Methodology
AirBNB is an online brokerage company that deals with renting out short-time lodging, homes, cottages, apartments, and hotel room reservation. AirBNB does not own any real estates, it therefore looks for people with real estates to register with it and from any client that AirBNB brings to the real-estate owner it is a given a commission. The company has already penetrated the Melbourne market, and it is currently charging an average of $120 per night for an apartment and $60 per night for a private room.
The data collection methods that were used in this study are:
Reading online Journals.
Conducting Surveys.
Questionnaires
After conducting the study, the researcher discovered that AirBNB is a popular company among the people of Melbourne. About 40% of the respondents noted that they have used AirBNB at least once to rent short-time lodgings in Melbourne for their vacations. About 20% of the respondent noted that they know about AirBNB but they have never used its services, but they look forward to using its services. About 10% of the respondents noted that they do not like using online platforms to book lodgings and cottages since they are worried about their privacy.
From the above statics, it is evident that the AirBNB already has a good reputation, a strong brand, and it already has a good market share in Melbourne. The company is, therefore, able to provide clients to its principals (Baum and Crosby 2014). Therefore, it is a worthy marketplace for Rachel Clare to invest in since his houses will be getting sufficient clients, which will make it possible for Rachel to cater for all the costs of maintaining the houses and still get a good profit.
From the research, the researcher discovered that Melbourne is an attractive destination for many Australian locals and also foreigners. This can be attributed to the cordial weather conditions, exciting career and investment opportunities, and eye-catching white beaches (Gordon, Canter and Webb 1998). Despite the great attractiveness of the entire Melbourne region, there are certain suburbs which can guarantee more returns for a real estate investor.
The average amount charged per night depends on the location, number of guests, shared and/or private facilities, and number of bedrooms as shown in the graph below.
They include:
Carlton
It is very close to the central business district and it is well known for its Italian flavor, classic cafes, coffee outlets, bars, and restaurants. It has a high population of young professionals and students due to its proximity to the university. Due to Carlton’s location and popularity, the suburb definitely attracts many people, who either visit the city for business purposes, vacation or in search of career opportunities. Carlton, therefore, can guarantee the highest AirBNB returns on investment.
Findings
Keyborough
It is located in south-East Melbourne, approximately 27kms from the central business. It has some of the quietest and beautiful beaches in Australia, good parks for nature walks, and sporting facilities which offer a wide variety of sports with the most popular being Yoga. The suburbs can give good AirBNB returns because its facilities attract local and international tourists (Lucius 2011).
Dandenong
It is located south-East of Melbourne, approximately 30kms from the central business district. It contains a collection of almost all ethnic groups in Australia and immigrants. It is well known for upholding cultural and religious values and believes (Murphy and Watson 1994). The suburb also has some of the best public transport links in Melbourne and it is the headquarters of the city of greater Dadenong. Due to the combination of many ethnic groups, new visitors to Australia may find it worthy to visit Richmond in order to learn the culture, therefore, making Richmond a good suburb for an AirBNB real estate investor, who intends to invest in lodgings and hotels.
Comparison of house prices in different Melbourne suburbs
The graph below show the price per night in $ dollars of various types of houses within the Melbourne suburbs.
Conclusion
From the research, the researcher discovered that majority of Melbourne population especially in the suburbs which are near central Melbourne are young professionals who are below the age 45 years. These young professionals have young families and therefore much of their income is committed to financing their lifestyle. An apartment will, therefore, be the best investment to generate high returns because it will be preferred by the young professionals since it is cheaper in terms of rent than a house which can only attract people who have bigger families, good flow of income and in need of some privacy (Crowe, Dell’Ariccia, Igan and Rabanal 2013).
According to Coiacetto (2006) an apartment will occupy a smaller ground space, and it will host as many rooms as the number of floors constructed thus it can generate more rent than a house. An apartment offers an opportunity for expansion through adding more floors, while a house is fixed thus making an apartment a more profitable investment than a house.
From the research, the researcher discovered that Melbourne is an exciting career destination for many people in the world and that’s why it has a high population of young people. According to Brueggeman, and Fisher (2011), the young people have a great desire for a luxurious lifestyle, but their income cannot finance the desired lifestyle. Majority of them therefore prefer to leave in private rooms, because they give them and their family some privacy, thus making private rooms to have a very high demand in Melbourne. Shared rooms have the lowest demand and therefore will give the lowest returns on investments. Whole houses come second since as soon as the young people who live in private houses get substantial income they move into whole houses.
Conclusion
From the study, it is evident that AirBNB is one of the best market opportunities for real estate owners. It is already present in Melbourne and for any real estate investor who would like to capture more customers who are searching for houses online can use it as a marketing agency. Melbourne has been discovered to be a good real estate investment hub in both central Melbourne and its environs.
Rachel Clare should consider investing 70% on apartments, 30% on houses in the most profitable suburbs in Melbourne which are Keyborough, Dandenong, and Carlton. He should then register his property investments with AirBNB since it will provide him with an opportunity to get the online clients. Rachel Clare should not invest in shared rooms since they attract very few customers in Melbourne.
References
Baum, A.E. and Crosby, N., 2014. Property investment appraisal. John Wiley & Sons.
Brueggeman, W.B. and Fisher, J.D., 2011. Real estate finance and investments (pp. 5-6). New York, NY: McGraw-Hill Irwin.
Coiacetto, E., 2006. Real estate development industry structure: Consequences for urban planning and development. Planning, Practice & Research, 21(4), pp.423-441.
Crowe, C., Dell’Ariccia, G., Igan, D. and Rabanal, P., 2013. How to deal with real estate booms: Lessons from country experiences. Journal of Financial Stability, 9(3), pp.300-319.
Gordon, J., Canter, T. and Webb, J., 1998. The effect of international real estate securities on portfolio diversification. Journal of Real Estate Portfolio Management, 4(2), pp.83-91.
Lucius, D.I., 2001. Real options in real estate development. Journal of Property Investment & Finance, 19(1), pp.73-78.
Murphy, P. and Watson, S., 1994. Social polarization and Australian cities. International Journal of Urban and Regional Research, 18(4), pp.573-590.
Ratcliffe, J., Stubbs, M. and Keeping, M., 2009. Urban planning and real estate development. Routledge.
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