regarded as misleading or deceptive under the Fair Trading Act.

Should I include my ‘House Rules’ in the Agreement?

It’s a good idea to post your ‘House Rules’ in your holiday rental property. These are just everyday rules for living in your holiday home – things like taking out the garbage, noise, leaving keys behind, etc. It’s an excellent way to reinforce good behaviour or highlight potential issues during their stay.

Some of these things are inappropriate (or over-kill) to include in a signed rental agreement – but you still want your guests to be aware of them. Make sure the rules don’t contradict any of the terms in your rental agreement. And make sure to keep both the notice of House Rules and your rental agreement up-to-date.

A list of House Rules will further protect you and your property. Renters are subject to them, so make sure a list of them is given to your guests on arrival or the House Rules are posted prominently in your holiday rental property.

Security Deposits

Should I charge a security deposit?

Yes, absolutely. It also makes it easy for your guests to pay and easy for you to refund at the end of the rental, with minimum transaction fees.

Bear in mind that security deposits made by credit card or PayPal can easily be voided – and usually just after your guest vacates your property. So make sure you take the security deposit in cash, or it’s transferred directly to your bank account.

If you have visitors from overseas, make sure you can accept payment in non-Australian currencies. Whatever payment system you choose, ensure you have it set up well in advance to avoid any waiting periods or losing any bookings.

How much should my security deposit be?

The security deposit amount is up to you, but it should, at a minimum, cover your insurance deductible. That way, if you need to make an insurance claim, you’re not out of pocket. The security deposit should be higher for properties with a greater value or with more inclusions. In addition, consider what other property owners in your area are asking for as a security deposit.

You can never be sure, and accidents do happen, so you need to consider an appropriate amount based on your property’s value and comfort level.

What are my rights to charge guests for the damage they cause?

You should make it clear before you accept any booking that any and all damage that a guest may cause, whether accidental or through their negligence, may be charged to them. If you take a security deposit, you are entitled to take any damage out of that amount.

Remember, glasses get broken accidentally, and plates get chipped in everyday use, so use your discretion in how much and what you decide to charge guests for. Normally you should charge for more substantial damages or damages that need repair as a result of your guests’ stay. Consider what you would expect to be reasonable if you were a guest in a holiday rental and use that as a guide.

The easiest and quickest way to manage your property’s final inspection is to use a checklist when the guest is leaving. Sometimes items are forgotten, or guests move items such as lamps or chairs – having a list ensures you don’t forget to check everything.

Inspections are also best done as close as possible to the guests’ departure, so you can rectify and address any items that have been broken, damaged or are missing.

What type of property insurance do I need?

Holiday Rental Property Insurance is not the same as Home and Contents Insurance or Landlord Insurance. And if you try and claim for damage by your holiday rental guests under ‘normal’ property insurance, your insurance company will probably reject your claim!

You need to have specific Holiday Rental Insurance to cover you for damage to your property while rented to a holiday rental guest. Many insurers offer Home and Contents or Landlord Insurance, but only a few insurers in Australia offer short-term rental or Holiday Rental Insurance. So be careful and check your insurance policy.

And most insurance policies require you to have a Holiday Rental Agreement with your guests too. So don’t cut corners, cover yourself and use a Holiday Rental Agreement.

Call your insurance company and ask them these questions:

  • Is my property covered under my policy for short term (under three months) holiday rentals?
  • Do I need a formal short term rental agreement with my guests?
  • If I use a rental agent to manage my properties and sign the tenants’ agreements, am I covered?

Refunds

When am I required to give guests a refund?

A guest has the right to a refund if something has changed in the accommodation promised. For example, if you no longer have a three-bedroom house and can only be able to offer them two bedrooms. Or if there is something substantially mis-advertised in your brochure or website, such as an elevator or handicapped facilities that are not available.

If guests change their minds after taking their deposit, you have no obligation to provide a refund. You don’t need to provide a refund if the customer does not like the accommodation or finds cheaper accommodation elsewhere and cancels their booking.

You cannot be held responsible for external environmental conditions outside your control such as rain, wind, lack of sun or snow. This is all part of going on holiday, and if a guest decides to cancel their accommodation on this basis, they are not entitled to a refund.

To be safe, ensure your guests understand your Terms and make your cancellation fees and Conditions clear in advance.

What if I accidentally take two bookings that overlap?

When you agree to a booking and accept a deposit, you are essentially making a contract with your guest. You have to honour this agreement, just as you would with any contract. After all, you are expecting your guests to honour their booking obligation, and they expect the same from you.

If you have made an error, you are obliged to fix it and put the guest in the same or a similar position not to be disadvantaged. You will need to try and find similar accommodation and/or compensate them for any difference. You should let them know immediately upon realising your error and make all efforts to rectify the situation.

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