More and more people are choosing to dip their toes into the world of the short-term rental market, with companies such as Airbnb propelling the rise of this ‘sharing economy’.
There are currently over 4+ million Airbnb hosts worldwide, and 6+ million active listings on the platform, showing the huge popularity for home-owners looking to make some extra money, and the demand from travellers looking for alternative accommodation.
However, before you go listing your property online, it’s important to consider if short-term renting is right for you as a landlord.
In this blog post we’ll take a look at how you could maximise earnings from your property, and the various rules and regulations you should be aware of before you make any decisions about putting your home on the market.
Firstly, what defines short-term rental?
A short-term rental is typically defined as a rental of any residential property for a short period of time, which generally includes stays of less than six months, but more often than not they range between one night and a couple of weeks. This is due to the fact that many short-lets are occupied by holiday-makers and travelling business people.
Generally speaking, utilities, television and internet are included in the rent, and properties are rented out fully furnished with the landlord expected to provide necessities such as an equipped kitchen, bed linen, glassware etc.
What different types of short-term rental are there?
With around 65,000 holiday homes in the UK, the popularity of domestic holidays taken in the UK in a rental property is showing no signs of slowing down any time soon. If you are considering buying a property to rent as a holiday let, it’s important to do your research to decide which location will be the best place for you to purchase.
Ideally, you want to invest in an area which is popular but where demand exceeds supply. This way, your property will be easier to rent out and you’ll be able to charge a higher rate due to the popularity of the area.
Highly seasonal markets in the UK include coast and countryside areas such as Cornwall and the Lake District, whereas city destinations such as London or Edinburgh experience peaks and troughs, and generally, the demand for city apartments fluctuates less than for rural areas.
Letting your own home
As previously mentioned, websites like Airbnb allow you to market your property, take bookings and collect payment online, without having to invest major capital as buying-to-let does. This offers an attractive and flexible option for many home-owners wanting to venture into short term letting.
If you live in a popular city, such as London, renting out your home when you go on holiday can not only cover your property’s costs whilst you’re away, but can also make you a decent amount of profit.
However, there are some other costs which you need to consider such as a specialist insurance policy to cover you against accidental damage and possible loss of income due to unforeseeable events. Plus, you’ll also need to make sure your home complies with national and local health and safety regulations.
How to get the most out of Airbandb
The business model of Airbandb is simple yet very effective. There’s no charge for listing your property on the website, but the company makes its money by charging fees to both hosts and guests for each rental property.
Hosts can choose which dates their property is available for renting, along with the price per night and any other additional costs, such as cleaning, and a relationship between the host and guest is encouraged with an open line of communication to discuss more details.
This does mean that guests expect prompt responses from their hosts, and with such a huge amount of properties available, it’s important for hosts to live up to guest expectations to stand out in the market and secure those bookings.
The site also rewards attentive and available hosts by including in their profiles their response rates and ranking their listings in the search results accordingly, so your availability to commit to responses is essential to your booking success.
The platform encourages a ‘trusted community’ model where both guests and hosts can publicly rate each other’s experiences, so it’s important to follow a few different steps to increase your chances of positive reviews and therefore frequent bookings:
- Provide lots of detail – including location information and clear photos showing the front and interiors of the property
- Get positive reviews – make sure you’re available to speak to or on hand to maintain the property and fix any issues which may arise
- Be transparent – make sure to show your property in an authentic light so guests have sensible expectations
- Be active online – respond to guests’ questions quickly and efficiently
Other holiday rental websites
With such a huge demand for Airbnb, it’s no surprise that competition from other rival holiday rental sites have popped up offering similar services. These all use a similar business model, connecting home-owners and guests, whilst taking a percentage of the rental fees.
Some of these other websites include:
- Vrbo – targeted at second-home owners looking to offset the costs of owning a holiday property by renting it out
- Wimdu – has over 350,000 holiday rentals located in key European city destinations around the world
- 9flats – offers affordable holiday rentals from over 6 million locations around the world
- HolidayLettings – offers access to worldwide markets and like Airbnb charges landlords 3% of the rental cost
So what rules and regulations do you need to know?
If you’ve made up your mind and want to take advantage of this potentially very lucrative market, there’s a few rules and regulations you need to be aware of.
Health & Safety
Your home may seem perfectly safe to you, but this doesn’t necessarily mean it’s good enough for your guests in terms of health and safety. It’s essential to make sure that:
- You carry out a fire risk assessment as required by law
- You improve any fire safety measures e.g. installing a smoke alarm
- Your property is fully compliant with all local health and safety regulations
- You have an up-to-date gas and electricity inspection and fix and issues that may arise
It’s vital to comply with the fire and safety laws to ensure any landlord insurance cover you have is viable, so investing in the services of a certified fire safety professional to give your home a full review is well worth considering.
Tax and insurance
When it comes to HMRC, the same rules apply to any other business that would make you money, and your should make sure that:
- You have an accountant that can advise you on your tax liabilities and what expenses you can claim against tax
- You seek advice from a specialist insurance provider
- You know the income received through renting out your property will be taxable just like any other income
- You should be able to offset the cost of specialist landlord insurance against earnings as an expense, along with a proportion of the utility bills
Remember, no two properties are exactly the same so it’s important you do your homework on policy options. For example, If you’re renting out your primary home, then it’s likely you’ll want a different level of cover for someone who is renting out a holiday home.
What are the pros and cons of managing a short-term rental property?
- Extra income – short term rentals can bring in a substantial amount of extra income, and by as much as 30% more than long term rentals
- Flexibility – it’s up to you who stays in your property, how long for, and at what cost. This flexibility also means that if you decide the short-term rental market isn’t for you, you can simply decide to no longer rent out your property
- Compared to long-term rentals, short-term rentals don’t provide a stable source of income, as there’s likely to be periods without tenants unless your property is in an area with consistently high demand
- Damage costs – with many different guests staying for short periods of time, it’s more likely that you’ll have to replace items due to wear and tear, as opposed to if the property was being rented out long term to just one tenant
- Timely to manage – with a high turnover of guests, you need to have time to dedicate to the bookings and to respond to queries which can take up a lot of time, plus during quieter periods you may also need to proactively find your own tenants, which again can be time consuming
To conclude, renting out your property for a short period of time can be a great way to earn some extra income. However, it also requires a certain level of commitment and management to be done properly so it’s whether you’re able to commit to this to reap the rewards.
To let or not to let…that is the question!