Melbourne Airbnb Net Yields Land at 2.9% After All Costs

The gross short-term rental premium runs at 102% for a 3-bed house in Melbourne, but after Airbnb fees, insurance, maintenance, utilities, council rates and the state's 7.5% short-stay levy, the picture changes substantially. This article covers both a 3-bed house and a 2-bed apartment because the cost structures differ materially: apartments come with a lower entry price of around $523,772 versus $1,700,318 for a house, but they add body corporate fees that houses do not pay. Melbourne is a premium, capital-growth market where the appreciation thesis often matters more than year-one cash flow, and the after-cost numbers below should be read in that context.

3-Bed House: After Costs, the Premium Narrows Sharply

A 3-bed house in inner Melbourne grosses around $97,803 on Airbnb at the market median occupancy of 67%, against $47,609 on a long-term rental. That is a 102% top-line lift, but operating costs eat a far larger share of the short-term rental side.

The table assumes self-management on the short-term rental side (the Melbourne dashboard default, since most owner-operators run Airbnb themselves) and agent management on the long-term rental side at around 7% of rent. Other platforms charge differently from Airbnb's 15.5% host-only fee: Stayz sits at roughly 5%, Booking.com around 15%, and direct bookings carry no platform cut at all.

Airbnb Fees, the State Short-Stay Levy and Utilities Lead the Cost Stack

Airbnb fees of $15,159 are the single biggest line item that the long-term rental side does not face, followed by the Victorian short-stay levy at 7.5% of revenue. The state government brought this levy in from January 2025 and it applies to every booking. Insurance also steps up from $2,863 to $4,697 because short-stay landlord cover treats guest turnover as commercial-style risk. Maintenance is higher on the short-term rental side ($13,531 vs $9,522) because the modelling includes furnishing replacement, which is a real cash cost that catches first-year hosts off guard.

Utilities of $3,180 sit entirely on the host's account in a short-term rental (guests pay nothing extra), while in a long-term rental the tenant covers their own electricity, gas and water usage. Council rates of $3,027 apply equally to both strategies, since they are tied to the property, not the rental method. The combined effect: total operating costs of $48,162 for the short-term rental versus $20,464 for the long-term rental, more than double.

2-Bed Apartment: Lower Entry Price, but Body Corporate Bites

A 2-bed apartment in Melbourne enters the market at around $523,772, less than a third of the house entry price. Apartment economics shift the comparison meaningfully because body corporate fees apply regardless of rental strategy.

Body corporate of $3,826 per year appears in both columns because it is a property-level cost that owners pay whether the unit is on Airbnb or rented to a long-term tenant. In high-amenity Melbourne CBD towers (pool, gym, concierge), body corporate can run higher again, eroding the entry-price advantage that apartments otherwise hold over houses on yield.

House vs Apartment: Apartments Win on Net Yield Despite Body Corporate

The apartment delivers a net yield of 5.8% on short-term rental and 4.9% on long-term, against 2.9% and 1.6% for the house. The lower entry price of $523,772 versus $1,700,318 more than compensates for the body corporate drag of $3,826 per year. This pattern is consistent with most dense, high-priced inner-city markets: smaller properties win on yield, larger properties win on capital stability and tenant pool depth.

That said, Melbourne is fundamentally an appreciation play rather than a cash-flow market. Both property types deliver gross yields well below the national median of 4.0%, and the post-cost net yields confirm the market is priced for long-term capital growth. Investors choosing between a house and an apartment here are typically weighing tenant profile, capital growth trajectory and personal risk tolerance more than year-one net income. The apartment yield advantage shown above is real, but it can be erased by a single special body corporate levy or one quarter of weak occupancy.

Short-Term Rental Breaks Even at 33% Occupancy on the House

The 3-bed house needs 33% occupancy for short-term rental gross revenue to match the long-term rental annual rent. That is the floor, not the target. The Melbourne market median sits at 67%, well above the break-even, but inner-suburb performance varies substantially. Carlton North - Princes Hill and North Melbourne typically run higher than the city median; outer pockets can sit at or below the break-even line in winter quarters. Run the numbers at 52% occupancy as a stress test before committing.

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Hiring a Manager Drops the House Net Yield to 1.9%

The tables above assume self-management, which matches how most Melbourne owner-operators run Airbnb. Hiring a professional short-stay manager adds around $17,605 per year on the 3-bed house, roughly 18% of gross revenue. That moves total costs to $65,766 and drops net yield from 2.9% to 1.9%. Management fees vary substantially by operator: full-service co-hosts typically charge around 18%, while listing-only or pricing-only services can be half that.

A useful rule of thumb: if you live more than 30 minutes from the property, or if you travel more than four weeks a year, the manager's fee usually pays for itself in higher occupancy and faster turnover, even though the headline net yield falls. The dashboard lets you toggle management on and off to see the trade-off for your specific suburb.

Tax Treatment Can Tip the Balance Toward Long-Term Rental

Negative gearing allows rental losses to be offset against salary or wage income, reducing taxable income. This benefit overwhelmingly favours long-term rental investors because mortgage interest in early ownership years often exceeds rent, creating a paper loss. A short-term rental property generating positive net income (like the figures above before mortgage) gets no negative gearing benefit because there is no loss to offset. At the 45% marginal tax rate (income above $190,000), each $1 of rental loss saves $0.45 in tax; at 30% ($45,000-$135,000) it saves $0.30; at 37% ($135,000-$190,000) it saves $0.37. So an investor on the top bracket with a $20,000 rental loss saves $9,000 in tax, while a 30% earner saves $6,000.

Depreciation amplifies the effect. The building depreciation allowance runs at 2.5% of the building's construction cost per year for buildings less than 40 years old: on the $1,360,254 building value here, that is $34,006 per year of non-cash deduction. Fixtures and fittings depreciation (air conditioning, carpets, appliances) adds further deductions in the first few years of ownership. The 50% capital gains tax discount applies equally to both strategies for properties held over 12 months. 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.

Regulation Sits in a Holding Pattern

Melbourne currently has no day limits or planning permit requirements for short-term rentals, though a proposed local policy ($350 annual registration plus a 180-day cap) is on hold pending state direction. The Victorian state short-stay levy at 7.5% of revenue commenced 1 January 2025 and is the only active tax-side regulation. NSW Greater Sydney's 180-night cap on non-hosted short-term rentals does not apply in Victoria. Verify current state and council rules before investing; this is an active legislative area in Australia.

The same investor question shows up across Australia's premium capitals. Victoria Rental Investment Insights covers the equivalent cost stack in another major market, and Inner Melbourne's Top Yield Is 3.6%, Still Below State Median compares the suburb-by-suburb yield ladder for readers narrowing down a buy decision.

Data reflects market conditions as of April 2026. These figures are city-level medians across 14 inner Melbourne suburbs; individual suburbs diverge significantly. The dashboard shows suburb-level data for every bedroom count and property type. Explore rental data in the dashboard, or read more about the market score methodology and data sources.

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.