The uptake of home sharing and online holiday rental sites started with a slower burn in Australia than elsewhere, but today they have well and truly taken off and investors all over the country are smelling the dollars and reassessing their options.

In many cases it seems almost too good to be true, with some properties earning the equivalent of their monthly rental in a 1 week booking. The flexibility offered is also appealing – with owners being able to choose to use the space as they wish, whenever they want; when friends or family come to visit, or when they want to do repairs or renovations, the apartment can simply be blocked out on the booking site’s calendar for the preferred dates.

However, there is a downside and though it has not yet burst, the home sharing/holiday rental bubble has definitely developed a slow leak in recent times.

There can be confusion for hosts and guests alike, as rules around holiday lettings are often set by local councils, which of course means they vary from postcode to postcode.

Some of the restrictions have borrowed from foreign strategies that have been successful in other cities, such as requiring that property owners obtain a license, they register as a holiday rental business, or by applying a cap to the number of annual bookings that can be taken.

There has also been the possibility of compensation payments to neighbours and fines for owners of properties where disruptive activities are reported. Strata corporations have also been given the right to ban short term holiday renting in their buildings.

There are also practical elements that shouldn’t be overlooked. Though the income earned on your investment could be significantly more, the investment in time and maintenance required to run a holiday rental property is also considerably higher.

It’s impossible to be at arm’s length from all things that need to be dealt with immediately, usually at all hours of the day and night. The wear and tear on the property is also increased due to a higher volume of traffic through your property and varying levels of care applied, by what can be a real mixed bag of guests.

If your property is part of an apartment building, you (or worse, your guests) will inevitably deal with angry neighbours or disgruntled body corporate members at some point too.          

Investing in property to run a holiday rental is certainly an option for those with a suitable property. There are tax considerations that should not be forgotten, because you would be increasing your income as well as changing how the tax office views your property.

You’ll need to keep comprehensive records of your holiday rental income and expenses and understand how capital gains tax may come into play for you when you decide to sell your home. Though there may be the perception of a constant stream of guests in a holiday rental, or big cash windfalls during peak periods, there will always be lulls and if you have regular mortgage payments to cover you may find yourself falling short more often than not.

Talk to one of First National Real Estate’s Investor Relations Managers to find out more about how to get the best result from your investment property today.