After All Costs, Melbourne's Airbnb Premium Shrinks Sharply

The gross short-term rental premium in Melbourne looks impressive at 105% for a 3-bed house, but after all costs the picture narrows considerably. This article covers BOTH a 3-bed house and a 2-bed apartment because the cost structures differ: apartments add body corporate fees but have far lower entry prices, and that combination changes which property type wins on net yield. Melbourne is fundamentally a premium, appreciation-led market, so cash-flow comparisons need to be read alongside the long-term capital growth thesis.

The 3-Bed House: Gross Premium of 105% Compresses to a Modest Net Edge

A 3-bed house in Melbourne sells for around $1,700,318 with weekly rent of $931 ($4,036/month), putting annual gross long-term rent at $47,609. Run the same property as a short-term rental at $443/night and 67% occupancy, and gross revenue jumps to $97,803. That headline doubling is the optimistic story most Airbnb content stops at. The cost stack tells a more sober one.

Note: this table assumes self-managed short-term rental (the dashboard default) and agent-managed long-term rental at around 7%, which is the standard Australian arrangement. Other platforms charge differently to Airbnb's 15.5%: Stayz takes roughly 5% and Booking.com around 15%.

What Eats the House Premium: Airbnb Fees, Utilities and the Victorian Levy

The biggest single cost difference between the two strategies is Airbnb fees, which strip $15,159 from gross revenue before any other expense. Add the new Victorian short-term accommodation levy at 7.5% (commenced January 2025), and another $7,335 comes off the top. Insurance lifts from $2,863 for a standard landlord policy to $4,697 for short-term cover, and utilities of $3,180 sit entirely on the host's books rather than the tenant's. Maintenance also runs higher under short-term use because the website's short-term rental maintenance figure includes furnishing replacement.

Once those line items are netted off, total short-term rental costs reach $48,162 versus $20,464 for the long-term rental. Net income lands at $49,641 for short-term against $27,145 for long-term, and the 105% gross premium shrinks substantially in net-yield terms: 2.9% versus 1.6%.

The 2-Bed Apartment: Lower Entry Price, Body Corporate Adds a Fixed Drag

Melbourne 2-bed apartments sell for around $523,772, less than a third of the house entry price, with weekly rent of $720 ($3,120/month) and short-term gross of $58,438. The trade-off is body corporate (strata) fees, which apply regardless of whether the unit is leased long-term or run on Airbnb. Houses do not pay this.

Body corporate of $3,826 appears in both columns because it is a property-level cost tied to ownership, not rental strategy. For Melbourne CBD-style high-rise stock, this single line is often the largest fixed expense an apartment investor faces, and unlike maintenance it cannot be deferred.

House vs Apartment: Smaller Cheque, Different Yield Profile

The apartment entry price of $523,772 versus $1,700,318 for a house is the headline difference, and it changes who can play. Investors locked out of a Melbourne house at over $1,700,318 may be able to buy two apartments for the same outlay. The cost trade-off is body corporate of $3,826 per year that house owners avoid entirely.

On net yield, the apartment delivers 5.8% short-term and 4.9% long-term, against the house at 2.9% and 1.6%. The apartment's smaller capital base does most of the work: even with body corporate dragging on costs, dividing a smaller net income by a much smaller sale price produces the better yield ratio. That said, Melbourne is an appreciation play. Houses have historically outperformed apartments on capital growth, and the yield gap may be more than offset by long-run price appreciation. The dashboard lets you model both yield and growth assumptions for individual suburbs.

Short-Term Rental Only Breaks Even Above 33% Occupancy

Break-even occupancy for the 3-bed house, where short-term gross revenue equals long-term annual rent, sits at 33%. That is the gross floor, not a target. Below it, you would earn less running Airbnb than just leasing long-term, before even accounting for the higher cost stack and the time burden of self-managing turnovers. Melbourne's market median is 67%, comfortably above the break-even, but suburb-level dispersion is wide. Inner-city suburbs with tourism pull (CBD, Southbank, St Kilda) operate well above the median; outer rings and some industrial-adjacent areas sit well below it.

View Melbourne in the dashboard → Free preview · every bedroom count and property type

Hiring a Manager Drops the House Net Yield to 1.9%

The tables above assume self-management on the short-term rental side, which is how the dashboard models the default scenario. For a 3-bed Melbourne house, hiring a professional short-term rental manager adds around $17,605 per year, roughly 18% of gross revenue. Total costs lift to $65,766 and net yield drops from 2.9% to 1.9%. That is a sizeable difference, and it is the single most important assumption to interrogate: investors who treat short-term rental as a passive product almost always end up using a manager, which means the realistic net yield is the lower number.

Whether that fee is worth paying depends on opportunity cost. Self-managing a 3-bed house typically demands 5 to 10 hours per week during peak periods (guest communications, cleaning coordination, restocking, listing optimisation). Investors who value their time at $50/hour or more often find that a manager pays for themselves; investors with capacity to absorb the workload directly capture the 18% as additional yield.

Regulation: Melbourne Is Permissive, but the State Levy Is Live

Melbourne currently permits short-term rentals with minimal regulatory restrictions: no day caps, no planning permit requirement at the local level. Melbourne permits short-term rentals with minimal regulatory restrictions. Details: Currently no day limits or planning permit requirements. Proposed policy (on hold): $350 annual registration + 180 day cap. State government levy commenced Jan 1, 2025. Local caps shelved pending state policy. View official regulations A proposed Melbourne City Council scheme involving a $350 annual registration and a 180-day cap is on hold pending state policy. The Victorian state short-term accommodation levy of 7.5% commenced 1 January 2025 and is reflected in the cost tables above as the short-term rental tax line. Verify current state and council rules before investing; this is an active legislative area in Australia.

Negative Gearing and Depreciation Can Tip the Net-Yield Comparison

The pre-tax tables overstate the gap between short-term and long-term rental for Australian investors who carry mortgage debt. Negative gearing allows rental losses (where mortgage interest plus operating costs exceed rental income) to be offset against salary income, reducing taxable income at the investor's marginal rate. At Melbourne house prices, an 80% loan typically produces a long-term rental cash-flow loss of $20,000 to $40,000 per year in early years. For a high-income investor on the 45% marginal bracket (income above $190,000), each $1 of rental loss saves $0.45 in tax; on the 30% bracket ($45,000 to $135,000), it saves $0.30. A long-term rental property showing a modest pre-tax loss can deliver a positive after-tax position once the offset is factored in.

Depreciation amplifies this. The building depreciation allowance runs at 2.5% of construction cost per year for buildings under 40 years old, and fixtures and fittings depreciation (carpets, air conditioning, appliances) adds further non-cash deductions. For Melbourne's housing stock, where building value is around 80% of sale price, the annual building deduction can reach $34,006 on a depreciable base of $1,360,254. Short-term rental properties that are profitable do not benefit from negative gearing in the same way, because there is no loss to offset. The 50% capital gains tax discount on properties held over 12 months applies to both strategies equally. The dashboard calculates your after-tax position including negative gearing and depreciation based on your income: enter your salary to see how the tax treatment changes the short-term rental versus long-term rental comparison for your tax bracket.

Suburb Dispersion: City Medians Hide the Real Spread

The figures in this article are city-level medians across 14 Melbourne suburbs, and individual suburbs diverge significantly. Carlton North - Princes Hill leads the long-term yield ranking at 3.6% on a sale price of $1,362,418, while Docklands sits at 3.1% despite a higher entry price of $1,997,854. Short-term rental performance varies even more sharply because tourism demand concentrates in specific pockets (CBD, Southbank, St Kilda) rather than spreading evenly. The dashboard shows suburb-level data for every bedroom count and property type, with the same cost stack applied consistently.

For a regional comparison, Melbourne Apartments Yield Roughly 5.8%, Outpacing Houses covers the same after-costs question at a different price point, and Victoria Rental Investment Insights runs the analysis for an alternate Australian market.

Data reflects market conditions as of May 2026. Explore Melbourne rental data in the dashboard, or read the data sources methodology for how each cost line is derived.

This information is for educational purposes only and should not be considered financial or legal advice. Regulations and market conditions change frequently. Verify current rules with local authorities before making investment decisions.