A growing number of private landlords are turning to Airbnb and similar platforms, but Apropos by DJ Alexander Ltd, a property management firm, is warning landlords to tread carefully to ensure they are not jeopardising their legal interest in the property.
Many landlords see Airbnb as a potentially attractive proposition compared to traditional buy-to-let (BTL), especially in light of government cuts to tax reliefs, which largely explains why Airbnb now claims to have 223,200 active listings in the UK generating £854m with average earnings for the owners of £3,100 per year.
David Alexander joint managing director of Apropos by DJ Alexander Ltd, commented: “The recent regulatory and financial changes in the BTL market have made it more difficult for landlords to earn a good yield which, coupled with increasingly complex regulatory challenges, is causing many to rethink their options. It is understandable, therefore, that many may see Airbnb as a viable alternative to long term letting.
“Interestingly, Airbnb, appear to be highlighting potentially substantial earnings for owners who join their site. Although their official data states that average earnings for Airbnb hosts are just £3,100 per year which is unlikely to attract many landlords, they also provide potential revenues specifically for different cities which are much more appealing. For example, they state that property owners in Edinburgh could earn £1,959 a month; in London £3,563, in Manchester £1,595 with differing figures across the UK. These numbers will appear very attractive to landlords who have falling rents in real terms, lower tax incentives, and increased management and maintenance costs.”
Alexander continued: “There are, of course, pluses in short term letting on Airbnb and other websites. The daily income is higher than long term letting; there are fewer legislative, financial and regulatory issues; and it can be less punitive, in some circumstances, for borrowing.”
“However, you must inform your lender if you are making this change; your insurers needs to be informed; there may be considerable dead periods when you aren’t earning; the maintenance costs will be higher as you have beds to change and properties to clean on a regular basis; and Airbnb, although in the ascendant at the moment, is coming under considerable pressure from numerous local and national governments in the UK and abroad. They have already been banned in some cities and had their activities restricted in various places around the world.”
He added: “With Airbnb you may find that you make more money for the peak five or six months of the year, but the winter is completely dead in which case your earnings may balance out. The problem is that there is more work involved in dealing with 50 guests a year than in two permanent clients staying for a year. It is a balance and will depend on your expectations, your current experience of where your property income is going, and your location.”
Although Airbnb listings are across the UK there are four key areas where the majority are located: London; Scotland; South-West; and South-East which collectively account for 73% (163,300) of all listings. Of greater interest is that these four areas account for 78% (£666m) of all income generated for hosts in the UK.
Alexander concluded: “These figures highlight the importance in short-term letting of having a rental property in the right area.
“The issue for any wavering landlord contemplating the move from long to short term letting is the level of return, the guarantee of occupancy, the limiting of regulatory and financial restrictions, and the impact on the long-term value of the property investment.
“These are a lot of factors to consider so I would urge landlords thinking of this step to think long and hard before making a leap into the unknown. It will work for some but could be a mistake for others. Equally many landlords could substantially improve their earnings by reviewing their portfolio, their finances, and their individual circumstances. There is still a very good return to be made from the PRS, but it requires a professional approach.”