Direct Comparison of My Apartment Before and After Airbnb

In this post, I’m taking you through my property investment journey in the Auckland CBD. We’ll look at how my brother and I started, compare the performance of a standard long-term tenancy against short-term Airbnb rentals, and share the exact numbers that proved short-term rentals can be a game-changer for urban property investors.

Wow! My Brother and I Owned a Property! Half a Property Each, to be Exact. But What Now?

Venturing Into Property Investing

My brother and I purchased our first investment property at the ages of 23 and 25 in 2016. It was a one-bedroom apartment in Auckland CBD.

Like many first-time investors, we were excited simply to become property owners and investors. Neither of us had extensive investing experience, and while we understood the basic principles of property ownership, we had yet to appreciate how different theory could be from reality.

Purchasing the apartment was only possible because our parents loaned us the funds required for the security deposit. At that stage of our careers, we had stable employment but modest incomes and limited savings. Without their support, the purchase would not have happened.

That assistance gave us an opportunity many young investors never receive, but it also introduced an important financial obligation that would later become central to our investment decisions.

Cash-Flow Positive Investment

The apartment already had an existing tenant whose lease continued for several months after settlement. Their weekly rent was $485. These included water and electricity. This figure appeared encouraging at first glance.

Our mortgage repayments were $342 per week. Electricity averaged around $60 per month or about $15 per week. Annual council rates were $1,253 or roughly $24 per week. The Body Corporate levy totalled $4,888 per year, or approximately $94 per week, and included water charges.

When the weekly costs were added together, the figures looked like this:

• Mortgage: $342 per week
• Electricity: $15 per week
• Council Rates: $24 per week
• Body Corporate: $94 per week
• TOTAL EXPENSES: $475 per week

With a weekly rental income of $485 per week, my brother and I were making $10 profit per week. Just like that, we were property investors with a positive cash flow on our very first purchase, and I had an extra $5 in my pocket every week—watch out, Warren Buffett!

The Cost That Changed Everything

But wait…did I mention that our parents loaned us the amount needed for the security deposit? The security deposit required was 30% of the value of the property in 2016. Of course, we have to repay our parents. This now gives us an extra weekly expense on the property:

• Original Property Expenses: $475 per week
• Repayment to Our Parents: $147 per week
• TOTAL EXPENSES: $622 per week

Rental income remained unchanged at $485 per week. But my hopes and dreams of relaxing on the beach somewhere watching the bank account rise on my laptop all on its own were dashed in an instant. Instead of generating a positive cash flow, the property now produced a weekly shortfall of $137.

The apartment was no longer supporting itself. Every week required additional money from our salaries simply to keep the investment operating. Like many first-time investors, I had imagined property ownership as something that would gradually create financial freedom. The reality was rather different. Rather than reducing financial pressure, the investment initially increased it.

Instead of building savings, we were contributing additional money each week while hoping future capital appreciation would eventually justify the sacrifice. That experience taught an important lesson that many first-time property investors overlook.

Cash flow from a rental property is not determined solely by mortgage repayments. It is determined by every financial obligation associated with acquiring and operating the asset. Ignoring those obligations may produce attractive spreadsheets, but it does not improve actual financial outcomes.

Our investment strategy, at this stage, essentially relied heavily on future property appreciation rather than present-day income. This is not investing. This is speculation.

To make matters worse, the tenancy was coming to an end soon, and neither my brother nor I had any experience operating a rental property, so we had no idea how to find another tenant.

When The Numbers Stopped Working

We assumed replacing the tenant would be straightforward. After all, Auckland was constantly described as having a housing shortage. News reports regularly highlighted strong rental demand, and commentators often suggested that landlords had little difficulty finding tenants. From the outside, it appeared to be one of the safest property markets in the country.

Reality proved to be more complicated.

Hiring a property manager would have simplified the process, but it was not an option since we did not know exactly how property management works and we thought it would introduce an additional cost. Every additional dollar mattered, so we decided to manage the leasing process ourselves.

We photographed the apartment, created a listing on TradeMe, and arranged viewings after work and on weekends. Looking back, our first mistake was obvious. We asked too much rent. Not because we were greedy, but because we simply did not understand how seasonal demand affected the Auckland rental space.

The apartment became available in early October, traditionally one of the quieter periods for CBD leasing. We priced it according to what we hoped it would achieve rather than what the market was willing to pay. The result was silence.

Days passed without securing a tenant. We even reduced the asking rent. Still nothing. Eventually we advertised the apartment for less than our previous tenant had been paying, yet enquiries remained surprisingly limited.

Meanwhile, every week without a tenant meant another week of mortgage repayments, rates, Body Corporate fees, and loan repayments coming directly from our own salaries. Vacancy is one of the least appreciated risks in residential property investing.

Many appraisals assume continuous occupancy, but cash flow depends not only on rental yield but also on the ability to keep a property consistently occupied. Even a well-performing rental property can quickly become financially stressful if it sits vacant for several weeks.

Every day without a tenant raises the same questions. Was the asking price still too high? Was something wrong with the apartment? Had we made a poor investment? The longer the vacancy continued, the more confidence gave way to doubt.

Chance Conversation Leading to Airbnb

My mother came to the rescue yet again! One day she asked me, "Have you heard of this thing called Airbnb?" Surprisingly, I had never even heard about Airbnb at the time–here was my mother introducing me to new technology and I was supposed to be the tech-savvy millennial!

She explained that it was a website where people look for somewhere to stay when they travel and that anyone can list a spare room or even an entire property on the website for these potential guests to book.

I had my doubts. It did not sound very reliable to me. How can we be sure that someone will book? Why would travellers choose an apartment owned by ordinary people instead of a hotel? We were down $622 per week! That was a lot of money. Moreover, from my perspective, the idea sounded speculative. Traditional residential tenancy felt predictable. Airbnb felt uncertain.

Today, Airbnb is a globally recognised accommodation platform, but in 2016 it was still unfamiliar to many New Zealand property owners.

A Temporary Solution Driven By Necessity

We decided to give Airbnb a go as we really had no other choice.

The plan was to list our property on the platform to cover our recurring expenses whilst we continued looking for a long-term tenant. It was simply a temporary solution. We approached it with conservative expectations. If the apartment rented for a few nights each week, perhaps it would reduce our weekly losses while we continued looking for a permanent tenant. That was the entire strategy.

Our logic was simple. We listed it for $70 per night, and if we could rent it out at least a few nights a week, the income would help cover our costs. Seven nights at $70 equalled approximately $490 per week, almost identical to what our long-term tenant had previously paid.

Nevertheless, beginning in October 2016, our property was on Airbnb. We opened our calendar. Within the first few hours, we received our first booking. Another booking came in on the second day. Then another. And another.

We started upping the price to see if we could possibly cover our entire $622 per week deficit. We easily covered this amount after a little listing and pricing optimisation. I was hooked!

Initially, we assumed the early bookings were simply good fortune. But the reservations continued. As occupancy increased, we cautiously experimented with higher nightly rates. Demand remained strong. We increased prices again. Bookings continued. It became increasingly clear that we had misunderstood the market. The apartment itself had not changed. Its location had not changed.

Discovering Revenue Instead of Rent

Traditional residential investing generally focuses on securing one tenant who pays a fixed weekly rent over an extended period. Short-term accommodation operates on an entirely different principle. Instead of renting a property once, the owner effectively sells hundreds of individual nights throughout the year.

Each night has its own market value, influenced by seasonality, local events, hotel demand, tourism, weekdays, weekends, and booking patterns. In other words, the apartment was no longer simply a rental property. It had become a revenue-generating accommodation business. That realisation fundamentally changed how we viewed property ownership.

Rather than asking, "How much rent can this apartment achieve?" we began asking a different question. "What is this property capable of earning?" The distinction may appear subtle, but it represents one of the most significant mindset shifts an investor can make. For the first time, we were no longer thinking like landlords. We were beginning to think like hospitality operators.

The first few weeks on Airbnb were enough to convince us that we had stumbled upon something fundamentally different from traditional residential investing.

Remember that our objective was to secure long-term tenants permanently.Airbnb was simply a temporary solution while we searched for someone willing to sign a conventional lease. Yet as the bookings continued to arrive, the numbers told a story we could not ignore.

Instead of merely reducing our losses, the apartment was beginning to outperform our original expectations. That prompted a simple question. What if this was not a backup plan at all?

By the end of our first full financial year operating exclusively as an Airbnb, the apartment had generated about $49,000 in gross revenue. That equated to an average of roughly $942 per week. This was almost double the income generated under the previous long-term tenancy.

At first glance, comparing gross revenue with weekly rent may appear misleading, and rightly so. Short-term accommodation carries additional operating expenses that traditional rentals simply do not have.

Consumable amenities must be replenished regularly. Internet becomes an operating necessity rather than an optional utility. Booking platforms charge service fees. Linen requires frequent laundering and replacement. Guest communication, maintenance coordination, and calendar management become ongoing operational responsibilities.

Unlike a traditional tenancy, where the property may require little day-to-day attention for months at a time, a short-term rental operates more like a small hospitality business. The revenue is higher because the workload and the service standards are significantly higher.

Seasonality, Occupancy Rate, and Management

There are peaks and troughs in income within a given year. The majority of earnings come in the summer months when Auckland is full of tourists and the hotels can no longer cope with demand. The high season lasts for about 6 months during which time the price of a one-bedroom CBD apartment can easily reach between $180 and $230 per night, and it is still undercutting the hotels significantly.

Moreover, in short-term rentals, perhaps the most misunderstood metric is the occupancy rate. Many new Airbnb hosts and other short-stay rental owners believe the goal should be to achieve 100% occupancy. While that may sound desirable, it often indicates that pricing is too low.

Our apartment achieved an occupancy rate of 85% during its first full financial year. From an investment perspective, this proved to be an excellent result. An occupancy rate around this level generally suggests that pricing is close to market equilibrium.

However, if occupancy consistently falls below 80%, pricing may be too ambitious relative to demand. Conversely, occupancy above 90% often indicates that rates are lower than what the market is willing to pay. High occupancy may feel reassuring, but constantly selling every available night can mean sacrificing revenue unnecessarily.

The objective is not to fill every night. The objective is to maximise total annual income. Those are two very different goals. This principle remains one of the foundations of professional revenue management today.

But higher income alone does not create a better investment. Profitability depends on controlling expenses just as carefully as increasing revenue. As our experience grew, we began paying close attention to every aspect of the operation.

Cleaning schedules were refined to reduce downtime between bookings. Guest communication became faster and more consistent. Pricing was adjusted regularly to reflect demand rather than remaining fixed throughout the year. Maintenance issues were addressed proactively before they affected guest reviews.

Each improvement seemed relatively small on its own. Together, however, they significantly increased both guest satisfaction and financial performance.

Our experience and results revealed an important principle.

Successful short-term rental properties are rarely successful because they are listed on platforms like Airbnb. They succeed because they are actively managed. Booking platforms and other relevant online travel agencies simply provide access to demand. The quality of the operation determines whether that demand translates into sustainable profit.

Nevertheless, with how we managed our Auckland CBD apartment, and factoring in the expenses of operating a short-term rental, we managed to make a profit of just over $20,500 before tax for 2016. This figure was particularly significant for one reason. The property was effectively financed at 100% of its value because the security deposit itself had been borrowed from our parents.

Fundamental Lesson For Property Investors

Looking back, the financial results were important, but they were not the greatest lesson. The greatest lesson was learning that every property should be evaluated according to its highest and best economic use, not according to convention.

For our apartment, the traditional rental market valued the property one way. The short-term accommodation market valued it very differently. Neither model was universally right or wrong. Each reflected a different market serving a different type of customer.

The role of the investor is not to force a property into a predetermined strategy. It is to understand its unique characteristics, analyse the available data, and identify the model that creates the best long-term value.

That mindset marked the point where we stopped thinking of ourselves as owners of an investment property. We began thinking like operators of a business. And that distinction would eventually lead us down an entirely unexpected path.

In 2017, building from the success of listing our apartment on Airbnb, as well as the learnings and realisations from operating a short-term rental property, I established Zodiak Management with the vision of helping property owners become property investors and turning their properties into successful rental businesses.

The company now has a growing team managing hundreds of rentals across the Auckland CBD, central suburbs like Eden Terrace, Freemans Bay, Grafton, Herne Bay, Ponsonby, and Parnell, and coastal suburbs such as Hibiscus Coast and Takapuna.

Our strategic approach to property management has earned the confidence of property owners.

Zodiak Management provides end-to-end comprehensive property management solutions through our dedicated teams for property and account management, guest and tenant experience, marketing and sales, and housekeeping and property maintenance. Each team owns and manages a particular domain of operating rental properties.

We also recognise that every property investor has a unique risk appetite and distinct financial goals. Some prefer focusing solely on long-term rentals, while others lean toward short-term rentals. There are also those who want a portfolio diversified across different rental structures.

Our company has further introduced an adaptive approach to managing rental properties. While it is true that short-term rentals deliver some of the highest incomes and yields among all categories of rentals, these properties are exposed to cyclical risk due to season-driven demand patterns.

An adaptive rental strategy addresses this risk. Our adaptive rental management service, to be specific, is a first-in-the-market solution that switches rental properties between short-term and medium-term stays depending on seasonal demand to improve and stabilise occupancy rates and rental income.

The true value of a property is ultimately realised through the strategy behind it, the discipline with which it is managed, and the ability to pivot as markets or unique situations evolve. Hence, as the rental landscape continues to change, one principle remains constant: every property has the potential to become a successful rental business when it is matched with the right operating model.

Whether that means a long-term tenancy, a short-term accommodation strategy, or an adaptive approach that evolves with market demand, the best investment decisions are always grounded in data, guided by experience, and focused on creating sustainable long-term value.