Virginia Graham Riches: Welcome to Property and Mortgage Insights Australia. I'm Virginia Graham, your host and a mortgage broker. Today we're talking to Linda from Property Ladder — one of the most experienced rental managers in Cairns, and an expert in Airbnb. Welcome, Linda, and thanks for joining us.
Linda: Thank you.
Virginia: Let's do a deep dive into Airbnb. Where should an Airbnb investor be looking, and why?
Linda: Personally, we don't like buying into on-site management — for a few reasons. Your body corporate is much higher because you're paying for that management service, and from a lending perspective they're harder to borrow against; sometimes the bank reduces the LVR if it's strictly in a letting pool. The second factor is location. When people fly into Cairns they'll either hire a car or do tours. Someone who doesn't want a car wants to be in the city, within about two kilometres at most. Somewhere like Whitfield is beautiful, but you need a car — and car hire is expensive right now. The beaches are similar: lovely, but a different kind of holiday that needs a car.
Linda: The Cairns market tends to be short stays — two to two-and-a-half days, three on average. People fly in, do the Reef, the Skyrail and the Daintree, tick off the bucket list, and they're off. They like staying close to town. We invest in smaller-budget, pet-friendly accommodation close to the city, because pet-friendly is a big drawcard. If you go more upmarket — say a gated community a few kilometres out with gardens and pools — the buying cost and the running cost are much higher. A two-bed, two-bath with four air-conditioners costs far more to run than a one-bed with one.
Virginia: When you furnish them, do you furnish a pool property differently?
Linda: Generally no — maybe a beach towel, that's about it. My philosophy is to buy the best I can but expect to replace it in two to three years. So rather than a $10,000 leather recliner suite, I'll buy a $1,500 sofa pair and expect to bin it after a couple of years — there's still wear and tear, and you want the property presentable. Same with mattresses: I go above budget to the middle, but plan to refresh every couple of years to keep it nice.
Virginia: What about the fridge and cupboards — do you leave supplies?
Linda: Everyone does it differently. We put in the things we'd want ourselves — a litre of long-life milk, sugar, tea, coffee, and cupboard basics like foil. Little touches that make the stay easy on a budget. I love mirrors too — they bounce the light and make a place feel bigger. It's all about making it feel like a home.
Virginia: They do look very inviting online — cosy, even in the tropics. Airbnb has changed over the years, hasn't it?
Linda: Hugely. Ten years ago when we started, nobody really knew about Airbnb. Now it's mainstream — it's how people book holidays, especially families who don't want three hotel rooms. I believe it'll continue in Cairns, because we're at capacity already; we're booked pretty much year-round, even in the low season. If you took that Airbnb accommodation out of the market, where would the tourists stay? They'd bypass Cairns — and that flows through to the reef boats, businesses and jobs. Airbnb is part of the fabric of tourism here.
Virginia: Is there a plan to build more accommodation?
Linda: There may be plans, but I don't see the ability to do it. Labour costs have doubled — my handyman, the cleaners, everything — and materials have doubled too. You'd be a brave builder to put it all on the line, hope you get the trades and materials, finish on time, and still make a profit. An example: I upgraded a custom shower screen recently for about $350 — good quality. I went to do the rest of the building's units, but the glass manufacturer went broke, and the same screen from the new supplier is now $700. When costs double like that and a builder's margin is only 10–20%, projects don't get finished. We're holding back on upgrades ourselves — a new kitchen sounds simple, but the materials cost and the four-to-eight-week delay with no rental income makes it hard to justify.
Virginia: So if someone wanted to buy for Airbnb, what would they buy — a unit within a kilometre of the city?
Linda: Units are great. I don't like houses for Airbnb — in the tropics there's so much external work: weekly pool servicing, gardening, grass and weeds that race away in the wet season. With a house you're paying extra to keep it presentable; with a unit, the body corporate handles a lot of that. There's a basic two-bedroom on Grafton Street at the moment, an 80s block walking distance to town, probably around $350k — you could Airbnb it or rent it long-term for about $450 a week.
Virginia: Has Airbnb accelerated your own journey?
Linda: One hundred percent. Some of the nightly rates in peak season — and peak here is everyone else's winter, late June through August — are fantastic; I get up to about $190 a night for a Grafton Street property. Would I be as far ahead in our retirement strategy without Airbnb? No. Has it been difficult? Good Lord, yes — everything that can go wrong does. You also have to allow for people with no common sense: I've got a laminated sign on the screen door, 'Have you locked the door with a key for your safety?', and they still leave it unlocked and wonder why they get broken into. But the financial rewards are there, so I put up with it.
Virginia: What's the best strategy, then?
Linda: You have to have a plan, and the property feeds into it. If these are going to be your passive income, work out exactly how — if you need $3,000 a week net, plan how to get there and buy accordingly. In the past we bought 'debt reducers' — properties so cheap we couldn't say no, never intending to keep them. We bought two on Robert Road years ago at about 25% of comparable value, when nobody else was buying and the bank would lend. We used them to propel the strategy, then sold them for a profit so we could keep something else. Duplexes are great too — a good pair can return over $900 a week. But the strategy that works for me might not work for you.
Virginia: How do people retire with Airbnb, given the income is seasonal?
Linda: I look at it as a whole. From November to Easter is our low season, so the income is lower; April to June is good, June to August is amazing, August to November is good again. I average the rental income across the whole year. And if you're younger and happy to do the cleaning yourself, you can run your own Airbnb and earn the cleaning fee on top of the nightly income. Cleanliness is one of the most important things for me — for a two-bedroom I allow the team two hours, not a quick hotel-style turnaround.
Linda: I have a great team — about seven people. Check-out is 10 and check-in is 2, so I have a four-hour window and do same-day turnarounds. For a one-bedroom I charge a $100 cleaning fee, so as an owner-occupier doing it yourself you'd earn the nightly income plus the cleaning. It's hard work, but investing is about hard work and sacrifice.
Linda: Here's a comparison investors miss. A long-term tenant living somewhere full-time is generally much harder on a property — they're cooking, showering daily, physically there — so after five years you're repairing and replacing. With an Airbnb, like our Grafton Street units, we painted, changed the lights and fans and updated the furniture, and I can walk back in four or five years later and it's like I left yesterday. Think how little time you actually spend in a hotel room — you don't mark the walls. So from an investor's point of view, Airbnbs have far less wear and tear; you just refresh them like a hotel room.
Virginia: You've convinced me. Back to the Cairns market overall — do you think it still has legs?
Linda: I do. Compared to Sydney, Brisbane or Perth, you get so much more for your money here — about half the price — and the income from units is much better. Rental returns in Cairns are really strong; I'm renting two-bedroom apartments in Manunda with white goods for around $420.
Virginia: With the recent crime stories, do buyers ask about suburbs like Manunda?
Linda: They're targeting everywhere now. It may have started in Manunda or Manoora, but it's everywhere — and it's sad. I live on acreage out of town; for the first 20 years we didn't even lock the door. Now we've installed security gates and we're more proactive. It's very much opportunistic, so if you're not locking up, you're a target.
Virginia: So it all comes down to strategy.
Linda: It does. The best advice I can give is to know where you're going before you start. I mentored a young couple — former tenants of ours — who started small with a one-bedroom, renovated it, and once there was enough equity bought a two-bedroom, did the same renovation, and rented it out. Then they did it again and bought a duplex half. They've now got three income streams, and recently sold one to bring down the debt on their own home. They had a strategy. Everyone says 'I want to retire' — but how much do you actually need? Be honest with yourself.
Linda: On the exit strategy, people ask: don't you want to be completely debt-free? Of course I'd love to be — but to clear the debt I'd have to sell a lot of our properties, and then I lose the future capital growth and income. I'd rather use the bank's money to leverage and double my money. Good debt, in the right place, spread across many properties, reduces the risk. That's why banks lend — and, I suppose, why mortgage brokers exist: if people had the cash, they wouldn't need us.
Virginia: Thanks so much, Linda — that's been so helpful. We'll definitely have you back.
Linda: My pleasure.
