If you've ever stayed at an Airbnb holiday rental, you may have toyed with the idea of hosting short-term guests yourself – even if it’s just while you’re on holiday. Next year, this will become a more attractive proposition.
From 6 April 2017 you can earn up to £1,000 a year tax-free if you let out your whole property – following George Osborne’s tax break for ‘micro entrepreneurs’ announced in his March Budget.
Hosts can earn 50% to 100% more on a short-term let than from a long-term tenancy, according to property management agency Passthekeys.co.uk. It cites nightly earnings of between £80 and £150 for a one-bedroom studio up to between £200 and £380 for a three-to four-bedroom house in central London.
Even at the lower figure of £80 a night, a host could earn £2,427 a month if they let out a room continuously. In contrast, the latest figures from HomeLet put average monthly rents in London at £1,543 for April 2016.
Given this sort of return for a night’s stay, it’s easy to see why Airbnb.co.uk* has become so popular. In the UK, 52,500 hosts have shared their homes on the website in the past year, typically earning £2,000 by sharing their home for 46 nights of the year.
But it’s not something to take on lightly. How would you feel if you were one of the unlucky few who have let out their home to ‘holidaymakers’ only to come back to find it’s been trashed by party-goers? Insurance is a major consideration, as is how your mortgage lender may view a short-term let. You also need to weigh up whether you have the time to meet and greet guests and respond to online messages.
Will you be covered?
Most insurers exclude theft, attempted theft and malicious damage by paying guests from their buildings and contents insurance policies.
For example, a spokesperson for LV= says: “As a general rule, we don’t cover Airbnb usage. This is because rooms are being let on a short-term basis, which presents a number of additional risks that home insurance isn’t designed to cater for.”
Airbnb does offer its own free Host Guarantee, which offers protection for up to £600,000 in damages – but you need to read the small print, as there is a long list of exclusions. For instance, it doesn’t cover identity theft, cash, jewellery and rare artwork, or any losses caused by a guest after the booking period has ended. Airbnb itself says that the Host Guarantee “should not be considered a replacement or stand-in for homeowners’ or renters’ insurance”.
For extra protection, you can ask guests for a security deposit, which is, again, handled by Airbnb. If you need to make a claim, you must do so within 48 hours of the checkout date.
If your insurance provider won’t cover short stays, you could consider taking out a tailor-made policy. This is a relatively new area for insurers, but Airbnb building and contents insurance is often covered under specialist bed & breakfast policies – for example, Discountlandlord. co.uk, HomeProtect.co.uk, Towergateinsurance.co.uk and Adrianflux.co.uk all offer this type of cover. Alternatively, compare holiday let insurance at Quotezone.co.uk.
Annie Plaskett, a spokesperson for Towergate, says: “We have noticed more clients mentioning Airbnb when they make an enquiry. If you are thinking about letting out either a room in your property or the whole property, you really must check with your provider to see if you are covered.
The chances of your premium increasing as result of this activity is high – ultimately, you are increasing the risk to your property by letting it out to strangers.”
There are numerous complaints online about how hard it is to get a payout – a website called Airbnbhell.com, set up by a far from happy ex-Airbnb host, is full of ‘uncensored’ Airbnb stories and offers a useful insight into what can go wrong– along with a list of competitors’ websites.
Ask your mortgage lender
If you plan to use your Airbnb takings to help pay off your mortgage, think again – the terms and conditions of most owner-occupier mortgages will make it clear that borrowers can’t let out their property. So if you have any form of loan on your home, ask your lender first and don’t be surprised if it says “no” – though some hosts will be tempted to ignore this.
A spokesperson for the Council of Mortgage Lenders says: “Many mortgage terms and conditions entitle the lender to seek immediate repayment of the total mortgage balance if a borrower breaches the terms of their mortgage contract. While this may not happen in practice, there are very important consequences for the borrower to consider – for example, if fire damage occurs to the property their insurance may be invalidated.
“Most lenders are unlikely to check proactively on their entire loan book to assess whether property is being offered on short-term lets, but it would clearly be a risky strategy on the part of borrowers to proceed knowingly without talking to their lender.”
If it’s something you really want to do, you could switch to a more open-minded provider. Market Harborough Building Society, for example, offers customers the flexibility to let their main home for up to 24 weeks a year, allowing Airbnb or rent-a-room usage for up to two bedrooms. Its standard variable rate is 5.49% but with a 1.5% discount for the term, it is currently 3.99% plus a 1% fee. It says it will look upon any application favourably – subject to the correct building and contents insurance being in place.
“It’s so easy as guests are no trouble”
Heather Forster's luxury barn conversion
Heather Forester (above) lets out the Snuggery, a luxury barn conversion near Truro, throughout the year – it adjoins a larger barn where Heather lives. Just 20 minutes from Cornwall’s north and south coasts, it’s listed at £84 a night on Airbnb.
Heather used to market the barn for £95 a night through a high-end lettings agency, but the agency charged 30% commission including VAT, compared with Airbnb’s fees of 3%.
“The only downside is that the agency paid us upfront, but with Airbnb you don’t get paid until after the guests arrive,” she says.
“I love sharing my home with Airbnbers and meeting new people. I am about to buy a motorhome, which I intend to list on Airbnb too. Some of my friends are renting out the kids’ rooms now they have left home. It’s so easy as guests are usually out all day and are no trouble. Thanks to the feedback system, people can’t afford to misbehave.”
With the average rent in the UK now £734 a month, according to HomeLet, it’s easy to see why tenants might be tempted to let out space to Airbnb’ers. But unless you get the go-ahead from your landlord, you could find yourself out in the cold. One in six tenants in the UK admits to having rented out part or all of their property to someone who isn’t on the lease agreement and 34% didn’t inform their landlord, according to research by Direct Line.
But the survey found that once the landlord found out, 11% of tenants named on the lease were evicted and 6% lost their deposit.
Hire an agency
If you can’t face the hassle of messaging guests, or meeting and greeting them, a growing number of agencies will manage your Airbnb let for a fee on top of the 3% you pay Airbnb. These agencies will manage anything from creating your listing with professional photography and optimising the price you charge, to professional cleaning and guest communications.
Unfortunately, most only look after properties in London, including Easy-rental-services.com, Helloguest.co.uk, Hostmaker.co, and Pass the Keys.co.uk.
Outside London, BNBbuddy.co.uk covers Edinburgh, while Airsorted.uk/Airbnb covers Edinburgh (and London). Airhostforyou.com manages lets in Brighton and cloud-based service Guesty can manage online bookings worldwide for a fee of 3%, so long as you arrange key collection and cleaning. Prices for a full management service range from around 12% to 20% of your rental income. Airsorted also has an option guaranteeing to fill your property for a set monthly rent.
5 tips for potential hosts
1. Create an attractive, accurate listing
Make sure your listing details any amenities and accurately describes what you offer, and what’s unique about your property. Good photographs are the key to a successful listing.
If Airbnb has a photographer in your area, you can arrange for free professional photography.
2. Set a competitive price
Airbnb has a tool to show hosts what people with similar spaces in the area are typically charging a night. Also browse online comparing similar properties.
3. Lay down house rules
Make sure you feel comfortable about who will be staying in your home. If you’re unhappy with a smoker, or pets, then say so. Mention if you work and need guests to keep quiet after, say 11pm.
4. Get to know your guest
Read their profile pages carefully and check their reviews.You can often read between the lines if hosts have left fairly neutral, rather than glowing reviews. Also build up a rapport through your messages.
5. Respond to guests quickly
If a potential guests messages you with any enquiries – or requests a booking – get back to them within 24 hours, preferably sooner, so they can be confident that they can rely on you to respond quickly during their stay.
* This is an affiliate link, which means Moneywise makes money when you click it. For a non-affiliate version, visit Airbnb.co.uk.