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How To Build a Small House For Airbnb?

Posted 7 October 2022
Beautiful Granny Flat AirbnbForrest Small Homes Owner
Passive income streams are just about essential to live the life you want these days. As far as investments go Airbnb properties are leading the way in lucrative additional income.

Just a  quick scan of Airbnb listings in your area will tell you that just one overnight stay is priced around the same as a weekly long-term rental property.  These numbers have investors jumping on board across all Australian states and territories to get a piece of the action.

Not everyone has the ability to buy a second property to rent out as a holiday home, but that doesn’t need to stop you from tapping into your very own Airbnb income resource.

An option for homeowners that is affordable, feasible and rewarding is to use your current land space to build a small house for Airbnb.

As well as getting income from land you already own, you also gain a lot of flexibility for how you rent either your home or your new small house and have the option to offer quality accommodation to family and friends who come to stay.

3d rendering of small house airbnb

What is a small house?

A small house is a minimalistic home, based on a big home structure, just compacted into less space. You’ll have a full-use kitchen, laundry, lounge and bathroom as well as one to three bedrooms, depending on your preferences. Most small homes range between 90 to 150 square metres in size, however part of the size available to you will depend on your local council regulations and the size of your yard.

To make a small home work you’ll need to think carefully about your design to maximise space and livability. Interior design comes into play as well capturing the minimalist appeal while also providing homey comforts that give a welcoming feel.

The reduced space still gives you everything you need in a typical family home, perfect for holiday stays as a home away from home.

Thankfully tiny homes are gaining popularity due to stunning interior designs showcased online, intriguing locations and a greater demand for environmentally friendly and sustainable housing options so there are plenty of options to choose from in terms of design and style as well as decorating tips and information.

Why make a small house Airbnb investment?

A small home is perfectly suited to an Airbnb investment because you won’t have to put forward a large sum to buy an additional property.

The additional income will cover your building costs and ongoing costs will give you a little extra in your savings, all for a fraction of the price an investment property and mortgage would cost.

Small homes are a low-cost build – especially compared to buying an investment property.

It’s important to research thoroughly before you commit to our build and know what you want before you get started. Statistics vary widely for Airbnb rates and occupancy levels so knowing how popular and how saturated your location already is can give you a better indication of what you can expect from your own private holiday home listing.

You’ll also benefit from the low maintenance of a small home. Maintenance work is light so repairs and upkeep aren’t going to carve into your income, and because your build is brand new, you won’t have to worry about wear and tear for years to come.

Keeping your Airbnb property close to home means you can keep an eye on things and know who’s coming and going as well as oversee cleaning and maintenance, or even do these tasks yourself.

If you have a family home and an empty nest, you also have the option of moving into the small home yourself and renting out your main property and living in the downsized home comfortably, for even bigger returns.

6 things to consider when building a house for Airbnb

There are a number of things you need to consider when building a small house to use as an Airbnb property, including how big you need the home to be, any local council restrictions that may influence your build, as well as what your local area has to offer and who it is appealing to. 

Here are the six big factors to consider as part of your initial small house plan:

1. Decide on the kind of small house you want to create

The fastest, most straightforward and cost-effective small home options are factory-made to standard layouts. You can still make choices on the quality of the finishings, depending on your budget, but most of the style is preset. The great thing here is you get to see exactly what you’ll get and know what the finished home will look and feel like.

Custom small homes will cost a little more but you have the opportunity to really create a unique space that capitalises on what you have to offer, be it stunning views, a lush garden or clever use of space and light.

The number of rooms and room sizes will also be dependent on what kind of small home you want. A family getaway with room for kids or something small for couples and single travellers.

2. Know your budget

Make sure you get fully inclusive quotes from dependable builders that are experienced in small home design, installation and completion. Ask as many questions as you need to know the parameters of the costs involved so you can set (and stick to) a realistic budget as well as a schedule for your small home completion.

Understanding the costs ahead of time is the only way to know if your Airbnb investment is worthwhile. As well as upfront building costs, set an annual budget that covers your ongoing expenses such as power and water, maintenance, loan repayments, cleaning as well as refreshing items such as sheets and towels.

It’s up to you to choose which items you splash out on and where to save. Do you want an upgraded facade or stone benchtops? These choices will not only influence your budget but how your home looks and appeals to your guests.

3. Take your target market into consideration

What kind of people would you be open to sharing your property with? They will be coming and going during their stay and possibly asking for advice and suggestions so make sure you target the kind of people you’d enjoy interacting with.

You can set up your property size, design and style it to target that market and be appealing to a particular group of travellers. For example, families would need extra rooms and bunk beds while couples might be enticed by a romantic getaway with a king bed, spa and crackling fire.

Consider what is close by and what visitors would enjoy experiencing to help give you low vacancy rates year round.

The prices you set will also influence who comes to stay including offering discounts for extended stays if that is your preference.

4. Talk to your local council

Every Australian State and Territory has different rules and regulations about the use of small homes on your property as well as regulations around Airbnbs. Talk to your local council to know what codes are currently in place for your location and what you need to factor in, including the overall size, distance from your existing property and fences and elevation.

There will be costs involved for permits and checks as well as possible fees for having an additional structure on your property so be sure to factor all these in as part of your budget.

5. Design the home for holidays

Holiday homes tend to do well with an open-plan kitchen/dining/living set up and a bright, clean space overall. Look for ways you can make your small home feel like an escape from the norm.

Small homes are most certainly a place where less is more. It’s going to take some careful consideration to find the perfect balance between minimalism – which is essential for making a small home feel spacious and functional – and providing those creature comforts that make your property the perfect home away from home.

Decorative and statement pieces are important for wow factor and for giving your space a unique style, just make sure every piece has a purpose. If in doubt, keep extra items stored in your own home and let guests know you can bring them over if they need them.

6. It’s all in the details

Your guests need to feel welcome and at home as soon as they open the door. 

High-quality fresh towels, luxurious (and irritant-free) soaps, coffee, tea, sugar and milk mean that your guest can settle in and relax as soon as they walk in the door.

The details you choose will depend on your audience. For families with kids; access to toys, a stroller, high chair and porta cot can be a godsend while others may feel spoiled by a sheer curtain blowing in the wind, a restaurant guide, a well-chosen artwork or a box of chocolates.

Where you position your furniture and what pieces and colours you choose also creates an impactful mood and atmosphere. Look for ways to create a sense of relaxation, luxury and simplicity that has them at ease and feeling great to be there.

List your tiny home on Airbnb

Listing your home will involve strategy and a lot of your time. Make sure the photos you take are high quality and show the key features the property has to offer. Don’t go overboard with too many images, you want to give people scrolling through a realistic snapshot of what they can expect from your home, without going into too much detail. 

Price setting is an aspect of your listing you will need to perfect. You want to achieve a balance that covers your expenses with profit, but not outprice yourself and put visitors off. Be realistic with your building budget and check on what other similar-sized properties in your area are listed for. 

Staying flexible about prices can be a real advantage, especially when you are starting out because you won’t have any positive reviews as social proof. It’s possible to start lower than expected and build your prices up as you develop a customer base.

Prices change through the year can include:

  • Discounts for longer stays
  • Minimum stay periods over peak periods
  • Discounts for last-minute stays
  • Reduced rates for off-peak stays
beautiful small home outdoor

How much money can you make from an Airbnb in each capital city?

There are no guarantees or set prices for return on investment in any sector. Before you go ahead with your plans to build a small house for an Airbnb investment it’s important to factor in where your property is located and what your area provides to visitors. You’ll also need to factor in how in-demand holiday properties are and how many are already located close by. 

As part of your budget and income, determine what an acceptable vacancy rate will be for you to still make money from your small home build over time.

Airbnb Data is a great resource for pinpointing the numbers in your location. We’ve also helped by covering these capital cities listed in order of highest average overnight rate:

CityAverage Rate per nightOccupancy RateActive rentalsActive hostsAnnual rental growthMonthly Revenuelistings that are entire home

What’s interesting is that Hobart stands out as having the highest occupancy rates and the highest monthly revenue. Even Perth, the last on the overnight rate list still has a high monthly yield thanks to great occupancy rates, showing that your small home AirBnB can do exceptionally well if you are in an area with high demand year-round.

Owning a successful AirBnB property that provides a significant additional income stream doesn’t necessarily come from buying an expensive investment property or giving up your privacy through renting out a room in your home. A little research and planning can give you the ability to create a small home in your backyard, specifically designed to be a perfect holiday stay for extra income and more financial control.

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