How to Manage a Holiday Rental Property in Australia – the Legal123 guide. 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.
In this guide we cover the pros and cons of Holiday Rentals, whether you should self-manage your property, how to advertise your Holiday Rental and why you absolutely need to use Holiday Rental Agreements with your renters.
This guide is divided into 2 sections: a Quick Guide with the top 6 FAQs and then the Complete Guide that answers most questions you might have about How to Manage a Holiday Rental Property.
Quick Guide – Top 6 FAQs
Click on the question to reveal the answer.
I want to rent my house/apartment as a holiday rental. Do I need an agreement or licence?
- Yes, you should have an agreement for the protection of your property and for your guests/tenants. However, you do not need a licence. Licences are 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.
What do I need to tell guests about my terms and conditions?
- Holiday rental property owners may have specific terms and conditions, for example, cancellation fees or Security Deposits. If you have any ‘special arrangements’, you should make guests aware of them before they make a booking and enter into an agreement with you. A failure to disclose these conditions could be regarded as misleading or deceptive under the Fair Trading Act.
For online bookings, you should make terms and conditions easily available and identifiable on your website to avoid possible disputes. Where an accommodation provider or booking agent requests a bond or Security Deposit, the conditions associated with that bond should also be disclosed on the website or clearly in your advertisement. You also need to make sure you make clear in any advert or website any additional costs that are not included in the cost of the rental such as departure cleaning, wi-fi, utilities, etc.
What are my rights as an owner to charge tenants/guests for 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 responsible and pay for if you were a guest in a holiday rental and use that as a guide.
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 the photos of your property 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.
What if I accidentally take two bookings that overlap or are for the same period?
- 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 so that they are not disadvantaged. You will need to try and find similar accommodation and/or compensate them for any difference. You should let them know immediately upon realizing your error and make all efforts to rectify the situation.
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 3 bedroom house and are only able to offer them 2 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 mind after you have taken 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.
In addition, you cannot be held responsible for external environmental conditions which are 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.
Should I Rent My Property As a Holiday Rental?
If you own a property and want to rent it out you have two choices. Either rent it out as a long-term Residential Property or rent it out as a short-term Holiday Property. Each option has its own 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).
However, each State or Territory in Australia has 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 Property, the longest you can rent out your property is for around 6 weeks. The legislation varies by State and Territory (so do check) but the shortest is Queensland at 6 weeks – so it you keep within that you’ll meet the Australian requirements.
With a Holiday Rental Property you have a lot less security of income, however, you avoid the onerous Residential tenancy legislation. As long as you meet the Consumer Protection regulations, you will find you are much less restricted in how you manage your Rental Property.
Should I Self-Manage My Holiday Rental Property?
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, call outs, advertising, etc. These can quickly add up and turn your Holiday Rental Property into a break-even or loss-making proposition.
An alternative to a property management company is an independent property manager, someone you know or a local 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 own comfort) you can also choose to manage the property bookings. 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 a clear 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. A simple-to-use Property Manager Contract is included with the Legal123 Holiday Rental Agreement.
How Should I Advertise My Holiday Rental Property?
Thanks to the Internet there are quite a few effective and inexpensive advertising options now available. Search for Holiday Rental websites that cover your area and compare prices, competitor properties 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 advertisement 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 less 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.
Even if you are using a property management company to advertise your property, you should consider the various Holiday Rental websites in order to maximise exposure for your property.
Should I Have a Rental Agreement with My Tenant?
Yes, absolutely – this is probably the single most important item in this guide. You need to have a clear and comprehensive agreement with your renter, which includes a clear statement about start and end dates and the price you are charging.
Once you have accepted a booking from a guest 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 mutual agreement between you and your guest.
A Holiday Rental Agreement will protect you and your property. It ensures you and your renter are clear on all the terms of the rental, 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.
Your Rental Agreement needs to specify a 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, and
- Additional fees for cleaning, utilities, 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.
Should I Charge a Security Deposit and How Much?
You need to be comfortable that the amount you charge is likely to cover general damage that may be caused to your property. 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 amount that is appropriate based on the value of your property and your comfort level.
Choose a payment method that is easy for your renters. 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.
The easiest and quickest way to manage the final inspection of your property 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.
Lastly, try and make your property stand out from the crowd. Offer inclusions that your competitors don’t have: welcome packs, wine, champagne, arrange tours or tickets to events, etc. And above all, make sure your Holiday Rental Property is clean, well maintained and your service is spot on. Then you’ll always have people coming back or recommending you to their friends.
We hope you found this article on How to Manage a Holiday Rental Property helpful.